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Investing money, growing your money, and getting huge returns is something
everyone wants. And the easiest thing to do is to go on a website, sign up, and start
investing money monthly in some kind of index fund.
These are long-term funds which give you expected returns of maybe 7 to 10%, and
it will compound your money, and you will end up richer than you expect from today
in 30 years of time.
This is all a good thing to do, but many people forget that before you venture into the
investment game or savings game, you need to make sure you don't go broke.
So here are three things which you need to make sure you do before any kind of
investing, and this will ensure that you are not riding a wave which is going to crash.
Emergency Fund
First and foremost, you need to have some kind of emergency fund. Emergency fund
is like a runway of six months or one year if for any reason you lose your job or there
is some kind of huge emergency and you need to have some kind of money.
So if you have a runway of six months or a year so that your expenses like rent,
food, anything else which you can think of, can be covered, then you are in a good
place because you can lose a job, you can have a certain expenses, so you need
not worry.
Having an emergency cash is like a buffer for anything else, and six months to one
year is a nice time for you to get back rolling and get a new job or get out of any kind
of mishap which is happening.
This is the first step. Whenever you get a job, first step is to save as much as
possible to get your emergency fund in place.
Once you have covered this, you need to move to the second step.
Health Insurance
Many times, it is your health which gets impacted and because of which you lose a
lot of money. So you need a nice, simple, which covers everything which you can
think of and the premium is less. A health insurance for any kind of bad timing.
Maybe you don't get sick and you might think your money is wasted, but remember
the small premium of money is going to buy you peace of mind. So buy a health
insurance for yourself and also your family members who are dependent on you,
who are being taken care of with your money.
You need to make sure neither you nor any of your dependents can get sick and
wipe out your entire emergency fund or entire savings or entire investment plan. This
shouldn't happen. So buy a nice, high coverage health insurance for you and your
dependents. This way, you will not worry whether any kind of mishaps in the health
section occurs in your family.
Term Plan – Life Insurance
Further, moving on to the third and the final thing, you need to make sure that you
have a term plan or sometimes called a life insurance plan. This have a very low
premium and you need to take this for yourself because you are the earning member
of your family.
So you need to make sure you have this because in the event then there is an
unexpected death, your family is covered. So, the term insurance or the life
insurance should be covered for at least 20 or 25 times multiple of your annual
income.
So in the event something happens to you, the main sole earner of the family, your
family does not go into financial shock. Of course, there will be an emotional pain
which can't be cured. But at least they will be breathing and not on the roads.
They will be suffering, but not financially. So, these are the top three things in first
you need to make sure in your life. If all of these are checked marked, then and only
then you move to the savings or the investment plan for yourself.
Else you are just building something which does not have a solid foundation. And
without a foundation, the building crumbles. So go ahead and build all three of these
for yourself. And when you have done this, you're ready for the next chapter.
Conclusion
Your savings and financial independence are essential to live a peaceful and calm
life. Money doesn’t solve all your problems but it solves all your money problems.
So, sorting your money situation is the foremost thing you need to do.
When you are surrounded by all the gurus on finance, wherever you go like TikTok,
YouTube, etc, you are tempted to jump into any hot scheme. Beware, many of them might be scams or simply too advanced for your time. Slow down and get back to the basics.
Sometimes simple thing works and keeping your finances simple is a golden rule.
Too much and too complicated and you won’t even know where all your money is
going. Remember, if you don’t understand something, then you would either be
dumping the decision to the crowd or simply making the wrong decision. Your money
is hard earned, took you long time to come out of survival and now, you are moving
up the ladder. Don’t let lucrative things lure you and take away either your money or
your judgement.
When somethings are complex, getting pushed too hard – remember there might be
ulterior motives like scam or the person referring might be earning money from it.
Simple works and therefore it is often overlooked.
You keep looking for magic and the next thing that will earn you a million dollars
because you want a lottery which will get you rich quick. But those are exceptions
and not the norms.
The simple thing that works isn’t charming and hence many people end up not doing
them.
Don’t become like the crowd, get your basic sorted and do simple boring stuff. There
is a reason it has withstand the test of time, because it works.