You Live Only Once, Keep it Stress free

Being thankful for what we have is one of the most beautiful feelings. But we often take this positivity too far. Very recently, I was talking to a friend about getting our residential complex insured against Fire. The friend dismissed my concerns saying that I am fretting for no reason and even her building is not insured. At the end of it, I felt like the pessimist in the argument, over-worrying as if hell is just waiting to break on us.

That evening, I read about fire in this high-profile high-rise and immediately called up my friend. It was my turn to make even. Well, not really. The friend conceded to my concern. She said that had it not been for our little chat, she would have brushed aside this news. But not now. She is going to press for fire safety & insurance to be followed to the T in her building.

Great! I thought as I hung up the phone and started reading about why we overlook Contingency Planning. I came across this interesting interview of Author Robert Meyer of the book The Ostrich Paradox – Why we underprepare for Disasters. He called optimism pretty dangerous – “excessive optimism is probably the most damaging one. The idea that triggers action is worry or fear over something bad happening to us, and if it never hits the radar screen, we’re not going to prepare for it. And so the more we ignore worst case scenarios, the more we think that bad things are things that happen to other people & not to us, the less able we are to prepare’’. (Read the full interview here: http://wwno.org/post/why-arent-humans-better-prepared-natural-disasters)

True said the author. We always assume that a calamity won’t hit us. If there’s fire, it would be in another building. If there’s theft, it would be in neighbor’s. If there’s accident, it would be another guy on the road, not us. Due to this, we never equip ourselves financially for the emergencies. However, there won’t be a sane financial plan, unless it accounts for an Emergency Fund.

What is an Emergency Fund?

A Girl Having an Accident

An Emergency Fund is the pool of money that we keep aside for unannounced large expenses so that we don’t have to compromise on living expenses. Emergency could knock in any form like loss of job, major house repair, sudden ailment in family, unexpected travel. The fund should be easily accessible almost like cash since you may not have the time to access investments.

The fund should be 3 to 6 months of your monthly running expenses. For example, if your monthly expenditure is Rs. 1 lac, then Emergency fund should be between Rs. 3 to 6 lacs. Having said this, it is not easy to set aside a large sum just like that. It requires a bit of planning.

How should you create an Emergency fund?

To create an Emergency Fund, you have to do some math. A quick step by step will help here.

  1. Chart your monthly income and expenses: This must include the essentials like rent, fees etc. plus other discretionary expenditures like shopping, movie, eating out.
  2. Set your amount for the Fund:Consider the total of all essentials in a month. That total will give you a sense of how much you need to keep afloat in case of any emergency.
  3. Work out a Saving Plan: To accumulate a large sum, you need to work out a strategy. Evaluate how much is ok to keep aside every month and how long you need to keep saving to achieve the set amount.
  4. Put Emergency Fund in accessible place: The money should be available even at mid night if required. So you can partly keep it in cash, partly in a bank and some in maybe a liquid fund (more on Liquid Fund later).
  5. Stay on Track: You may have a festive month or new (school) session month which may prevent putting money aside but ensure that you are back to saving from next month on. Discipline is key in securing yourself.

I am doing Emergency Fund building for myself and can vouch for the peace of mind I have had lately. After all, it’s one life & those gloomy skies are better off at bay.

Photo Credit: <a href=”https://www.freepik.com/free-vector/a-girl-having-an-accident_2188407.htm”>Designed by Freepik</a>

Millennial Mom

Have you often caught yourself saying, “Life’s one heck of a bitch right now”. Finding your plates too full or sometimes too much to juggle between – you must be a Millennial Mom.

Millennial Moms have unconventional jobs, role demands, work schedules, and therefore a much higher need to be financially savvy. We are doing a series on how Millennial Moms with varying roles should be dealing with money. Here’s the piece for our first role.

Role 1: Moms who run the Media

Graphic Designers, TV anchors, Executive Producer, Creative Directors, Director of Photography… These mom’s have challenging careers and work differently from regular employed workforce. The work comes in erratic shifts, for days at a stretch sometimes and sporadically.

Most times work comes on assignment basis in the creative field. While the pays are handsome, the receiving g date is not fixed like the salary. How can one then make the best calls in managing money. Here’s a practical guide.

Pay yourself first

Freelancers are very much like the entrepreneurs. It is important to reward yourself to keep going. Take aside your salary to last you your next expected payment before you use it up in clearing the dues.

Use apps to track your payment or follow ups

A hard part of freelancing is deferred payments which you have to diligently follow up. The right apps can keep reminding you for follow ups and keep a note of your money reserves vis a vis expenses.

Emergency fund

We can’t stress more about the need of emergency fund for everyone and its even dire if your pay-checks are irregular. Emergency funds can be limited for salaried individuals who have medi-claims and other cover. But it’s critical if you are independent.

Using the upfront payment mode

When making large purchases like car, camera and heavy equipments, prefer to use the upfront payment option. Since you can time the purchase after a big payment credit, paying lumpsum will earn you rewards like bigger discounts and cash backs. You also avoid the EMI headache and heavy interest rates charged on taking loan.

Don’t compromise on Investment

Not having regularity in payments should not become an excuse to not invest. Make lumpsum investments if recurring is not possible.

Financial Advisor

The financial terms may scare you or you may be very busy to figure the investment tools. Also in freelancing, there are no employee benefits like PF, Gratuity etc. you must engage an advisor to plan your insurance, retirement and other investments.

Get a life cover

A lot of people misunderstand Insurance as an investment tool only. While it can give returns but primary use of Insurance should be of covering your life. Absence of life cover and medi claim can land you in quite a spot in case of any uncertainties.