Planning your finance anew is going to be crucial in 2021. The world did not expect what transpired last year. The Coronavirus (COVID-19) pandemic has derailed most people’s life plans, but it also has taught us a valuable lesson that we must always be prepared with solid investment planning.
Creating the best plan for yourself and the family requires a thorough consideration of different financial aspects such as insurance, savings, and investment plans. Here are five tips that will help you plan your finance the right way this year.
- Monitor your investments
COVID-19 forced many investors to withdraw their funds and take a break from making new investments. In 2021, you have the opportunity to plan new investment strategies, ensuring that you do not have to abandon your life goals. While rebuilding your investment portfolio, it is vital that you first decide what kind of assets can offer you the best return on investment and help build a fortune.
Currently, there are various investment plans available in India. However, you must find an avenue that offers flexibility, ensuring that you have control over the investments. Unit-Linked Insurance Plans (ULIPs) can help you in that regard. They let you choose between equity, debt, or balanced funds depending on your risk appetite and financial goals. Moreover, you can switch among the funds depending on your changing needs or the market condition. ULIPs also offer a life insurance cover that shields the economic stability of your loved ones.
- Be financially ready for anything
Many people had to suffer a pay-cut or loss of jobs last year due to the pandemic’s effect on the economy. This year, build a financial plan that can ensure you monetary protection in case of an emergency. We know that the pandemic has not ended yet. Hence, you do not have the option to let your guard down.
One way to ensure that is to maintain your liquidity options while controlling your expenses. Also, focus on building a substantial emergency fund, ensuring that you do not have to face any financial challenges.
- Get the right insurance policies
By now, you may have understood the importance of a life insurance policy. It will help you ensure that your dependents will be able to maintain their lifestyle in your absence. You already have learned how to invest money in ULIPs, which essentially are life insurance plans. ULIPs help you protect your family while also growing your savings. If you think that the ULIP cover is not enough, consider purchasing a term plan. It is a pure life insurance policy that offers a considerable sum assured at an affordable price. Make it a point to opt for a life cover, which is around 10-15 times your yearly income.
You also need to find the right health insurance policy for your family. Due to COVID-19, medical expenses are now significantly higher. So, you need a medical policy with a minimum sum insured of INR 5 lakh.
- Take care of your debts
Start the New Year by planning how to repay your liabilities faster. If you are financially secure, consider making large repayments towards big-ticket obligations, such as a home loan. Moreover, make sure that you repay the loans with higher interest rates first.
- Improve your credit score
Financial institutions now reject many loan requests if the applicants have a low credit score. So, work on improving your score. Start by repaying your credit card dues and stop using them unnecessarily. You can also build a respectable credit history by repaying other loans on time.
Now that you understand how to invest money and build a secure financial plan, get to work immediately. The faster you build your financial plan, the more prepared you will be to face the future.