Transitioning into a financially secure and healthy future – the new normal

Written by Tarun Mathur

Having a backup plan when things go sideways is a core part of financial planning. But how can you plan something that happens once a century? The COVID-19 crisis was one such event that changed the world once in a century, leaving many people in search of answers.

People who fell victim to the COVID-19 virus had to spend fortunes to get treatment; People lost their jobs or had to accept cuts in their salaries; Self-employed and small business owners had to stay at home, lost their income for months, and investors also experienced a financial and emotional rollercoaster ride last year.

The answers to your questions are not easy as there is no one-size-fits-all formula that can help you overcome a crisis of this magnitude. However, there are some proven ideas that, when combined with the new insights we have drawn from this rare experience, can help you transition to a financially secure and healthy future in the new normal. Let’s explore:

Life insurance

The importance of life insurance cannot be emphasized enough – the coronavirus pandemic has only brought back the spotlight on the age-old wisdom of protecting the family’s financial future with extensive life insurance.

The COVID-19 virus has already killed nearly 3.5 million people worldwide. Around three lakh people have died from the deadly virus in India. According to the data available, almost half of the people who have died from COVID-19 in India are under the age of 60. It goes without saying, therefore, that most of them are working people, in many cases the only breadwinners in the family.

After their departure, their families’ financial futures would be secure if they had substantial life insurance coverage. The proceeds from this coverage can fund the family’s future financial goals such as higher education, marriage, etc. For a financially secure future, it is therefore a must to choose good life insurance.

Health insurance

The COVID-19 is essentially a health crisis, and then a financial one. Health in the new normal is paramount. The pandemic has shown the world that an emergency can arise at any time and even endanger entire families and require medical care at the same time. Therefore, the old notions of health insurance coverage of around Rs 5-10 lakh have no value in the new normal.

For a healthy and financially secure future you have to rethink this and protect yourself not only today, but also in the future against rising medical costs and newer and more expensive treatments. Surely a coverage of Rs 1 crore now available at an affordable price could be the answer.

Create an emergency fund

The labor market has seen many upheavals over the past year and is probably in its most volatile state, perhaps since independence. The kind of job and salary cuts we have seen did not exist in India even during the global financial crisis. The lesson here is that even if you are safe in your career now, you cannot take your job for granted and you need to make sure that you are financially protected from such a calamity if it ever happens.

You can start by collecting a nest egg enough to survive at least a couple of months. While up until a few years ago three months of spending as an emergency fund was considered sufficient, many financial advisors are now suggesting that the number should be reconsidered and at least doubled in the new normal case.

Keep investing

A big mistake that many people often make during a major crisis is that they go completely on the defensive and no longer invest their money in their future. Part of it is driven by the fear of losing their hard-earned money – which is natural given the decline in stock markets we’ve seen over the past year – while another important factor is the human tendency, between the two emotions Greed to waver and fear. However, one should not stop one’s investments in such difficult times, as the best returns are often achieved with the money invested in times of crisis. The remarkable rally in equity markets that we have seen from late last year through this year is evidence of this.

Hence, you need to keep paying your insurance premiums, adding more and more money to your ULIP plans, and keeping all of your other investments going. If you took the first three steps above, your present would be secured and with this fourth step your future would also be financially secure.

The author is CBO-GI at Policybazaar.com. The views expressed are those of the author.

source https://dailyhealthynews.ca/transitioning-into-a-financially-secure-and-healthy-future-the-new-normal/