Fears are dreadful especially when it is about your own life and your hard-earned money. While fear for our and the lives of our loved one is universal, financial fear crops up due to our carelessness and mismanagement of finances. It is thus crucial to identify your money fears at the right time and take remedial steps before they start disrupting your life on a regular basis. It is also crucial to have the courage to confront your fears and look for ways to overcome them. Take a look at a few common financial fears:
In an uncertain world, the fear of losing a job is perhaps the most dreadful. After all, who wants to forego a regular and stable income? Job loss is distressing as meeting your daily but most important expenses like medical costs or loan repayments becomes difficult. A little preparation can help you sail through this tough phase of life.
To mitigate such a scenario you must start building a contingency fund early in your career. In fact, this build-up is most rewarding if it starts as soon as you start earning. Your contingency fund should be good enough to meet your regular expenses for at least 6 to 8 months. You can consider increasing this fund every year as and when your salary increases. Liquid funds, saving bank account and recurring deposits are some of the effective ways to build a contingency fund. You can also consider learning a new skill or gaining experience in some other field. This will help you making the next career move.
Losing All Your Money In Dealing With Unexpected Health Woes
Life is full of unexpected events, and medical emergency is one such event. It comes without warning and has the potential to drain your finances. Rise in lifestyle diseases and medical costs are behind this fear. To overcome this fear, it is extremely important to buy adequate health cover, and most importantly to understand all the terms and conditions of the policy you bought to use it in the most effective way when the need arises. You should also assess the health risk regularly as you get closer to retirement and increase the insurance cover keeping inflation in mind.
Being Dependent On Your Children In Golden Years
Whether you have just begun your career or nearing retirement, the fear of being dependent or not having a regular income in the golden years worries almost all. This fear is valid as no one wants to be dependent on anyone for their day to day expenses or important needs. But this fear can easily be handled if you plan well in advance. It requires right financial planning and a regular review to build adequate funds for your retirement needs. Reviewing will ensure that your retirement corpus assessment remains realistic and achievable with a change in time.
You can build this fund by investing in right investment avenues regularly and religiously. While doing so, focus on inflation and the real rate of return on investment. It is important to create a retirement corpus after factoring in expected expenses, cost of living and value of money at the time of your retirement.
Getting Into A Debt Trap
Debt helps you in accomplishing your financial goals. It is important to assess how much debt you can repay before you apply for a loan. Repaying a loan by taking another one is not a great idea as you may fall into a debt trap. The fear of falling into a debt trap may keep you away from taking new loan for important needs.
Managing this is however not an impossible task. You just have to plan your loan in line with your repaying capacity. Also, go for loans only for things which are a necessity and not a luxury. You can invest in suitable short-term options to build fund for luxury items. After availing a loan, ensure you have repayment plan in place. It would be wise to repay your EMIs on time and stay from the fear of getting into a debt trap.
Who Will Take Care OF My Family In My Absence?
If you are the only breadwinner in your family, the fear of putting your family in a financial distress may give you sleepless nights. You will worry about your children’s education and marriage expenses, loans repayment in an unfortunate event of your demise. To overcome this fear, it is important that you understand the importance of Term Insurance. Term Insurance will work as an income replacement tool for your family members in case of your demise. It will not only take care of the regular expenses, but will also help your family members live a financially independent and respected life.
The writer is CEO, BankBazaar.com
BankBazaar.com is a leading online marketplace in India that helps consumers compare and apply for credit card, personal loan, home loan, car loan, and insurance.