Top-3 financial foundation risks every Investor needs to tackle immediately.
The black swan event of COVID-19 has taken the world by a complete surprise and exposed you and many people across to assess, manage, and mitigate some of the foundational risks associated with your financial lives. Everyone faces risks of uncertainty and the possibility of financial losses good enough to shake your financial pyramid and even crush your family’s financial security. Therefore having a risk management plan to fix some of the important foundational financial risks will enable you to have more comprehensive control over uncertainty and financial wounds.
Let's look at the Top-3 foundational financial risks associated with your financial pyramid and how you can prepare for them:-
1. Risk of High Uncertain Medical Expenses:
If you were to be told that you need to undergo an urgent surgery which is a literal matter of life and death for you or your any family member and the cost of the procedure is Rs.12 lakhs and to make things worse, you don’t even have medical insurance! Now what?
That is how you can have a substantial amount saved for your short or long term goals but a simple miss on saving for this health uncertainty can easily leave a battering dent in your finances. But before rushing to buy any health cover for you and your family it’s important to check some basic parameters like knowing your needed risk cover sum, claim-settlement ratio, network hospitals, pre and post hospitalization, and other essentials.
2. Risk of Premature Death and Disability:
Given the gravity of the situation, COVID 19 has put people under into people more than ever before are aware and concerned about their and their families' financial survival in unpredictable times. If you are the primary income earner of your household and you not being able to earn anymore due to an accident or any specific disability brings in financial hardships to your family and if others depend on you financially or you have debt then it's crucial for you to have a life as well as disability insurance. Having disability insurance is not always prioritized but if you are an earning member of the family then it surely calls for profound understanding. Having Insurance is about transferring your life risks which you can’t afford it to a company that can afford it. There are various permutation and combination of life insurance products available and you need to be precise with your requirements before taking it. It is ideal to keep your investment and insurance separate but again it also matters what is it that you are looking for.
3. Risk of inadequate cash flow:
At a time where there are layoffs, pay cuts, job cuts, fall in profits for business owners, lower interest rates on deposits and other issues the need of liquidity is looking all-time higher and it has also highlighted the mistake done by the majority of the people who ignored or didn’t keep sufficient liquid assets to maintain adequate cash flows.
Budgeting is nothing but balancing your expenses with your income and it can help you fix this issue. Before it was believed that three months of salary worth in your bank account or in liquid assets is sufficient but now it’s time to re-evaluate and discuss your budgeting elements with your family as each individual's financial story is unique.
Although it may seem challenging or perhaps even pointless to live below your means though it’s important to acknowledge some prominent financial risks life pose and plan your financial roadmap accordingly with the help of a financial advisor who can help you understand your money habits as they come with an expertise in money sphere and can help you draw out your financial roadmap to thrive in chaos.