Mini Financial Plan for Standard Families
Article written by Sherin Dev; Follow me in Twitter or be a fan in Facebook
Every family, whether rich or ordinary, requires a financial plan. No doubts. There are lots of false assumptions, myths and ignorance in this area. Most of the people wrongly believe that, financial planning is only practicable and desirable for families with high earnings. They believe those families with sizable income can only spare enough funds to create financial planning through investing lot in various investment products. Most of them wrongly believe that, financial planning means only investing and which required high earnings. Ignorance to the real meaning of what a financial plan is, the major culprit to drag back most of the families from creating one to secure their entire family and prevent spending, savings or relying on online payday loans.
I too agree that, one step or area in financial planning process is, investing. Yes, it requires considerable amount of money to invest in various instruments regularly to build wealth for long term. But, what would happen if a family have one bread winner and lead very standard life which means their income is sufficient only for each month’s expenses? Here is the importance of thinking about a financial plan that suitable for such families to all the means. This article tells you how to create a 'mini financial plan' that works best for standard families by providing all the benefits of a real financial planning.
Financial planning generally meant financial safety of a family from various emergencies like sudden demise of main earner in a family or costly hospitalization expenses etc. Another goal is to create an emergency fund to meet contingencies. In a Mini Financial Plan, savings and investments occur in the same time and both together work as an emergency fund with high liquidity.
Generally, involvement of a highly experienced professional required to create a financial plan for families. But, a Mini Financial Plan can be planned and executed by anyone who have standard intelligence and have capacity to identify the income and financial requirements of family at present and future with or without his presence. Mini financial plan is a simple three step process that anyone can easily create.
First step in a Mini Financial Plan - Safety of Family
First step of a mini financial plan is the planning of family safety. This means safety against any happening contingencies due to the untimely demise of main earner in the family. Insurance is the best option to protect a family from such situations. It is always not possible to subscribe an endowment plan within the reach of everyone. An alternative to this problem is the subscription of a cheap term insurance which required lower premium but high insurance. Paying little premium in each year or half yearly, ensures your family will be protected from the above contingencies.
Second step - Protection against hospitalization charges
This is the second most important element in a Mini Financial Plan. Having a health insurance always ensures protection from highly expensive medical requirements that happen to any of the family members. Subscribing family floater insurance is the best option to fulfill these requirements. This is not only cheapest, but best suitable by protecting each and every member in a family! Such policies generally offer cash less treatments to the policy holders and their family members or immediate reimbursement from the insurer. One should choose right insurer by considering their service quality, reputation and offered facilities.
Third and Final step - Emergency fund creation through savings which also works as investments
Third and final essential elements in a Mini Financial Plan is the creation of emergency fund which also should work as an investment by generating further income time to time. A savings plan can be started by equally contributing little amounts in each month to a or two right investment instruments. Such funds should have high liquidity that generally insurance companies not offering. One of the best way is open a recurring deposit account where you put small amount of money regularly. Alternatively one can buy units of mutual funds or index funds in small tranches through the Systematic Investment Plan (SIP) route or using Dollar Cost Averaging (DSA). This would grow your money over a period of time using the power of compounding!
To get more information on financial planning, here is a classic financial planning process chart for you. Have a look. It would provide you exact ideas on the real steps involved in it.
If you are the one not yet done a financial plan, why to wait for the same now? You now having all the required information on what a financial planning is and who all can start it. Plan and start it now to get financial prosperity to all in your family.
14 comments so far! Expect yours now!:
You can find lots of useful tips concerning family financial plans. But I think most important is the fact that financial plan should cover all areas of your financial needs and should result in the achievement of your goals. The scope should cover areas such as risk management and insurance techniques that would protect your goals against any unforeseen calamity. It should also cover the education needs of your children.
Your plan should be proactive enough to accommodate unexpected financial events that may have negative impact on your plan. When evolving your financial plan, make sure you don’t miss out anything.
Just reading the above article and thinking how a 'mini financial plan'works best for standard families. Also need some more explanation about the Emergency fund creation through savings which also works as investments
I think it is best to have a monthly budget that a family reviews together. Stick to an envelope system like Dave Ramsey suggests and pay cash for everything. If you can't pay with cash, you can't afford it. Stay out of debt.
It is imperative that every family must have a financial plan. This does not make it easy for them to spend money but it also brings peace and avoid the family to waste money and also they are able to enjoy life. This plan depends on the size of the family and the total monthly income.
We can easily identify a family that not have a financial plan. such families generally run out of money and start lending money from other continuously. If have a plan, they can well prepare in advance and live in that budget. Once of the beauty of having budget is the possibility of saving that generally not happen with families with above no financial plan status !
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A financial plan should be like that which covers the whole financial issues for a family each and every thing should be considers well in it else it is of no use. It should be like that with which all the goals of a family should be achieved.
Third and final essential elements in a Mini Financial Plan is the creation of emergency fund which also should work as an investment by generating further income time to time.
Plans are really necessary for the people and for the small families it is really needed so that they can work in their own budget
family members or immediate reimbursement from the insurer. One should choose right insurer by considering their service quality, reputation and offered facilities.generally offer cash less treatments to the policy holders and their
The plan is no doubt very effective.
In today's world, it is very important for every one to plan some financial strategies in order to make our future secure and safe. Such mini financial plan create savings, which would be very helpful for us at time of an emergency. Thanks.
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You are absolutely right that Mini Financial Plan can be planned and executed by anyone who have standard intelligence and have capacity to identify the income and financial requirements of family.
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