Sunila, along with her friend Divya, paid a visit to a debt counselor’s office to find a way to recover from her financial crisis. Sunila discovered that her spouse was unable to channelize and allocate his money in an appropriate manner. After visiting the counselor’s office, she decides to help her husband invest money in a suitable manner. To start afresh, she makes a plan based on the counselor's advice and decides to have a detailed discussion on those plans with her husband.
The First Step
It is always better late than never, so stop worrying and start working on your finances as recommended by the counselor. You can immediately start channelizing your money well to get several benefits. To get a healthy financial backup, there are several procedures you can opt for. An emergency fund can be created to make up for a loss of job. You can set aside 6 months’ salary which is put down to a liberal Rs. 30,000 monthly expense. You need to keep at least 10% of your earnings as savings in your bank account.
Apart from a contingency fund and regular savings plan, one needs to diligently allocate funds in financial instruments to maximize returns on investment. Your counselor will recommend you a basket of such instruments to save taxes as well as maximize returns.
A general rule after forming an emergency fund and savings is that the remaining amount should be put into investments. One should ideally invest 75% of that amount in equity instruments such as stocks, MFs and other funds, and 25% in debt instruments such as FDs, PPF, NSC etc.
One must always keep in mind their future expenses too. For that purpose, you need to create an infant fund to take care of your children’s needs, such as basic and medical needs. Always keep the changing inflationary trend in mind while calculating future expenses.
To avoid any problem during medical emergencies, you need to invest in a good medical insurance policy and maintain a medical emergency fund.
The story doesn't end here. After a few months, Sunila was tension-free about her finances but continued to explore newer investment avenues. Her finances include a parents fund, maintenance fund, entertainment fund, luxury fund, vacation fund and so on.