How to overcome four financial fears of life?

In our previous article on four financial fears of life, we had discussed the four major financial fears of life. Hence, if you haven’t read it, then it is highly recommended that you first go through that article before reading this one. In this article, we would discuss how you can overcome those four major financial fears of life. So, let’s get started.

Answer for “What if I cannot work till the age of 60”?

There are two ways to overcome this fear, which you can either use individually or together.

In the case of temporary or permanent disability, having disability insurance would prove advantageous. The disability insurance or personal accident insurance provides you with an assured lump sum amount if you have a total temporary disability or total permanent disability. It is important to know that taking up such an insurance policy, should cover maximum instances. It is still fine if the temporary disability is not covered but it must cover permanent disability. The reason for the same is that in case of temporary disability, you would be able to resume work when you get back to your original health. However, in case of permanent disability, there is a strong possibility that you cannot work at all. The second way to overcome this is to have a well-planned investment in mutual funds. This will help you not to rely heavily on insurance as the latter does have a lot of exclusions. So, it is advisable to have a combination of both personal accident insurance as well as mutual fund investments.

Answer for “What if I cannot live up to the age of 60”?

The best way to overcome this fear is to have a life insurance policy in place. Having it would give you an assurance that your dependents will cope with financial loss in your absence. There are two types of life insurance policies, one being pure term and the other being traditional one i.e. endowment, money back, unit-linked insurance plans (ULIPs).

Hence, it is advisable to have a pure term plan. Does it mean that everyone should have it? The answer is ‘no’. Those who have no dependents or who do not contribute towards family income don’t need any life insurance. Now, you may ask how much do I need? This is something that would depend upon your current expenses, the standard of living, your financial goals and also, whether you have any outstanding loans or not. It is also advisable to review the same annually to account for any changes.

Answer for “What if my children do not get the right foundation?”

Education is the perfect way to create the right foundation for your children. It is really important that your children pursue what they truly desire. Hence, in order to overcome this fear, you need to properly plan for your child’s education. You need to decide as to what is the kind of career that interests your child. Then just do a little bit of research about it, to understand how much does it costs in today’s terms. After that, you will have to adjust this amount for education inflation. Based on your risk appetite, you need to derive a rate of return, which will help you calculate the systematic investment plan (SIP) or lump sum amount you require to invest today to get the required corpus for your child’s education. Here, mutual funds can help you in a better manner to overcome this fear.

Answer for “What if I outlive my retirement corpus”?

This is one of the major problems that are faced by people these days but they simply ignore it due to the optimistic attitude towards the way they are approaching their finances.

However, it is really important to address this issue so that you would be able to find a solution to overcome this fear. To overcome this fear, you need to have a retirement plan in place. Proper retirement planning would help you to know the amount that is ideal for you to retire with. Then you would need to find out the required amount that you need to invest today to achieve the computed retirement corpus. Said that all these should be done by taking inflation into account. Many a time, people assume life expectancy in a wrong way. It is always better to be on a conservative end and expect the life expectancy to be 100 years. Investment in mutual funds would help you to achieve your desired corpus and a proper retirement plan helps you overcome the fear of outliving your retirement corpus.