One thing that the COVID-19 pandemic has taught people across the world and especially in India is the need to develop immunity-both health and financial. While health immunity is important to ward off the severity of various types of infections or other issues, financial immunity helps in dealing with the financial impact of any kind of problem. Savings, investments, and insurance are the three key areas where Indians are focusing in their efforts to build financial immunity, a survey commissioned by SBI Life Insurance revealed.
What does Financial Immunity Mean?
Financial immunity refers to the ability to withstand a sudden fall or stop of one’s regular income or sudden massive expenses. It means building a corpus of funds that is adequate to compensate for the loss of income or meeting sudden hefty expenses. This is achievable but over time through disciplined spending, regular savings, and wise investing.
Finding Financial Immunity Level
An important step in building financial immunity is to identify the level at which you can continue to live your normal lifestyle while having the necessary resources to deal with any financial upheaval in your life. Rising medical costs, instability of jobs, and health-related concerns are the primary factors troubling Indians and making them look towards building financial immunity, the SBI Life survey reveals.
You need to calculate your financial immunity online by considering factors like your current age and income, planned age of retirement, the investments made by you, and additional expenses that are likely to come up in the future. One can even use an online financial immunity calculator to find out the level. By filling in details like the current annual income, monthly savings, present value of investments and the planned age of retirement one can find out about the corpus that is required to meet future funding needs.
Building Financial Immunity
Once you are clear about how much funds or corpus you need to have financial immunity, you can take steps to build that level.
- Review Your Budgets and Expenses– This involves reviewing your expenses and savings and making the necessary changes to boost your savings levels while doing away with unnecessary expenses. The aim is to cut out the extras and save a little more for dealing with problems.
- Create an Emergency Fund-A portion of your savings should be kept handy or deposited in accessible mediums to deal with any kind of financial emergency especially health issues.
- Invest Wisely– The next step is to make investments in not one but several options to get varied returns. You can choose from a variety of options like mutual funds, stocks or bonds or unit linked insurance plans based on your financial goals and risk appetite.
- Buy Health and Comprehensive Insurance Plan-Buy an insurance policy that ensures the financial stability of your family in your absence. You can even take additional protection cover for accidents, critical illness, and disability to ensure that you do not have to use up all your savings for dealing with such medical expenses.
To conclude, calculating and building financial immunity is important to deal with any kind of problem. All it requires is a careful review of the way you spend and invest while buying insurance products to safeguard the financial safety of your loved ones. The increased focus on saving and building a corpus for the rainy days is an essential part of the financial immunity building.