Secure Your Wage Increase

In the rapidly evolving world, financial planning has become a critical aspect of one's life. Here's a breakdown of key factors to consider for a secure future.

Firstly, retirement planning is essential, especially as life expectancy continues to increase, with many individuals living well beyond 80 years. To ensure a comfortable retirement, it's advisable to plan for 20-25 years post-retirement. Annuities can be a useful tool in this regard, with ideally 40-50% of retirement savings invested in them.

Investment products, such as Unit-linked Investment Plans (ULIPs), have shown promising returns over the past 20 years. Equity-linked ULIPs have fetched an average return of 10-12%, while debt funds have returned 6-8%. However, it's important to note that past performance is not always indicative of future results.

When it comes to life insurance, it's recommended to have a coverage of ₹1 crore if earning ₹10 lakh a year. A 30-year-old can pay ₹10,000 a year for ₹1 crore in term insurance, but the premium increases to ₹20,000 a year if purchased at age 40. A portion of a bonus or raise can be redirected towards enhancing insurance coverage, particularly term insurance.

The cost of living and essentials can increase significantly due to inflation. For instance, a monthly expense of ₹70,000 today could climb to over ₹4 lakh in 30 years. Moreover, education inflation often outpaces food and retail inflation, meaning that the cost of a degree that costs ₹5 lakh today could cost ₹35 lakh in 10 years.

It's concerning that consumers allocate only a percentage of their monthly income to investment products, despite growing responsibilities and obligations. A PwC report highlights this trend, showing a widening gap between household financial liabilities and net financial savings.

A study found that 46% of Indians depend on personal research for life insurance decisions, potentially overlooking major life events when reassessing coverage. Self-employed and affluent individuals are at a higher risk of under-insurance, with 43% admitting they haven't reassessed their coverage.

The Reserve Bank of India's annual report for 2023-24 shows a widening gap between household financial liabilities (6.1% of GNDI) and net financial savings (5.1%). This highlights the need for careful financial planning and regular reassessment of one's insurance coverage.

Lastly, it's essential to consider health and life cover, as rising healthcare costs could potentially burn a hole in savings. Ideally, life insurance cover should be 10-12 times your annual salary to adequately protect present and potential financial liabilities. The maturity amount of ULIPs is tax-free, making it suitable for medium-term investment.

In conclusion, financial planning is a crucial aspect of ensuring a secure future. By understanding these key factors and regularly reassessing one's insurance coverage, individuals can make informed decisions to secure their financial wellbeing.