
By Old Mutual Eswatini
There are 5 contours to one’s complete financial picture. They are saving, investing, financial protection, tax planning, and retirement planning, but in no particular order.
#Number 1: Saving
The need for sudden money can come at any time. It can be as mundane as a car breakdown or as serious as losing your job.
However, such emergency events can be dealt with if we have enough savings to cover the need. As a thumb rule, the fund for your emergency needs should be three to six months of your expenses.
Debt instruments like Liquid Funds are excellent options for parking money meant for emergency needs.
#Number 2: Investing
We often confuse investing with saving or consider them to be synonymous. While saving is about setting money aside, investing is putting money/purchasing assets like – stock, bond, mutual funds, etc. – in order to make your money grow.
Now talking in terms of investment, mutual funds are an excellent investment option if it is done right. However, while investing in mutual funds it is essential to be mindful about choosing the right fund for your investment, otherwise it might turn counterproductive. Hence it is essential to make your investment as per your investment requirement and horizon.
So here the thumb rule is, to turn your dreams into financial goals and set a timeframe around it. Then pick a mutual fund that matches your investment timeframe.

#Number 3: Financial protection
We might weave several dreams in life and create investment plans to turn those dreams into reality. But unless we protect them with a safety net, the same can turn into a liability. That safety net is insurance.
There are 4 kinds of insurance we all need. And these are:
(i) Term insurance:
It is a kind of life insurance that ensures that your family or dependents do not have to go through financial hardship if you die early. As compared to other health insurance products, the sum assured for term insurance is higher than the premium amount.
Now if you calculate it correctly, then you can account for the day-to-day expenses of your family, a retirement corpus for your spouse, cover for your liabilities like – home loan, and children’s education in the sum assured.
(ii) Health insurance and Critical Illness insurance:
Having health insurance ensures that you do not have to pay from your pocket in case you or any of your family members have taken ill.
Health insurance covers all costs for treatment of the insured like hospitalization, medication, pre and post-hospitalization expenses, etc.
Meanwhile, you can opt for critical insurance along with your basic health policy. In case you are diagnosed with one of the critical illnesses mentioned in your policy, the insurance company will pay you the sum assured.
(iii) Mortgage Protection insurance:
Mortgage protection insurance pays off your mortgage if you die during the term of the mortgage. It ensures the loan or mortgage for a home, car, property, etc. does not become a liability for your family, in case you die early.

(iv) Personal Accidental insurance:
In case you meet with an accident and get seriously injured, or become partially or fully injured, the insurance company will pay the sum assured to cover the expenses for treatment and also loss of income.
Meanwhile, if you die during the accident, the lump sum amount will be paid to your family. The payable amount, however, is dependent on the fatality of the accident.
#Number 4: Tax Saving
Every year, a growing number of working professionals are introduced to the taxation system. This includes various recent graduates and young, fledgling professionals.
These are first-time taxpayers who are just venturing into their careers and therefore, do not have a large income to be concerned about.
It is easy at that stage in your career to not worry about tax saving being an essential part of your income tax process.
The benefits of tax saving can seem inconsequential. However, this can often set an unfavourable precedent for years to come.
As your career grows and your income witnesses an increase, tax saving should become an important aspect of your tax planning every year.
Higher incomes are subject to higher tax rates, which is why it is prudent to save up as much of your hard-earned income as possible.
Hence, the aspect of making crucial investments that can lower your tax burden for years to come should be inculcated as early in your career as possible.

#Number 5: Retirement planning:
Retirement is one of the most crucial life stages, and it can be as blissful or as miserable depending upon how you have planned for it. It holds true for financial planning too.
Now, planning finances for retirement is a two-step process. First, is saving for retirement and second is, generating income from your assets during retirement.
Contact Old Mutual for your Personal Financial Management training delivered to your organization at no cost to you! Contact: Eswatini@oldmutual.com
8 thoughts on “The Five Key Aspects of Personal Finance”
Comments are closed.