Break the inertia: Government schemes can get you on the road to financial security, even with limited resources
inancial security is nothing but making sure people ‘plan’ for their—and their families’—future needs in terms of basic necessities, comforts and luxuries by judiciously choosing long-term savings and protection plans. Each of us has different types of family responsibilities and, more important, unique earning and spending levels. So if you want to ensure that your future lifestyle needs are met and protected, you must aim for financial independence and security.
“I earn well enough today, why bother about tomorrow?”
This is one of the most common questions I get to hear. It may sound logical at first; however, two important factors need to be carefully considered that make planning not a luxury but a necessity: Inflation or future rise in prices; and natural progression of needs, with either aspirational upgrades or increasing family responsibilities.
“I barely meet my expenses; hence, I cannot plan”
This is the second and very relevant point to address for a financial planner like me. In today’s times, with the rise in real-estate prices, rental rates and overall cost of living, especially in metros, a large chunk of one’s post-tax pay goes towards meeting EMIs and personal spending. Interestingly, the new generation of Indian consumers has also shed the conservative attitude towards taking loans that their parents may have had. This gen-next is not averse to borrowing (with high credit card spends) to meet their present-day aspirations; including ownership of high-end vehicles, foreign trips, and even liberal personal spends. This is leading to an interesting impact: lower ‘net savings’ despite rising levels of ‘gross earnings’. If one does not strike the right balance, there is a risk of financial imprudence—essentially, one will never be able to make a meaningful plan to attain future financial security.
All considered, it is my firm belief that we should all do the following:
- To begin with, break the inertia and optimise your limited resources.
- Something is better than nothing—so start small, but do start.
- If you can’t immediately provide for everything, identify your most critical priorities; for instance, life protection, medical coverage, pension creation, etc.
- Once you decide these, there are several lowcost options from not just the private sector but government-sponsored welfare schemes too.
A good start would be to take advantage of these government schemes and later aim to participate in private-sector offerings. It is also a good idea to suggest these to other deserving people who may not be financially savvy
Government welfare schemes are for one and all:
In today’s media blitz, I am sure you have heard of a host of plan options from leading private-sector mutual funds and insurance companies. But few people speak about the options that abound in government schemes, which anyone can avail (see table above).
Thus, if budget is a constraint, a good start would be to take advantage of these and later aim to participate in private-sector offerings as your capacity to save rises. In fact, it is also a good idea to suggest these schemes to our domestic help and other deserving people who may not be financially savvy.
Limited resources should not hamper your long-term planning. Make sure you prioritise key long-term goals and make a beginning, however small. To start with, take full advantage of government initiatives and schemes, and resolve to step up into mutual funds and private life insurance-related wealth products as and when your investible resources grow.
We at Ethical Advisers firmly believe investments should be based on well-researched facts and deep knowledge, not rumours. We welcome any questions that you may have on this or other topics related to long-term investing; feel free to contact us.