Hyderabad: The clarion call for 'Atmanirbhar Bharat' (Hindi for Self-reliant India) given by PM Narendra Modi has become quite popular. Being self-reliant is a good way to deal with unprecedented conditions at the present. Dangers can come from unforeseen corners in the future too.
So, the onus is on each of us to be financially 'Atmanirbhar'. How does one become self-reliant when it comes to their own finances? What are the steps that will prepare you financially to deal with the worst of times? In this article, we will look at 4 easy ways to become 'Atmanirbhar' when it comes to personal finance. Read on.
Build war-chest for emergencies
When disaster strikes, the time to prepare has already passed. Your salary/income may face a steep cut, making EMI payments and honouring financial liabilities a nightmare. Or worse, you can be given the pink-slip (sacked/terminated) during a downturn. This means zero income, unless one gets another job.
The more experienced and fatter their pay package, finding a job is that much more difficult. The only way to survive such a situation is dipping into your emergency corpus.
- A typical household has a fixed monthly expense, plus any EMIs/financial obligations.
- This can range from Rs 30,000 to more than a lakh of rupees for a middle-class family.
- The goal of an emergency corpus is to have 12 months of the monthly expenses + EMIs.
- Target the emergency corpus amount, say Rs 5-6 lakh.
- Next, save a small amount in your bank account each month, say Rs 3,000.
- Whenever you have some extra cash, put it in that emergency corpus so that your target is reached quicker.
The day a financial emergency strikes, you will be able to handle it comfortably. Even if bad times don't come, you will be able to sleep peacefully at night no matter what.
Protect yourself, family with medical insurance
You must have heard about the huge bills charged by private hospitals for treating patients. Government-run hospitals are much cheaper, but the quality of care & treatment is debatable as per anecdotal evidence.
This is why families make a beeline for private hospitals when somebody gets sick. For a 7-10 day treatment, getting bills of Rs 5 lakh to 10 lakh is quite common. Imagine paying such a large amount. Lack of funds could mean having to mortgage home jewellery! There is a cheaper way: medical/health insurance.
Upon payment of a small amount per year, one can take a much larger sum insured for their family with health insurance. You can get Rs 1 crore health insurance cover for a family of 3 (husband, wife aged 40 years) for about Rs 20,000 annual premium.
If your income is lower, you can start with a smaller sum insured like Rs 10-15 lakh also by paying a smaller premium annually. Some employees are covered by employer health insurance policy, but they don't cover aged parents etc. So, it is better to have a standalone health cover for the entire family.
Have a pension plan for possible early retirement
Everybody imagines retirement to be a time when they will put up their feet and have a lot of time to pursue their interests. Read newspapers/magazines all day, watch sports, do gardening, travel the world etc.
We don't mean to burst your bubble, but retirement also means no salary. That SMS from the bank on 30th of each month will not come. Unless you work in an organization which pays a guaranteed pension, reaching retirement age would surely mean working beyond 60 years of age.