Taking care of your finances is complicated and convenient at the same time today. Most of us have grown up learning the basic rule of thumb, which is, essentially, to save as much money as we can for a rainy day. But, with the increase in expenses, it is becoming more challenging to stay financially healthy. Fortunately, there is also an abundance of financial instruments in the market that can enable you to plan efficiently.
Term insurance is one of the common financial tools that is used to ensure security for loved ones in case of an unfortunate event. Insurers also offer different kinds of term insurance plan, with a variety of benefits that can be valuable to people with diverse financial profiles. Let’s understand how you and your family can stay financially healthy with term insurance:
Calculate Personal Budget
If you are trying to maintain your financial health, budgeting is the groundwork you need to lay down. It gives you a clearer picture of the investment prospects in life. For instance, term insurance cover can vary for people, depending on their financial needs, lifestyle, etc.
Most people assume that having an estimate of the savings and expenses in life counts as budgeting, but that is not true. You must understand the present and possible future requirements in life, which demand a significant amount of money. This will allow you to determine the coverage you need from term insurance without putting additional financial strain on yourself.
Not only this, but you can also develop efficient saving habits with term insurance over time and utilize your money in more productive ways. When done early in life, proactive budgeting will become the foundation for financial stability for your family in the later years.
Manage Inflation Impact
As you move through different life stages and grow in your career, the spending in life also increases. Along with that, the impact of inflation on your earnings will also affect your financial planning. It is crucial to consider that an essential factor when buying term insurance for your family’s security. If the amount of sum assured is insufficient, 10 or 20 years from now, your loved ones may have a hard time staying afloat in your absence.
Depending on the policy tenure of your term insurance, you can gauge the inflation impact within the time frame and choose an appropriate coverage amount. Therefore, make sure to consider these crucial factors at the time of buying the term insurance plan.
Invest Money Wisely
Your financial plan should ideally include a diverse set of investments that allow you to save and grow wealth over time. This is key to enable financial stability for you and your family in the coming years. As mentioned earlier, term insurance can be the foundation layer of your financial plan since it provides protection against unforeseen circumstances.
So, as an investor, it is crucial to prioritize your investments in order to optimize the results. Setting clear and precise short-term and long-term goals can be useful when planning your investments.
For instance, if you are at a stage in life when the next big expense is your child’s higher education, your investments should be aligned accordingly. If you choose to buy term insurance at this stage, the amount of cover should be enough to ensure their education is not compromised even in your absence.
Begin Saving Early
You often hear that it is never too late to start saving in life. While that is true, there is undoubtedly an advantage if you start planning and saving in the initial years of earning. Having realistic financial goals early in life can make planning easier for you. It allows you to visualize the next few years financially and put your money into favourable investment opportunities.
Similarly, it will enable you to understand what is insurance value in your context and set up a financial shield early. According to preliminary estimates by RBI, the household savings increased to 21.4 per cent of GDP in the first quarter of 2020-21. It is understandable since the pandemic pushed most of us to rely on household savings. In light of this, the focus here should be on planning your savings more efficiently and building a support system early in life.
Build a Comprehensive Emergency Fund
Building an emergency fund with a term insurance plan can help your family meet their needs in case of your untimely demise. The fund that you create over the years with the term insurance can enable them to fulfil everyday needs as well as life goals that require significant financial backing.
If you are the sole breadwinner of the household, it is even more imperative to invest in a term insurance plan. Doing so would ensure that even in the face of adversity, the income source has been replaced, and they can live a life of dignity. Relying on credible insurance providers such as Max Life Insurance for this purpose may be in your best interest.