21 Aug 2021, 10:00 — 4 min read
The mention of Rakshabandhan brings fond memories to our minds. It evokes a feeling of connectedness and celebrates the brother-sister bond. ‘Raksha’ means protection towards ones loved ones. This not only includes your sisters, but also your entire family.
The result of this attitude manifests in a feeling of safety and hopefully good vibes in the course of this journey called life. This attitude is reflected in our finances. As per internationally acclaimed author, Robert Kiyosaki, a plan to be safe is critical for your wellbeing.
A plan to be safe covers 12 months of fixed expenses. The fixed expenses include our maintenance bills, petrol bills, food and education expenses, some budgets for basic wellbeing. That said it differs from household to household. In a certain household travelling may not be a part of basic budget whereas in certain households it may be a part of the basic budget.
An affluent household we know includes insurance premiums as a part of the budget although that is technically a saving.
What should be included in this?
If it is a young family, it is even more critical to have health insurance as there are many things which demand one’s attention financially. If it is an older couple, it is important to preserve retirement savings or someone in a semi-retirement situation who does not want to take more risk.
If the family is young, one needs to have a cover of at least 15 times the annual income as the interest thereof will be around the number one would spend to maintain today’s lifestyle in the absence of the key breadwinner. Otherwise, if someone has assets then the cover is not needed. A problem situation is when there are not sufficient assets and inadequate cover. This can be the cause of families being destabilised, at least in the short term. In our circles many years back I recollect that the main breadwinner had expired at a relatively young age and his family did not have adequate assets. This resulted in a lower standard of living, however fortunately the children’s education had taken place and they were able to manage somehow with some difficulty.
But that said, ‘raksha’ is also protecting your savings from inflation. Inflation eats into the value of our savings. The route to this is investing in vehicles like Mutual Funds and the like and Direct Equity opportunities. That said, the joys of the festive season are lived better when we plan for the worst.
In our culture, the brother gifts some valuable gifts at the time of the wedding of the sister’s children. You can plan something for that effect starting now. Assuming it would cost 100 rupees today, the same thing would cost 400-500 rupees 15-20 years down the line. Planning at the right time helps to save valuable capital for the big goalposts in life.
Make planning a priority to live with confidence.
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Posted byAnirudh Anand Gupta
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7 Sep 2021, 11:00