Long Term Financial Planning

We looked at short term needs, but are those enough? We also need to look at our long term needs. We would not be working through out our life’s, so we would need to make money work for us. This I picked up from the book “Rich Dad Poor Dad”. It’s a beautiful book, it really wakes you up.

What are the long term needs we should take care of?

• Health care
• Care of our near and dear ones
• Retirement care
• Luxuries

Health care: Life expectancy is growing and the longer you live the more it becomes necessary to take care of your health or medical costs. This is most important. Medical costs are going up and will keep going up. You would not want all your savings going off in case you fall sick. So it’s best to have a health insurance in place. At a younger age we may feel it’s not important, but as we grow older it becomes very important. It becomes difficult getting an insurance policy after the age of 40. It’s better to get one before that. Now the question comes as to what should be the amount of health insurance. It would differ from person to person. The points to be considered are how long do you expect to live, Marital status, Gender, Lifestyle and Family health history.

Care of near and dear ones: Here we need to see how many dependents we have and for how long they would depend on us. Some points to be considered are Spouse, Children (include education and marriage expenses), Parents and others.

Retirement care: Here we should take into account the cost of living. Note our costs usually go up as we age. It might sound funny, but it’s true. Also is boring to just sit in the house and be idle. It is best to work on what you would do once you retire. Lot’s of people just spent their entire life working for money and not doing what they longed to do. Take up such tasks, they will keep you occupied. Find out what you would be able to do when you retire and start planning for the same when you can. Saving for retirement is not very complicated. It’s easy. Remember the power of compounding (when you start investing early, you would need to invest less to reach the same target on retirement), Pension plans, tax benefits (the government gives you tax benefits for investing, invest it for your retirement), Employer contribution (This is one of the best, it is not part of your taxable income e.g. PF). Even if you do this little bit it goes into making a big corpus for your retirement

Luxuries: Don’t forget to pamper yourself on retirement. You need to enjoy your life as well. Why did you work for so many years? Plan a separate corpus for planned holidays after retirement on a regular basis.

Plan and Enjoy life Longer.