The previous blog here talked about how an Emergency Fund is the fail safe to create a financial plan. There were couple of friends, who pointed me to write about other pre-requisites. So what are the “Pre-requisites in creating a financial plan”? Do we drive just because we know to drive and have a helmet (the emergency fund)? No, right? We also need to insure our vehicle and insure ourselves, before we embark on a travel. Our financial planning journey is no different.
We first put the helmet on – which is create an Emergency Fund. Then we also ensure, we have Insured ourselves and the vehicle for the travel. Which is the same as Health Insurance (insuring our health), Term Insurance (Insuring our life) and Home Insurance (insuring your property).
Health Insurance
Health Insurance ensures that all surprise health expenses are covered. Health is the first thing that can actually put any plans off. This insurance will ensure that the family does not steer away from the financial plan when there is an emergency related to health. So the health insurance is safety net for you to execute your financial plan.
Term Insurance
In term insurance, we are covering life. So what happens to plan, if something were to happen to me. Term insurance ensures that my entire financial plan has a safety net which is not dependent on me. If the insurer were to pass away, the term insurance will cover the entire financial goals of your family.
Home Insurance
Home insurance (for those who own one) is the safety net for your real estate property. You can even have safety nets for your home loans called “Home Loan Insurance”.
Once you have covered these insurances and your safety net, your financial plans might have only minimal disruptions. Remember always that these steps can be done in parallel. In the next blog you will actually see a workflow to create an end to end financial plan.
