Our life is filled with many planed events and some unpredictable ones! though we plan for things many go unplanned . It is fine with small routine things , but life gives us shock by some unpredictable events that shake our personal and financial life,so, we better be ready to face it!
Life has become much unpredictable these days! With change in employment prospects, way of working, environmental changes, lifestyle changes , we are exposed to uncertainties. When we face them , they try to knock us down. We get emotional support from our family and friends and though they extend help financially too, no one likes to take it .
So, why Contingency management is important ?
While planning your finances, you take care of your goals and goal based financial planning, you look after ways to get good returns from your invests too. But, while doing this, when emergencies occur,all this planning and ongoing investments hamper. Your loans taken, regular investments, future goals suffer and your total attention goes towards meeting daily and monthly expenses.
Contingency management helps you to be ‘financially independent during emergencies’hey assure you and family, that your monthly expenses and liabilities will be taken care . When this is taken care, you pay full attention to solutions to face that situation.
Now, lets see, some major type of contingencies that people face today and way to plan for them.
- Job Loss or pay cut in your employment or major losses in your business:
We have seen many big corporate asking their employees to resign forcefully. Many have experienced pay cut also. Last year, one of the big airline company also did the same with its staff and all employees started facing troubles. Many had ongoing home loans, some had aged parents to look after, some were single earning members of the family and what not.
On the other hand, we look at start ups everywhere. People start their own ventures. Initially they need to act wise and take right decisions and try not to face any loss.
When income halts for the reason not in your hands, your personal and household expenses suffer big time. Loans, tuition fees, electricity bills, medical bills etc have to be paid on time.
This can happen with anybody. In this situation, you should look out for way of getting new job or how to make good of losses, and should not worry about household expenses.
For this, you should create a ‘contingency fund’. This fund should be equivalent to your six months household expenses . E.g. if your monthly expenses are Rs 50,000, then you should have contingency fund of Rs. 6 lakhs. By this, you can pay off your bills, loans EMIs etc and in six months, you will somehow manage to get way out from the situation.
You can create this fund by investment in ‘Liquid mutual funds’. Here, you can get your money back in T+1 day in your linked bank account. But, please remember that, contingency fund must be used for its very purpose only and not for any discretionary expenses.
2. Emotional and financial loss due to accidents:
When anyone in a family meets with accident, its creates emotionally, and physically challenging situation. When earning member of the family meets with it, it creates ‘financial burden ‘also.
Mere hairline fracture on a leg can create temporary disability of a person to go his/he duty. People working in manufacturing sector are prone to accidents everyday. Their health insurance will take care of its medical costs, but what about the ‘loss of pay’ due to temporary or permanent disability due to injuries? If such situation arises, then that person’s dependents face emotional, physical and financial challenges for a long time.
So, the solution is to take ‘Personal Accident Insurance’ for you!
This type of insurance takes care of financial help to your family till the time you fully recover. It gives compensation to your family. Loss of pay is taken care by giving your family , a lumpsum amount as a part of policy cover or in full. You can buy it online directly from insurance provider. Please read and understand terms and conditions of the policy before purchasing. You can buy it online directly from insurance provider.
3. Medical emergencies and its cost:
People are prone to many deceases due to pollution, lifestyle changes , long hours of working and tensions due to competition in the market.
This causes many deceases like hyper tension, high blood pressure etc. Some deceases occur suddenly e.g brain hemorrhage , paralysis, cancer etc. These deceases and illness are tough to handle emotionally, physically and financially. When anyone in a family suffers from any such ailment, we try to look out of best possible treatment and cure on time. And in all this, medical costs get us worried. So, at a time when one should look after a patient and stand strong emotionally and physically, financial burden makes us feel helpless.
So, the solution to this is, get ‘family floater health insurance‘. Here, you insure yourself and your family against all the medical costs which may occur in future by paying yearly premium.
Now, some will say, they already have medi claim benefits from their respective employer. But, think, what if, your employer change its policies about mediclaim benefits to its staff?
What if you change your job and your new employer doesn’t have provision to give such benefits? and even if your new employer provides such benefits, till the end of probation period, you wont be entitled to any such benefit. If the probation period is six months to one year, then for such a long period, you and your family will be without any health insurance and it is harmful .
On the other hand, as your age increases, you get prone to many deceases such as hyper tension, diabetes, etc. IF you opt for health insurance at that time, you get it with high premium, and with other clauses such as high co-payment percentage, etc. Hence, its costly for you not to take your personal health insurance.
So, get one personal health insurance for you and family.
In our life, many things ans situations are not in our hand and sometimes are beyond our imagination. But, we can be wiser and plan for them well so that we and our dependents suffer the least!