The process of investment is a journey itself wherein the investor will first set a financial goal and begin to put aside the money towards achieving the set goal. Most of the people set their investment goal to purchase an asset like house, property or car and so on. Before setting off with the investment journey it is important to take care of a certain set of things to financially safeguard ourselves as well as our dear ones to avoid any windfall.
What is an Investment?
The term investment refers to putting money to work either to start a project or to expand an existing one. It is a mechanism which is used for generating future income. In terms of finance, the word investment includes the purchase of property, equities or bonds amongst several things.
Let's understand the Important Things to Do Before Starting Investment Journey.
Having life insurance coverage is an important thing to protect and safeguard the dependents in case any unforeseen things happen to the investor. As having insurance will ensure that the lives of the family members will be financially secure in case of an emergency.
Most of the insurance companies provide two kinds of policies and they are investment cum risk policies and pure risk cover. It is better to go with pure risk cover which is also known as term plans with add-on facilities like accidental death cover, disability coverage, critical illness coverage which will meet the specifications of the investor.
Note: Insurance should only be used for protection purpose and should not be treated and combined with investment.
Setting Up an Emergency Fund
It is very important to have an emergency fund as it comes in handy during emergency times be it a health issue or a job loss or any kind of financial windfall. One should take care that the amount parked in the emergency fund should be sufficient enough to combat the cash crunch situation.
The next question which arises in an investors mind is
How much of amount to set aside for an emergency fund?
If in case an investor is single, then the amount will be less and you can keep aside three months salary as an emergency fund. If in case an investor is married (without children) then it is better to allocate at least six months salary amount towards an emergency fund.
If you are married with children then 12 months of salary amount should be allocated in the corpus to meet financial uncertainties.
It is better to keep this emergency fund in liquid investments as it will ease the process at the time of withdrawal and hence can be encased quickly. An investor can either choose to park their emergency corpus fund in a savings account or liquid mutual fund and so on.
Getting a Health Insurance
Today's sedentary lifestyle of most of the job goers has increased the number of health ailments which they have to undergo and with the growing healthcare expenses even a single day hospitalization can also make a big hole in your pocket. It is better to have health insurance in place to tackle an unexpected health issue if it arises.
Most of the corporate employees will be covered under the corporate health care plan. It is advised to purchase an additional health cover for yourself as the one covered by the company will come to end during a change in employment.
Go for a plan which offers a wide range of coverage and includes hospitalization covering all the expenses like daycare procedure, pre and post hospitalization charges and so on.
Apart from safeguarding yourself, do cover all your family members with a health care insurance plan for this you can opt for a family floater health policy instead of going for an individual health plan. The family floater health policy comes up with an advantage as it will not have any sub-limits member wise.
If you have elderly parents at home then go for a separate health care plan as insurance companies have certain limitations while providing coverage for senior citizens.