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If you are a single income family, here are 6 things you must do to ensure your and your family's secure future. Begin today!
If you are a single income family, here are 6 things you must do to ensure your and your family’s secure future. Begin today!
I call it the magic ratio, as It is a simple ratio for a single income family to know where they actually stand on a month on month basis. It is a constant reminder to you to be on track with your financial plan, and will keep reminding you of the gap you need to bridge to be on the comfort side of it.
How does this magic ratio work?
Out of a total income of Rs. 100/-, if you are paying Rs. 50 or less towards debt/liabilities/loans, Rs. 30 or less is spent towards your livelihood/ lifestyle expenses, and you are able to save Rs. 20 or more for your future needs, you have nailed it and are on a right track. This magic ratio would vary depending upon the size of your family and your age etc., but broadly it would help you understand where you stand in terms of a balance between your liabilities, spending and savings.
There has to be an adequate Term Insurance cover for the earning member who is running the expenses of the family. What is also important is to have disability and accident cover for them, as their absence and disability to work will both have a huge impact on the financial position of the family.
You must take into account all loans and liabilities along with the future financial needs of the family while deriving the life cover needed for the earning member. What is also required is to have only specific life term cover and not mix it with any Unit-linked Plan or Saving Plan, as the objective is to take the desired cover for maximum term at least cost.
Taking loans to pay off other loans, or getting comfortable with a minimum payment schedule for the credit card are traps you should avoid.
Try and minimize your debt and clear as much as you can as soon as possible to be out of the debt cycle.
An Emergency Fund or contingency fund has to be created for a single income family. The fund must have at least a balance of 3-6 months of the current monthly income depending upon the age and liabilities on an individual. This would be a breather in times of an emergency or income loss in business or loss of job. This fund should be kept in a liquid instrument, which can be accessed easily in times of need.
Out of the Rs. 20 that you save; every rupee should be wisely invested towards your life goals. As all goals, from your retirement to your kids’ education are of equal importance, allocate investments based on the time horizon to make sure you achieve the maximum return over the long term.
Make your savings work for you and generate income for long run; do not let them sit idle in your saving account.
Save Right, Invest Wise.
Published here earlier.
Image source: shutterstock
Hi, I am Shaily Shah; after a good stint of 14 years in corporate life, trying my hands at something i really liked doing as a teenager; writing my heart out! Also, by means of read more...
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