When someone asks, “What are your lifetime dreams?” Everyone respond as, “worry free retirement life”, “Kid’s education and marriage”, “dream home”, “secure financial future” etc., Normally, at the age of 30’s, majority people will be married and will have kids at age bracket 3 to 5. In general, working population will be Middle-level managers or Team leads in their professional career in mid 30’s. During this period, many will be earning their expected 6 figure salary and leading a comfortable life. But are you making the right financial decisions to achieve your dreams on time? Are you doing enough savings, investment and protections to achieve your dreams and goals? If you are not sure to answer the latter questions, go through the following 6 important investment decisions to make, when you are in your 30’s to achieve your lifetime dreams.

  1. Buy Term insurance (Risk Life policy)

All we know about, insurance is “life insurance”, where we take a normal endowment or money back policy, during the start of our career in early 20’s for tax benefits. Generally in India, we will take life insurance policy cover for INR 5,00,000/- sum insured and pay close to INR 20,000/- to 25,000/- annual premium for tax exemption, without having any idea about the life insurance and the real value required to be insured.

Ask yourself whether INR 5,00,000/- sum assured is enough? The main objective for taking life insurance is to cover the uncertainties and risks in life. One should take care of his or her family even after life. Any mishaps should not stop their dependants from achieving their goals and dreams. Some people take insurance cover up to INR 10,00,000/- paying annual premium close to INR 55,000/- which is, in general, a high commitment and on the contrary of any uncertainty, the sum insured(5L) is not enough to meet the dreams. By delaying the decision of taking term insurance increases the premium substantially. We are not recommending any particular product or any particular insurance company. If you wish to calculate yourself the premium for your expected sum assured you can visit the following links of your preference

http://www.licindia.in/premium_calculator.htm ,

http://www.hdfclife.com/financial-tools-calculators ,

http://www.sbilife.co.in/sbilife/content/11_2904

Now Let’s learn about Term Insurance in detail. Term insurance is a basic simple risk policy with very minimum premium when the policy is taken at an early start of your earnings. The structure of this plan is to protect the insurer with a high sum insured which covers you till 60 or 65 years of age and in the case of any uncertainty in the tenure, the whole sum insured shall be paid to the family and the breadwinner dreams will be achieved without any major issues. However, this is not a normal money back endowment policy on maturity.

For example INR 1,00,00,000/- (1 Crore) insurance cover for a healthy male of 30 years premium will be INR 15,000/- yearly, which is nothing but INR 40 / day. We have provided a link below as sample to calculate Term insurance premium as per your need. We are not endorsing or recommending any particular insurance company or product. http://www.njinsure.in/njinsure/policysearch.fin?cmdAction=showMenu

Simple tip:

  1. 10 times of your annual salary shall be your sum insured term plan.
  2. Term policy period shall be decided according to your intermediate goals such as children education, marriage and retirement.

Now a day’s many Life Insurance companies have started offering On-line Term Plan, you may look at that option also to avail Term Plan.

  1. Buy Health insurance

When you have insured your life with enough insurance cover, the next step is to protect yourselves from a medical emergency. As it is said “you should buy health insurance when you don’t need it, because when you need it no-one will give you”.

One main advantage is a low premium for the young individual. Delay in buying the policy and due to the sedentary lifestyle, we may get afflicted by medical conditions that usually in the 30’s and if you delay buying this health insurance policy which will lead to paying high premium or rejection of policy is inevitable.

When we discuss this point, you may reply yourselves that my employer health insurance is available for me to protect myself, in most case this may not be adequate and remember this will not be available when you are retired or resigned due to various seasons.

  1. Create Emergency Fund

Even though you are insured enough and medically covered, creating an emergency fund is equally important to consider. Create a corpus fund equivalent to 6 or 7 months of your monthly expenses and park this fund in FD/ liquid mutual funds to redeem whenever necessities.  This fund will come handy in case you decide to do higher studies or any job loss or prolonged medical conditions.

For details regarding how to create an emergency fund, a simple step is given in the following link.

  1. Take Personal Accident (PA) policy

When you are done with above three steps, you are ready for next step is that to take a PA policy to cover you, in case of any accidents in the road/home which will cover your medical expenses and weekly payouts to cover your family expenses and in case of temporary disablement or permanent disablement provide your sum insured as applicable to proceed in your life. This is different from life insurance. Life insurance comes into pay only after life, however if uneventful disabilities arise and to continue bread winning will be more financial debacle. PA Policies come in handy in such situations, until we settle down and overcome such issues.

  1. Start Systematic Invest plan (SIP)

As early as starting your earnings, saving for your future is the first step, but is just saving enough? NO.

Please run any online calculator to see the future funds required to achieve your dreams and goals, Today education cost for a professional degree requires close to INR 10,00,000/- (10 Lakh), but if your kid is 5-year-old now and in next 11 years ready for professional education, are you ready for expenses. Today INR 10,00,000/- (INR 10 Lakh) requirement considering current inflation which will require 30,00,000/- (INR 30 Lakh) for education. How to prepare for this?

Simple Math:

Assuming INR 5,000/- invested per month, growing at 12% can create a corpus of INR 1,54,00,000/- (INR 1.54 crore) in 30 years. The beauty here is your capital investment is only INR 18,00,000/- (INR 18 Lakh) and your money are multiplying by 8.5 times. If you delay starting of SIP by just 4 years and give your investment 26 years instead of 30 years, you end up losing  INR 54,00,000/- (54 Lakh) as your corpus after 26 years will be only INR 96,00,000/- (INR 96 Lakh)

So start thinking about your goals and needs in the future and start investing from today to meet your future goals (Kid education, Marriage and for your retirement expenses). Inflation is inevitable, hence your savings shall grow along with inflation to meet your future requirements and avoid shortage of funds.

  1. Start investing in appreciating assets

In the investment world, debt taken for any investment is not acceptable, except home loan. In today’s world everyone requires a home for their living and owning the same home is a delightful feel, which is basically a need for any individual and indirectly the value of the asset is appreciating in a long term, borrowing at an early stage buying a home will allow you to close the loan early.

Deciding to go for a second home only for investment purpose shall be carefully evaluated based on the current surplus cash, the home loan interest repayment and period of loan and rental income from that house (whether the house gives passive income to your pocket / goes from your pocket in terms of interest repayment) and other goals current status and if you have enough surplus to buy second home which will give an annuity in your retirement life and appreciating the value of assets in the future.

Action Plan

The above 6 important investment decisions, which we discussed are very simple to understand and implement. But many of us fail to implement these simple steps to get financially secured. So we have included a simple check list below which you can print and use to remind yourself regularly. fill second and third columns as per your evaluation and print the same and paste it in your work desk or mirror or anywhere you see daily.

Investment Decisions Current Status

(Fill Yes or No)

If No, Fill Planned Action Date
Buy Term insurance
Buy Health insurance
Create Emergency Fund
Take Personal Accident (PA) Policy
Start Systematic Investment Plan (SIP)
Start investing in appreciating assets

Being secured against risk through adequate insurance and having started SIP at an early stage of life will allow you to meet your financial goals and cover the life risk as you go along and reach financial freedom by the time you retire.

So without waiting the next minute, take this resolution of taking right and important investment decisions to give your financial journey a head start.

-Kumar Nathan

@kumarnathan1981