There are various milestones which we achieve in our lifetime. Each of these bring some changes in our priorities and financial requirements. To accommodate these changes and move ahead to achieve the goals you have identified, one has to prepare well ahead. Sometimes the change may require a big financial support to proceed further in your life.
Here are some of the milestones which we will have to go through and we should be well prepared to accommodate them without affecting our financial well-being:
1) Your First Job: Is always a memorable milestone.You aspire to become self -dependent as you start your career. Your planning at this stage can either do wonders or may disturb your financial well being in future. Start maintaining an emergency fund so that you do not have to rely on your parents if in need. Work out your expenses and build a 6-8 month contingency fund. Buy a medical insurance to meet expenses arising due to health problems. Make sure to work out your insurance amount so that you do not overcommit and drain your savings. You can add accident and life insurance cover based on your work profile. Adding a term insurance can be advantageous for some who wish to start their married life very soon.The premiums are very affordable and remain the same for the entire term and they are cheaper when you are young.
2) Mid-Career Changes: You are looking for change in your job either due to dissatisfaction or increase in your financial requirements.For some who have responsibilities of their parents will find meeting both ends difficult if not prepared. Start with an emergency fund of at least 6-8 months expenses as there might be months in between job change, which may go without an income.You have to make sure you meet your basic monthly expenses during this period comfortably.When you get an increase in your salary you have to provide for all your goals- meeting expenses, provisions for afamily, parents care etc.Buy adequate health & term insurance to meet the unexpected. Once you set for a change, plan for your life goals.
3) Marriage: Your lifestyle changes with addition of a family member. Since you will have to provide for each other after marriage it is good to discuss your protection needs and identify if there are any gaps. You can buy adequate insurance covers supplementing each other. Sooner, you will plan to have a child in your family.It’s always wise to start planning for the child as early as possible as you have to make a long term commitment for his/her expenses. Start with a small amount of savings and increase allocation as you reach the desired stage.
4)Birth of a Child: Always a joyous moment in every parent’s life. Sooner, the concern of child upbringing starts revolving around you. As the child is born add him in your health insurance policies to cover any health related expenses. Start allocating part of savings towards your child needs by investing in various asset classes. You can do it with child savings account and transfer periodically from your own account.The earning parents should have adequate life insurance on self to protect family financially when he/she is not there. It will always be a wise decision to start planning for your child needs even before he/she is born.
5) Getting Retired: Retirement is the biggest milestone to reach as you plan to stop working beyond this. As you are near your retirement evaluate your retirement needs. This will give you estimation of how much you willexactly require for meeting your expenses. Do provide for other expenses like gifts to your grandchildren’s etc, to arrive at an accurate figure. Evaluate your sources of income to check if there is any gap so that you can work on it before you retire. This should include your retirement fund expected from PF, Gratuity & superannuation, your insurance policies maturity and all other sources.Recheck your health insurance coverage and enhance it if there is any shortfall. Once retired, get all your income in place and invest to get the desired income.
The milestones discussed above are stages of your life cycle and you tend to make mistakes if not prepared. Financial Planning is a very dynamic process as it accommodates all these changes. Plan with it so that you do not put unnecessary strain on your finances and your family has adequate protection from emergencies arising in future.