Apart from the plans to jump the S Curve in your property acquisitions, you need to plan savings for your family security. This includes both your and spouse’s life and health insurance, pension or retirement plans, your children’s education fund and your yearly travel plans.
Even while doing this you must have a yearly budget for family security and prosperity. This must be separate from your home budget. You must ask yourself the following questions to plan the same
1) How much of my salary and my spouse’s salary should go towards security savings?
2) How should I use security savings to maximize my and my spouse’s tax savings?
3) How should we plan annual payments at various times of the year, so that we are in our comfort zone?
4) What should be the monthly expenditure on each head that does not bog you down?
Housing loans taken in India are usually large enough to tie down a person for life. Be careful that does not happen to you. In the US or other developed nations of the West it is adequate if you save just a quarter of your earnings. In India, it is not so. Housing prices are high in India. Besides our objectives are often clouded. We are extremely conservative and insecure and tend to save much more than we should. At times, it is so insane that we deprive ourselves and hoard. Instead of focusing on the present we start thinking of our future and the future of our sons and daughters. This especially if you have a girl child and you are from North India where the dowry custom is rampant.
In India home loan mortgage payments should not exceed a third of your disposable income and other savings should be within 7% to 10%. In short, your total savings should be leaving you with at least 60% of your wages to spend for your present-day expenses. There are essentially five savings you must have other than your home savings as you cross the age of thirty. We are covering two in this post and the rest subsequently.
Choosing your Life Insurance Policy
Your life insurance and that of your spouse’s is the most important. Take different policies to cover both of you. Whereas you can get attractive deals from various private sector players as well as the public sector LIC you need to understand your requirements. Your life insurance should not be clubbed with any investment plan if it reduces the claim amount receivable after you are dead and gone. Many insurance companies try and reduce their liability by promising lump sum paybacks after every 5 years.
Many others plan attractive combo packages that offer long term savings as well as insurance. Ignore such deals because the freebies are usually expensive. Besides you cannot compare apples with oranges and are usually at the salesman mercy. It is advisable to chose the plain vanilla type which offers the maximum claim amount against your premium paid.
Choosing your Health Insurance Policy
Your health insurance policy should be also free from exceptions and extras. It should be preferably all inclusive and cash less. There are some policies that are cheaper but insist that the first twenty five percent of the bill is paid by the insurer. This at times is a workable alternative if the premium is substantially lower, because it ensures that inflated claims by hospitals do not take place.
Before going for any health insurance package, it is worthwhile to check the policy details of the insurer and get yourself a medical check up. At times, your blood sugar level or BP level could be marginally high and is easily correctable with mild medicines or life style changes. Be sure that you get into the normalcy range before you take a health insurance, or else you will pay a very high premium.