No matter how financially prepared, or unprepared, you might be, losing a loved one is overwhelming. With the burden of grief on your shoulders, an additional load of financial decisions becomes now your responsibility to carry.
While the task might seem daunting, you don’t necessarily have to head into the battlefield unarmed.
With all the information at hand, the next step is to prioritise your & your family’s financial security before anything else. In order to ensure this, setting financial goals and allocating is essential.
Unprecedented times demand swift action and precise safety measures. The stress and fear of mishaps in life can cast a foreshadowing effect on your finances.
It is imperative to make use of all the resources available to put together the right strategy. A few steps in the right direction can help you pave your way to the right path.
Identify your financial goals:
Without the presence of an end goal in mind, any activity seems pointless. Whatever your necessities and aspirations are, write them down and then work on creating a path to achieve them.
It is very important for these goals to be SMART goals- Specific, measurable, achievable, realistic, and time-bound.
Create a Budget:
Assess how the loss of your spouse will affect your overall financial situation and decide if big changes will need to happen soon. Create a list of monthly expenses and income.
Include work income or any benefits and pensions you already have. If there are kids at home, project their needs now and through the college years and consider how your finances might look under different scenarios—for example, if you don’t go back to work or decide to keep working part-time. Then you can see what adjustments you need to make.
Use a Financial Planner:
Multiple resources can be found for your perusal to guide you in your journey towards financial planning. One such resource is the Financial Planner.
While multiple planners can be found online to help you plan your finances and track your progress, it is important to understand the essence of using this tool.
The process will indirectly guide you towards achieving your goals and in turn help de-code personal finances for you.
A planner helps you stay organised and disciplined by providing a one-stop guide to understand the basics of managing your finances. You can make the most of these planners by keeping a set of hygienic measures in place.
Create an emergency fund:
An emergency fund acts like a safety net you create while exploring financial risks or find yourself in a crisis.
Your emergency fund is the most important tool that comes to your rescue if your income gets restricted or you encounter an unanticipated crisis.
This should always be liquid and ideally at least worth 6 months of your monthly expenses.
Prioritise Life and Health Insurance
The horrors of the pandemic are bound to leave you anxious and stressed about the future. One way to deal with this is to prioritise your life and health insurance.
Do not compromise on adequate insurance protection. If you have a term plan, ensure you pay its premiums timely to prevent any policy lapse.
Similarly, ensure you have a medical insurance plan for yourself and your dependent family members to protect your money from getting drained in footing steep hospitalization bills.
Understand your needs and wants:
Once the dark clouds of debt begin to fade away and you find yourself financially in a better place, it is necessary to discipline your budgeting habits for your financial strategy to work the way you aspire it to.
While needs are justified and essential, wants are many times unnecessary. Spending on wants stems from desires. While it is not a bad idea to fulfil a few, it may not be wise to spend on all of them at once.
Strive to continue your essential investments:
Investments play a critical role in providing the right means to meet your financial goals and safeguard your future. When your today begins to rise, work harder to make your tomorrow shine.
Continue to save and invest in your future needs. On the unfortunate occasions of a cash crunch, prioritise between saving and spending accordingly.
Planning can be an intimidating process, even with a step-to-step guide. You are not alone in the process, trust your knowledge and seek out the right resources for verification.
There is no one shoe that fits all financial strategies, no one guide can help you assess the right plan for your own needs. Every individual and family warrants various different agendas and goals, depending on which, your plan might look different from that of another individual’s.
What is important to understand is that each activity you take up in this journey forms significant value addition to your financial growth. Creating a plan involves searching through your sought-out information and finding the best solutions.
With the right strategy planned, it will become easier for you to make the right decision at the right time for you and your family.
In the next series of this article, we will explore asset allocation and portfolio diversification for different financial goals i.e. selecting the right investment option for your immediate, short term and long term goals.
(This is the second article from a five-part series. Here is the first article – How To Plan Earnings)
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.