Financial Planning For Single Investors – Axis Direct
May 16, 2019 | Source: www.dnaindia.com
How To Manage Finances If You Are Single?
Money is both a macro as well as a micro concept when it comes to personal finance. Which means while the general personal finance adages apply to all, in certain situations, it's better to go by the specific ones that apply to a particular situation. Take for instance when you are happily single.
Until a few years ago, being single was considered a taboo in the society, especially if you were a single woman in her 30s or above. If you are single, financially independent, don't have kids, here are a few things to keep in mind regarding your money matters.
You cannot just depend upon your employer to give medical cover. In the future, the employer's policy may change. Hence, you cannot just depend on their medical cover. The amount you need will fairly depend on your individual needs.
But do keep in mind that you have at least Rs 3-5 lakh as medical insurance and also have adequate critical illness cover.
Another thing to remember is the personal accident cover. Buy a personal accident insurance policy, read the terms and see that it not only provides benefits of hospitalisation but also covers the loss of pay arising out of temporary disability.
Make sure you choose the instrument which offers good liquidity. Remember, while you will always have extended friends and family for support, as a single who has slightly less financial obligations, it's your responsibility to avoid being a financial burden on others during emergency situations. While relying on the credit card is alright once in a while, start with baby steps and build an emergency fund asap.
Buy a home or two?
There is no right answer to if you should buy a house or not as a single person. In case you buy, go for something you can afford with EMI. You can always buy a second home later on in life but it's important that the first one is affordable and EMIs are not too big a burden. A second home is a good way to get passive income via rent.
Avoid debt trap: The biggest mistake a single can do is rack up debt in the early years. Without many financial obligations, it's much easier to live a little beyond your means, especially vis credit cards. But this will put you in a debt trap and by the time you recover from it, you might have spent the better part of your 30s paying for it. If you are someone who has a student loan, make sure you pay that off before getting on another loan, especially a car or a travel loan.
It is an activity which is based on your risk profile. Ensure that you don't go stock picking as a single person. Have a healthy mix of equity and debt instruments in your portfolio. Unless you are a financial pro, don't rely on your skills while investing. Seek help from a fee-only certified financial planner. Remember, such professionals will be able to offer you unbiased advice without worrying about getting a commission off the financial instrument they recommend to you. A healthy mix of debt, equity and gold, as per your asset allocation, financial goals and risk profile is the key.