Top-up health insurance? Why would I need that?

Surely you took care of your health insurance long back! Or it could be that your employer is taking care of it. Besides you’re healthy and fit, so why worry about it, right? 

We often like to think that all misfortunes are for others and that such a travesty will never befall on ourselves. If corona pandemic has taught us anything, it is the fact that anything can happen to anyone at any time. So, what do we do then? Atleast, be prepared.

We know you already have a health insurance or are probably covered as a dependent. But will it suffice? Will the sum insured (that you picked several years back) be enough to cater to today’s medical expenses? Not sure?

You need to think of a Health insurance top-up 

A top-up health plan is an health insurance cover who have existing individual health plans or our covered by a Mediclaim from the employer. It is taken to cover up for additional medical treatment charges that you may incur beyond your existing cover. 

You must be wondering why would you need an additional cover when you already have one. Here are the reasons worth considering-:

Your current policy may not cover for inflated hospitalization charges

You probably picked up your health insurance several years back. Given the inflation, hospitalization charges have soared like anything in the past years. There are so many charges to cover for apart from the tests and Doctors’ fees, it is unthinkable to get hospitalized without a health insurance with enough sum insured to cover you up well. It will be a good idea to relook at your current sum insured and compare it to average medical expense in an unfortunate case of an illness/accident. Does it seem like it will be adequate? If not, it’s time for you to consider a health top-up.

Office Insurance might not be enough

True, your organization must be taking care of you and your dependents but is it enough? Employers health insurance, though compulsory might not be suitable for you. A plan should cover you for a range of surgeries, as these are medical procedures that cost the most. Does it cover for critical illnesses? Employers Health Insurance plans are mostly group plans which have little or no scope for customization, no guaranteed continuation in case you quit the organization and there are gaps in coverage benefits. However, that doesn’t mean you don’t take it or go for another one. In this scenario, it is best to get a health top up that is suitable for you and will fill for all the gaps an office insurance leaves. 

With years adding up to your age, sooner or later you or your dependents might have to go to a hospital if you haven’t (harsh reality). If you have, you know the kind of expenses well. Room rents, in-patient treatment, pre and post hospitalization charges and the medicines or injection, it can be daunting. A health top up can help you cater for all these. It works like a stepony to your existing health insurance plan; to help you out in times of need.

GETTING OUT OF AND STAYING OUT OF A DEBT TRAP

Last, we spoke of debt traps and how easy it is to fall into one – easy EMI options flashing across e-commerce platforms, personal loans available and of course the credit card and its unpaid bills. Today, let’s talk about how to get out of and more importantly stay out of debt traps.

If dealt with systematically, you’ll be able to get out of a debt trap sooner than you think! You don’t have to be the one to live paycheck to paycheck with unpaid loans, EMIs and bills hanging like a nook from your neck.

Here are some easy to follow suggestions that can prove handy when you feel trapped under debts:

LIST YOUR DEBTS

First thing first, list down all the debts so that you clearly understand the trouble and the depth of it. The details should include the kind of loan – EMI on car loan, home loan, personal loan or credit card bills along with principal amount borrowed, rate of interest, installment amount and number of years left. This will help you prioritize which one to focus on, which is also our next step.

PRIORITIZE THE DEBTS

Once the above list is ready, identify the most expensive debts – a large principal amount and higher interest rate. For example, a credit card bill is expected to have a very high interest rate compared to personal loan, car loan or education loan. You need to clear the biggest rock first. Even if it means refinancing, i.e., taking another loan with a lower interest rate.

THE DEBT PAYOFF PLAN

As a next step, you need a plan. A plan that can help you pay off the loan. You could either try consolidating all the loans and have one singular loan instead. You may check with your bank for this, as some banks provide such an option to let you have a single EMI instead of several. Or you can look into your existing investments that are yielding really low returns and are not ear-marked for any financial goals. Use those idle investments to pay off your loan.

You can also figure out an extra means of income (even if temporary) just to pay off the loans. As the years go by, there will be increase in income, some bonuses, investment income or even a matured FD. Use these to pre-pay your loan and get off the debt earlier.

PS. – If you have too many loans looming over your head then commit all your surplus income towards paying off these loans instead of investing the money. Take this decision only when you have consulted a certified financial advisor.

REFRAIN USE OF CREDIT CARDS

The moment you decide to use the credit card, it is an indication that you’re going beyond your pocket. Unless unavoidable, refrain from using credit cards. They have the maximum interest, options like paying minimum amount due seem lucrative at first but come back with interest rates as high as 40% when free credit period is over. Not only the purchases but such high rate is applied on outstanding amount too. Making you fall into a trap difficult to get out of.

AVOID ADDITONAL LOANS

Ideally, all loan amount combined shouldn’t be more than 40% of your total income. However, if you feel you’re in a debt trap, then most likely you’ve crossed the 40% limit that are straining your finances anyway. With uncertain times ahead, it is pertinent to not take any additional amounts and instead put all efforts towards easing off the existing ones.

It might seem extremely difficult to get out of a debt situation but all you need to do is believe there’s a way out, figure the way out and then stick to your debt pay off plan till you get out of it. If it’s too overwhelming for you to sit down and do this analysis on your own, drop us your details here http://www.slafinancialsolutions.com/contact.php#contactus and we’ll help you chalk out a plan for FREE.

How to know if you’re falling into a debt trap?

In today’s world, debts are unavoidable. Loan or credit facilities assist you to buy things you need and enable you to pay as you earn. As good as it sounds, this anticipated help becomes a big trouble when handled irresponsibly. It has even become the cause of businesses or individuals going bankrupt or falling into the never ending debt cycle.

Are you heading towards a debt trap?

An overdue credit card payment, a missed EMI, a sudden need to take a personal loan to pay off another loan are often the first signs of falling into a debt trap that most of us ignore thinking “Oh, I’ll handle it as I will have money soon”. Unfortunately, its these debts and their missed payments that become a problem later.

So here are the 5 things that you need to keep a tap on to ensure you’re not falling into the debt trap before it’s too late-:

Easy EMI may not be so easy after all

It does seem tempting to buy products on 0% EMI. It also seems fine to pay Rs. 2,000-5,000 a month spread over 6-12 months instead of a lump sum amount immediately. Now if we add 3-4 such ‘easy’ EMIs in a month; does it look easy anymore?

According to a survey by ET Wealth, 15% of the respondents, had an EMI outgo of more than 50%. If your EMIs are eating up 40-50% of your salary, right there is your warning sign.

Personal Loans

So many of us end up taking a personal loan to cover for big expenditures like taking exotic vacations, funding education abroad, big fat weddings etc; expenses that could have been paid for through our savings too. While it’s easy to get a personal loan when we need if we have a recurring income; but what we ignore is the high interest rate on personal loans that eats away our recurring income later.

Keep personal loan as last choice and only if there’s an actual emergency that you cannot handle otherwise.  

Loan to clear a loan

It might seem luring to get a loan to pay off a previous loan; an option that a lot of banks offer. But what people forget it that you will have to pay off that loan someday. So if you’re doing so just to buy some more time to pay off the loan; you’re entering into a clear debt trap and that too a cyclic one.

If you want to pay off a loan, use you low return investments to pay off rather get it refinanced often.

Misusing Credit Cards

Credit card is the worst form of debt because when you’re assuming the debt, you don’t even realise you have assumed it. On swiping a credit card the amount does not gets debited immediately and hence we don’t realise until the end of the month how much we’ve spent/ overspent.

Remember with credit cards, the amount to be paid gets delayed but you still have to pay it. So use it wisely. If you get shocked at the month end to see your credit card expenses; it’s time for you to say goodbye to your credit cards. 

Unpaid credit card bills

While having a credit card in the first place can create problems, non-payment of credit card bills can worsen the situation. Delay in the credit card payments beyond the due date attracts interest which is as high as 24%-36%.

Not just this, it brings down your CIBIL score making it more difficult to get loans in future for more legitimate things like house or car or emergencies. And paying minimum amount due doesn’t help in the long run because the interest cycle does not stop.

Thus, don’t miss your credit card payments no matter what it is.

When borrowing money, it is important to know how you will return it. Debt-taking plan should also include the debt-returning plan that is logical and doable. Look out for early signs from above and set a fixed date to close all debts and make your best effort to stick to it. Debts are meant to help and should be kept that way. Don’t let it become a noose around your neck.

3 MUST – DOS FOR UNPRECEDENTED TIMES LIKE THESE

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As the country progresses into Unlocking phase, the word everywhere is we must learn to live with the virus and be future ready for such global adversities.

The second worst affected, after human lives, by Corona Virus, is the economy of all the countries with affected citizens. And if we were to go by what experts have to say, there could be more such global crisis in future. So how do we get ready for such adversity?

STAY DISTANT STAY SAFE

True there are relaxations in place, but only as an attempt to get ready for the life ahead one step at a time. Unlock doesn’t mean all is well and back to how it was. Unlock is only to get us ready to adopt new ways of living – safe and more hygienic.

The 1918 pandemic more commonly called the Spanish Flu’s second wave, has a lot to teach us here. It was worse than the first and so could be the case this time. Virus mutations are unpredictable and till we have a well-tested vaccine available, it’s wiser to be preventive in whatever we do.

SCALE BACK ON YOUR SPENDINGS

According to Economic Times article of May 13, 27 million youth in the age bracket of 20-30 years lost jobs in April 2020. It also goes on to add 33 million men and women in their 30s lost jobs as well.

Financial Express predicted, 74% small businesses, start-ups will either shut down or marginally scale down in the next few months as an aftermath of the pandemic.

If these figures tell you anything, there’s going to be a severe financial crunch everywhere. Create back-ups, review your savings and expenditures to better fit into the new lifestyle both personal and professional.

GET WELL INSURED

Businesses can be rebuilt, jobs can be reinstated or found new. But one area where we become helpless is the health – ours and of those close to us.

Though corona virus has taken a front seat in our lives right now, there are several other factors in play that are detrimental to our health, whether it is diseases like cardiac arrests or cancer or even flu and fatal accidents. With finances already dwindling, health care expenses would be a burden that would be difficult to shoulder. While we cannot predict or avert such problems, what we can do is have an insurance cover to support us and our families when faced with such adversity.

Let’s get our future days pandemic ready!

Are you risking your financial future by trying to do DIY?

‘DIY’ or ‘Do It Yourself’ have been a trend since quite a while. Whether it is about making a piece of craft or decorating a corner of your house, DIY is the go-to search word for almost everything. You might make a little mistake while cutting a piece of paper, and that’s a manageable mistake as you can redo it or resolve it with some patchwork.

However, DIY in financial management may result in major financial problems that you may only realize later. Here are the reasons why you shouldn’t opt to manage your finances using the DIY method.

You’re treating investments as transactions

With an influx of fintech businesses, making investment has surely become easier as you can invest, redeem or review at a click of a button.

Investment is not a mere transaction. We repeat. Investment is not a mere transaction. Just because you can see an investment offer and an easy payment gateway doesn’t mean you should invest in it. It is a decision you take with a plan in hand considering your goals, lifestyle and your responsibilities. Are you sure you’re considering all of this while investing?

You are not saving/ investing enough

You’re surely making investments and managing it yourself, but have you considered if they will be enough for you?

For instance, one of my acquaintances recently mentioned that he was running an SIP of Rs.50000/- a month (sounds decent, isn’t it?). If I tell you his take home was Rs.3.5 lacs per month; do you still think its decent? No. And we all know why because he was just saving 15% of his monthly income. Now that we are in the midst of the crisis, he regrets for not saving enough when he had the chance to do so.

When one has enough disposable income in hand, it is easier to set money aside for investments. While we are doing it ourselves, we often forget this!

Quick withdrawal from financial goals

When you’re your own judge, you might not be rational too. In times like today, people who were managing finances on their own are clueless i.e. if they should stay or withdraw.

To avoid further risk, most are withdrawing their investments on seeing the lowering value of their portfolio. They think they’re on a safer side, without realizing that they’ve in fact paused their financial growth.

DIY is great, but not for every aspect of your life

If your stomach pains for more than a week, do you wait for it to cure itself or do you consult a doctor? Taking care of your money is taking care of your financial health. For that, an advice from a financial expert is essential. Without a professional advice, we can make financial mistakes whose burden will be felt only when thing aren’t going well such as times like today.

Consult a financial advisor today who can help you analyze your income, expenses and goals and accordingly chart out a financial plan for you. Proper planning can save you both time and money.