Health and Life insurance are one of the first questions ask a client to his financial planner. Sickness and death are not the only extraordinary circumstances your financial plan must provide for. There are happy moments too, that can strain one’s finances. E.g. one gets married or becomes a parent. So for those situations, one must be very careful about the financial planning. Here a look at some such special situations and tells you how to deal with them without rocking your financial boat.
- 1. WHEN YOU MARRY
The main problem of a newly wedded is about their financial problems. Here are few things that a newly wedded to do in this stage.
It may seem something you can do only when the need arise. Instead of waiting for the need arise, inform your bank, life insurance company, mutual fund and other financial service providers about the change. You will have to change the nomination details in their records. Women who change their surname after marriage must get it upgraded in the PAN records as well.
- Split tasks, combine resources
Be open with your partner and spell out your money concerns clearly. Both partners will have their own assets, liabilities and investments. Consider opening a joint account for household expenses, with both partners contributing to it. Combining finances benefits both. For instance, they get a higher rebate on a home loan, are able to manage their debt better, can buy a bigger life cover for themselves and have a higher investible surplus.
- Plan for the unexpected
Make sure you and your partner have adequate medical and life insurance. If both husband and wife have separate health insurance, ask the company if the two policies can be combined in a floater plan without losing the accumulated benefits.
The arrival of a baby is one of the happiest events in the life of any parent. However children also end up straining the family budget. The doctor’s fee, vaccinations, baby clothes and food etc. the bills just keep pilling.
- Don’t Overspend
If you are like most first time expectant parents, you would already have drawn up a list of things you want to buy for your child. However, does your baby really need all those things? Many couples spend way too much on items that are not actually required.
- Budget For A Single Income
Managing finances during and after childbirth become particularly challenging for double-income households, especially if the wife plans to take an extended break. The income drops, while expenses mount. Start stashing money away for a contingency fund from the day you get the good news. You should aim to put aside at least three month’s income before the baby arrives.
- Make Use Of Maternity Benefits
If the expectant mother has been working with an organization for atleast 80 days during the 12 months preceding the date of her expected delivery, she will be eligible for maternity benefits under the Maternity Benefit Act. The law permits women to draw this benefit for a maximum of 12 weeks, whether it is before or after delivery. However, she cannot take it for more than six weeks before her expected delivery.
- Add Health And Life Cover
Since a new born is particularly susceptible to disease, you should have adequate medical coverage. In case of health insurance, you will have to buy a new policy, though some plans allow you to enhance the cover in an existing policy. If you don’t already have a cover, the birth of your first child should be a trigger to get protection.
- Start Investing
After the baby arrives, formulate a long term investment strategy to fulfil the child’s dreams and aspirations. This is not limited to long term goals like the kid’s higher education and marriage. Only think how to fund her education from kinder garden to college. The earlier you start, the better prepared you will be.
- 3. In Case Of Illness Or Death
The cost of hospitalisation and medical treatment is going up steadily and one needs sufficient health coverage to deal with a prolonged illness. A pure health insurance or life cover may not be enough. One needs either a critical illness policy, which is a comprehensive cover against major illnesses, or opt for such a rider to boost the existing insurance policy. While talking any such policy, check the diseases that are being covered as well as the exclusions under the policy. Most people wait till retirement to do so, but this is not the best way to go about date it cover. You can create a will at the young age and update it over the years. In the unfortunate event of death, obtaining the death certificate is crucial since no financial institution will transfer the assets without it. When one gets insurance proceeds, it is best to pay off debts at the earliest and use the remainder for safe investments.
- 4. When You Get Promoted
Most people fail to consider how to make use of the newfound financial muscle to power their critical goals and aspirations. You would probably be saving for key financial goals, such as providing for your child’s education, buying a dream house or your own retirement. These savings should not remain static throughout your life, as your income rises over the years, so should your savings.
By all means, reward yourself and your family with treats whenever you are blessed with a substantial pay hike or bonus, but at the same time, consider how you can incorporate the higher inflow into your existing financial plan.