Often my readers and followers are curious to know whether I have faced any financial crisis in my life? If yes what kind of hardship did I need to go through? If so how did I manage that situation?
By the grace of God, I had never faced a financial hardship till today. I was born in a middle-class family. My dad was a banker and my mom was a housewife. Because of my dad’s secured job and fixed monthly income and mainly as we always lived below our means we never had money issues as such.
After my studies, I started working. Because of family values I always gave preference to saving rather than living lavishly even though I started earning on my own. I am blessed to have my better half from a similar background and we both kept ourselves grounded with an increase in family income each year and make sure we have enough savings to take care of any unforeseen event. We keep on investing more than 60% of our monthly family income to make sure we are financially worry-free at every point of time in life.
Here I take the opportunity to share some thoughts on How to safeguard your family’s financial health in the event of a tragedy/emergency?
Life is very unpredictable. We may face uncertain or unforeseen events in life. It is always prudent to be prepared for such kinds of situations. It is crucial to get prepared in advance for any uncertainty which may cause a sudden burden on our finances. Prepare yourself well in advance by following these 3 things.
1. Emergency Fund: You should always keep aside the amount equal to at least 6 to 9 months of your monthly expenditure including our EMIs. This money can be kept in good quality liquid funds, Bank FD or RD. One should consider the provision of the Emergency fund as an expense and not as a saving. It means you should never spend this amount elsewhere except in an emergency.
2. Term insurance: Insurance planning is very important before one starts thinking about investments. The Thumb rule is that you should be insured up to 10 times your annual income or your insurance cover should be your annual expense×55.
3. Health Insurance: Medical inflation is very high and it can make a big hole in our savings at the time of a health emergency. You should take a family floater as a base plan and stand-alone top-up the plan for your family even if you have employer health cover.. This arrangement helps to save on premium amount and offer large health cover at a very reasonable cost.
Above mentioned things are considered as hedging against loss.
But what steps can we take to mitigate the sudden financial burden that we are facing right now?
Can we tackle the situation by provisioning in our home budget? Yes, we can. In such a situation, we should focus on curbing our expenses and increasing our savings. Each penny saved can help us to get out of this situation faster.
1. Write down each and every expense. Penning down will help you to know where your money is going.
2. Postpone your big purchases until you come out of this situation.
3. Ask for help from relatives, friends, and colleagues if possible and assure them that you will repay the money on time.
4. Instead of credit cards, start paying by cash if needed as it pinches more when we spend hard cash rather than plastic money.
5. Restructure your loans by bargaining with the bank if you are unable to pay your loan EMIs.
6. Stop your monthly investments and give priority to settling the financial emergency first.
7. If required liquidate the investments done for aspirational goals such as dream vacation, car purchase, or buying gadgets.
8. Don’t get carried away with the surrounding people, avoid the tendency of the showing off.
9. Try to find alternate income resources to fund your expenses. You can covert your hobbies into classes, can take up freelancing projects, tutions, etc.
10. Most important step is to take the help of your Financial Planner. Consult him/her and make the necessary changes required in your Financial Plan.