Risks In Personal Finance

Risk Management for Personal Finance.

Many of us know about risk management in our working domains thanks to company training & policies, but have you looked at genuine Risks in Personal Finance.

·         Theft/Loss of Credit-Debit Card : This is a very very common risk which is prevalent today, The risk mitigation can be 2 ways. keep a Xerox of the Cards in your office Drawer & a scanned copy in your e-mail so you know the numbers etc in case of loss for blocking the card Another way of risk mitigation is to Reduce the Limits on the cards if you do not use it e.g.  A limit of Rs 50,000/- withdrawal is unnecessary if you do not withdraw more than Rs.10,000/- similarly a big credit card limit does not help you in any way if you utilise the credit card  in very small amounts.

·         Health Risk : Healthcare cost is increasing significantly now a days hence Floating Health cover for your family & you is essential even though Your company covers you for these, imagine a situation where no insurance company is ready to give you a policy once you retire……… start now with a decent amount. At least 2 times the current cost of Open Heart Surgery is a good amount to start with.

·         Death Risk: This is an extraordinary risk & must be covered at the earliest, Basic Thumb rule for Insurance is 13- 15 times your total yearly expenses. Please go for Pure Term plan from a good company. A pure term plan is surprisingly cheap but most people will go for LIC which is costlier, My suggestion is Take 50% coverage from LIC & rest from any other Company, so when LIC pays the claim, Other company will automatically pay the Sum insured. Additionally You should make your spouse the 2^nd Holder in Bank Accounts/Investments/Mutual Funds etc, this will make the life easier for everybody.

·         Knowledge Risk : You must list down all your investments on a excel sheet & keep a printout in your money drawer another good idea is to Mail the copy to yourself so you can access it even if your PC/Laptop fails……..

·         Liquidity Risk : You must create an Emergency Fund so in case of emergency you do not have to withdraw your long term investments which reduces your returns & adversely affects your Financial planning, I maintain an emergency fund equal to 6 months Expenses, This is split as 2 Month’s expense in Savings bank account & the rest in Liquid Mutual Funds so I will have immediate access to cash when needed.

·         Password Risk : We have the habit of not changing the password to our ATM Card, Online Bank account Etc. this can be very dangerous, I change the password at the end of Each quarter.

·         Other Risks : We many times ignore the risk of Loss of other documents like Passport, Vehicle registration card etc,  I keep a scanned copy of these documents in my Email So I Always have the access to it in case of loss, But Do scan these documents from Both Sides J……………….