Everyone wants to be a millionaire. But wealth building is not a matter of chance. It can be achieved by making the right choices. Please note that fortune is not built overnight. Financial discipline, patience, and consistency are the keys to building wealth.

 

We have created a cheat sheet from the money habits of the wealthy to help you create your fortune. 

 

Quicksand of Overspending

 

You must have heard the idiom that a fool and his money are easily parted. It's easy not to be a fool by budgeting your monthly expenses. It seems like a simple mantra, like 'spend less,' but it is hard to implement. We often don't pay attention to minor expenses that snowball into large chunks of expenditure every month. For example, consider a few cups of coffee you enjoy outside. The idea is don't fall into the trap of spending money before you save. This is especially true in our early years when we have just begun our careers. But everyone needs to adjust their expenses according to the money they make and not spend what they haven't earned. 

 

Penny Saved is Penny Earned

Imagine having the money for the dream vacation you planned sometime back or enough funds for your children's education. Saving is a discipline successful people learned early. The best way to begin this habit is by signing up for automatic debits towards various savings and investment tools. A savings plan will ensure you have less money every month to spend. It is also crucial to note that you are losing money in the long run if it just sits in your bank account.

 

Rule number one in the art of wealth building is putting money to help you earn a passive income. Financially literate individuals don't rely on a single source of income; they build several streams over the years.

 

As soon as you receive your paycheck, clear your debts, followed by committing money to various savings and investment tools of a methodically planned portfolio. What remains is the money for your other expenses. 

 

How to Save and Invest?

 

Systematic Investment Plans (SIPs) are an excellent way to build your investment basket based on your risk-taking ability, return expectations, and financial goals. SIPs look at different mutual fund schemes to build your wealth in the long run by interest income.

 

Let's look at Ajay and Shrishti, who are in their early twenties. Due to financial commitments and a lack of financial literacy, Ajay spends everything he earns. On the other hand, Srishti invests each month and increases her investment every year in a disciplined manner. After say 20 years Srishti would have been able to create a reasonable amount of wealth through her planned approach to investing. At the same time, Ajay is likely to have accumulated only debt, not wealth.

 

Look at investment options in the debt, stock, commodity, and money market to activate a passive income stream.

It's also time to recognise the benefits like tax^* deductions. For example, a Unit Linked Insurance Plan (ULIP) is a great tool to claim deductions. 

 

Get Rid of Wealth-Diminishing Habits

Debt is not a burden if taken for investments like buying a new house or funding your education. Imagine buying depreciating assets with a loan. Your monthly shopping sprees on your credit card or even buying a car with a car loan is not the smartest choice. Don't restrict your monthly income by paying high interest rates to someone else when you can earn that interest. An interest-free loan also comes with a financial commitment that diminishes your ability to save or invest. But what if there is a pressing need for funds? Just what a raincoat does on a rainy day, an emergency fund can do in a crisis. Taking lessons from the Covid-19 pandemic, consistently save to build a separate fund for emergencies so that you don't have to draw a high-interest personal loan.

 

Another major but often missed wealth-diminishing habit is ignoring inflation. Like rust corrodes a good piece of iron, inflation wears down your real return. Make sure you select investments that reduce the effect of inflation in the long run. 

 

Start Savings For Your Retirement Early

A secure financial future is a safe future. It's never too early to start saving for your retirement. Just like your retirement goals, define short-term and long-term financial milestones to build a wealth timeline. A wealth timeline will ensure you have built sufficient funds for your life's next milestone. Apart from institution-offered financial assets, you might have seen people investing in physical assets for their retirement. Real estate is the most sought-after physical asset that will bring in passive income from rent in your later years.

 

Another critical aspect is sufficiently insuring your life with a ULIP Plan. You and your family need to review your insurance covers because inadequate insurance is as bad as no insurance. Look at plans like Tata AIA Life Insurance’s Sampoorna Raksha Supreme (UIN: 110N160V02 for insurance coverage up to the age of 100.

 

 

Earn While You Learn

People build their financial acumen over the years as they manage their wealth. You may meet a financial expert if you don't know how any of this works. The lack of financial knowledge is not an excuse and being disciplined in investing is the only way forward. While you learn, make sure you inculcate this habit in your children as well at an early stage. Don't forget that compounding of interest works like magic if started early. Depending on how old your children are, teach them the importance of saving. One should suggest them to create a recurring investment from their first paycheck.

As many schools do not have financial literacy as a discipline, make sure you and your children are better prepared to take charge of your wealth with these five habits.

 

L&C/Advt/2021/Jul/1127

Life is filled with many uncertainties and all of us are constantly trying to ensure that we are adequately prepared for any eventuality. One such uncertainty is the occurrence of a critical illness that can effectively alter one’s entire life for the worse. In this context, there are several critical illnesses such as cancer, cardiovascular diseases, stroke, kidney failure, etc. that are capable of bringing all your plans to a standstill. Therefore, it is necessary to add insurance for critical illness to your life insurance policy.

 

What is a Critical Illness Rider^#?

A critical illness rider^# is an additional feature to a life insurance policy that provides the policyholder financial security in the event of a critical illness. Therefore, a critical illness rider^# is a tool that enables you to add a critical illness cover to your policy. As is the case with a majority of life insurance policy riders^#, it increases the premium amount but the increase in premium cost is negligible in comparison with the protection it offers the policyholder.

Several insurance providers in India offer critical illness riders^# in their life insurance policies so as to enable the policyholder to receive the benefits of a life insurance cover as well as a critical illness cover in one comprehensive policy. Furthermore, the combined premium of the aforementioned policies tend to be lower in comparison with separate standalone policies for life insurance and critical illness insurance. Therefore, insurance for critical illnesses can be planned through the appropriate cover with the basic policy.

Tata AIA Life Insurance with our Tata AIA life insurance riders^#, for instance, enables you to add the element of critical illness insurance to your life insurance policy. You can choose either the Tata AIA Life Insurance Non-Linked Comprehensive Protection Rider (UIN-110B033V02) or the Tata AIA Life Insurance Comprehensive Health Rider (UIN-: 110B031V02) for a targeted protection against a vast list of critical illnesses, along with terminal illnesses and Covid-19 protection.

 

How is a Critical Illness Rider^# Helpful in Medical Emergencies?

There are several ways in which a critical illness rider^# can assist you financially, some of which have been discussed below.

 

1. Provision of a lump sum amount upon diagnosis of the specified critical illnesses

Any medical emergency can disturb the financial equilibrium of a household owing to the additional expenditure it entails along with the physical and emotional trauma. Furthermore, if a medical emergency is in the form of a critical and long-term illness, it has long-lasting consequences for you and your family.

As a result, it can be incredibly difficult to manage the enhanced strain on your finances without any additional income. However, by adding a critical illness rider^# to your life insurance policy, you can safeguard yourself, at least financially, against some of the impacts of a critical illness.

Hence you must consider buying a critical illness insurance policy even if you already have a health insurance policy. The latter policy usually only covers the expenses of hospitalisation and leaves you vulnerable in the event of being diagnosed with a critical ailment.

A critical illness cover, on the other hand, offers the policyholder an assured lump sum amount between 30 days to 90 days of their diagnosis, provided the illness is covered under the policy. The amount can be utilised by the policyholder to pay for their medical expenses as well as manage the expenses of their household.

 

2. The flexibility to opt for monthly payouts

Some insurance policies for critical illnesses provide you with the option to receive the payout of a successful claim as a combination of a lump sum and regular monthly payments. Such an option is particularly suitable for people whose livelihoods are affected by a critical illness.

Asthma, for instance, can cripple a person and restrict their ability to travel to and from work. Similarly, a person undergoing chemotherapy for cancer may not be able to work for extended periods every month. Therefore, a monthly income provides substantial financial support to the policyholder in the event of loss of regular income.

 

3. Financial protection against the high incidence of chronic diseases in India

It is important to note that a recent report of the World Health Organisation has revealed that chronic illnesses account for 71 per cent of the annual global death toll. Chronic illnesses include cancer, cardiovascular diseases, and chronic respiratory diseases. Furthermore, the above report has shed light on the fact that 75 per cent of the global deaths from chronic diseases occur in low and middle-income countries.

Since India falls under the bracket of low and middle-income countries, the incidence of chronic diseases is particularly high here, thereby making it necessary for you to invest in a critical illness cover. Furthermore, you can buy multiple critical illness policies and financially protect yourself against different chronic diseases.

 

4. Conservation of your savings during medical emergencies

Having a critical illness cover allows you to let the flow of your savings and investments stay undisturbed in the event of the occurrence of a critical illness. Therefore, instead of being forced to, say, redeem a fixed deposit or stop a recurring deposit to pay for your sudden medical expenditure, you can file a claim under your critical illness insurance policy or life insurance policy with a critical illness rider^# and receive a lump sum amount to manage your finances.

A critical illness rider^#, thus, enables you to keep pursuing your financial goals in the wake of being diagnosed with a critical illness.

 

5. Avoid borrowing on being diagnosed with a critical illness

People are often forced to resort to debt to bridge the gap between their income and expenditure due to the additional medical expenses associated with a critical illness. However, if you have a critical illness insurance cover for the disease that you have been diagnosed with, you can follow a simple procedure to file an insurance claim and receive the lump sum amount assured in the policy.

Therefore, by paying a nominal amount for a critical illness rider^#, you can add a substantial degree of financial security to your life.

 

Conclusion

Adding a critical illness rider^# to your life insurance policy is a prudent financial decision. At a marginal additional cost, you can ensure a significant amount of protection for yourself and your family in the event of the occurrence of a critical illness. Therefore, you must buy a critical illness insurance cover in accordance with your medical history.

 

 

L&C/Advt/2021/Sep/1607