Got Money Phobia? How should we deal with it !!

Money and personal finance matters are very important however many of us fear in dealing with them and are clueless at the time of emergency, so let’s discuss what are the common fear most of us have and how can we overcome from these fears.

1. Stock Market is very risky: I will lose my money

Many of us feel that stock market is a very speculative place and there are very high chances of losing money. Those who have lost money in past or have no knowledge/experience have very high feeling about losing money in the market.

So, How to deal with it:  If you don’t have much knowledge then it is better to invest via mutual funds not directly through stocks. Still if you want to invest in stocks, it is better to first gain knowledge of the subject or take the help of a financial adviser. Also remember not to follow tips from anyone blindly. It is always wise to invest for the long term and not be influenced by short-term flux or churning.

2. I don’t have enough money to face a Medical Emergency

Many of us fear that if there is some serious medical issue in family, they may have to spend all their money to deal with it. It is actually true to some extent looking at the high cost of hospitalisation and medical care and if someone have critical illnesses or accidental injuries.

So, How to deal with it: Health Insurance is the answer. We all should have a basic health plan of, say, ₹5 lakh and get a bigger top-up plan of, say, ₹20 lakh with a deductible of ₹5 lakh. This will be cheaper than a single cover of ₹25 lakh. We can also create an emergency fund along with the basic health plan to cover the other expenses. It’s also important to buy critical illness and accident disability insurance plans which comes at small premiums and cover only those cases.

3. I won’t be self-dependent after my Retirement

More than half of Indians fear they will not be able to support themselves after their retirement, with 70% people expecting their children to support them, says one study.

So, How to deal with it: Proper retirement planning is must for every person. We should start saving more of our income by cutting down on non-essential expenses. Further we should ensure to invest in the right avenues so that our corpus is growing and able to beat inflation over the longer duration. It is always wise to take the help of a financial adviser. Also, we can explore additional sources of income to supplement our existing income.

4. I am in a Debt trap

This is a world of EMI and Credit cards. We keep on buying things through EMIs, sometime even if that is not required. Upgrading to a new IPhone or going for an exotic foreign vacation so as to put the pictures on Facebook/Instagram is not very uncommon now days. This temptation to buy on credit often results in several loans and falling into a debt trap.

So, How to deal with it: Be a sensible buyer is the KEY. Everything in the market is for us only, but it does not means that we should be buying anything or everything. We need to ensure that total EMIs should not be more than 50% of our income. If we already have lot of loans, a proper plan should be prepared to repay them, starting with the most expensive ones like a credit card bills or personal loan, and moving to car and education loans. Few Loans like home loan and education loans have tax benefits so we can continue however if the rates are high or we have capacity we can prepay the same.

5. I will be fired from my Job

In the current competitive market fear of losing job is very common, technology is replacing humans and many people become outdated/redundant in this kind of environment. Economic recession, cost cutting are also other reasons for people fearing loss of job. So If you are worried it may be due to one or more of these indicators you may have witnessed.

So, How to deal with it: we should always have emergency corpus to meet our regular monthly expenses in case of loss of jobs. We can have that corpus for 3 months to 1 year depending upon which industry we are working with.  Further we should keep on updating our skills and have knowledge about what is going on in our industries and sector so as to be ready to face these eventualities.

Finally the simplest way to manage these kind of financial fears is to be organised and prepare well for events and eventualities. The help of experts is always better if we don’t have much understanding of the things.

After Body and Mind, Check your Financial Fitness Also

This week Our Prime Minister announced fit India Campaign “Body fit hai toh mind hit hai (If the body is fit, the mind is fit),” said Prime Minister Narendra Modi while launching ‘Fit India Campaign’ on National Sports Day celebrated every year on the birth anniversary of hockey wizard Dhyan Chand. 

In this day and age, tracking our health stats is very important and we all put efforts to make sure that our body is healthy. But what about our financial fitness?

Let us look at major parameters to know how healthy we are financially:

1. Spending Less then Income:

To be financial healthy it is very important that on cash flow basis we are in positive numbers. Means our monthly expenses should be less than our monthly income.

2. Paying all the Bills on time:

There are many utility/household bills like electricity, gas, phone, Credit card bills. Paying all the bills on time and in full is the good indicators of financial fitness.

3. Have Emergency Fund:

There are emergencies which comes without any prior announcements like medical emergency, job loss etc. In general, the more inconsistent our income is and the more dependents we have, the larger an emergency-fund cushion required. As a thumb rule we should have 3-6 months expenses as emergency fund in liquid mutual funds/savings accounts.

4. Have Sustainable EMIs:

Debt-to-income ratio (DTI) is a figure lenders use to gauge how well we manage our debt. To calculate DTI, add up monthly debt payments and then divide the sum by gross monthly income, the lower the DTI, the better it is. It should not be more than 40% in normal case.

5. Have a Good Credit Score:

Similar to a DTI, credit score is another way lenders measure how likely we will be able to repay our loan — and a lower score usually means higher interest rates on everything from mortgage to credit cards. Normally the credit score should be above 750+ in the scale of 900 to get loans easily at decent rates.

6. Have adequate Insurance:

Covering the risk is another important aspect to be healthy. Health Insurance, Life Insurance and Accidental coverage are important insurances. Having appropriate insurance allows individuals to be resilient in the face of unexpected expenses, such as the death of a loved one or a medical emergency. Every person should have appropriate insurance based on his age, income, number of dependents and risk exposure etc.

7. Have Sufficient Retirement Savings:

In today’s world when even government employees don’t have fixed benefits plan it is all more important to have Retirement savings looking at the socio economic structure and inflation. We all need to have sufficient retirement kitty as our longevity of age is also going up.

To keep our mind fit we need to be stress free. Financial wellness is the most important factor to remain stress free hence we all need to ensure that along with our body and mind we are financially fit also.