The common goals in anybody’s financial plan revolve around saving for retirement, buying a house and funding children’s higher education and marriage. In the above cases, the goals are planned for. Uncertainties such as medical or vehicle repair expenses are also planned for through insurance. But there may arise some contingencies or financial emergencies that could turn your financial plan upside down.
Parents becoming dependent
A participant at one of my sessions, Priya, shared her unique situation with me. She is the only child of her parents and all was well, till her father suddenly had a stroke and became bedridden. While there was medical cover, it was inadequate to meet the medical expenses. Generally, I find that health covers for parents are in the Rs 5-10 lakh range and this amount is not sufficient for larger illnesses. As with most Indian families, her mother was not aware of their finances and it took some time for Priya to figure out all the investments and get herself added as a mandate holder/nominee. This was done since her mother is also not in good health.
Now came the more challenging part. The parents have their own home, but need to be supported financially, as the income from their investments is not enough to manage their expenses. Expenditures have shot up as they have a full-time caretaker, which not only means his salary but also his living expenses. Add to this the bill for the ongoing medical treatment. Priya is taking care of all the additional expenses, but this means she is no longer having enough to save for her financial goals.
Thankfully, she has a supportive husband, who doesn’t have a problem with her supporting her parents and is not cribbing about having to take on their family expenses alone. Also, they are debt free and hence do not have the burden of EMIs.
Last year, when a prominent airline failed, there very many stories of how its staff had to sell gold in order to survive. This may not be surprising in the case of ground staff, but hearing this from highly paid pilots was a surprise. Due to bad or no financial planning, individuals are grossly unprepared when hit with job losses. Further, they have many loans outstanding, making matters worse.
While having a financial plan alone is not enough to deal with these situations, it is at least a start towards ensuring that you are on the right track on savings. While planning, keep the following in mind.
- Always look at ways to save more by reducing lifestyle expenses. You don’t need to prove your lifestyle to anybody, especially at the cost of your financial security.
- Discuss with your spouse regarding financial responsibilities that could come up – like that of dependent parents. Keep in mind that there could be a time when you would need to provide for both set of parents. You would know your siblings’ disposition on this matter. Whatever the case, accumulate the amount that you think could be incurred on dependents. Include it in your financial plan in the form of a goal.
- Assess the critical illness covers available for parents and try to get a cover of at least Rs 10 lakh. A critical illness cover gives an amount on diagnosis of a serious ailment, if the patient survives it for over a month. The money received from a critical illness policy can be used towards any expense, not necessarily medical. In the above case, the critical illness policy would have helped to partially take care of expenses.
- Go over your parents’ investments and discuss with them. In Priya’s case, she found shares, which were in physical form, fixed deposits in six different banks and expired insurance policies. Check all investments for the mode of holding and nominees. Consolidate investments into simple investments that are easy to manage. Looking after sickly elders, and managing work and family will take a lot of your time. Hence, keeping things simple would work best.
Never assume, “it won’t happen to me.” Life has a funny way of proving us wrong. Stay prepared.(The writer is a Financial Educator, Money Mentor and Founder of Finsafe India)