Financial planning is integral to protecting and strengthening our family’s future. But there are some people who need meticulous financial planning even more than others. For instance, the people working in the defence sector need proper and structural financial planning because of their lifestyle – their work is demanding, they have to spend months or even years away from their family. It is normal for them to continuously shift from one region of the country to the other as per the requirements of the job. In such a scenario, it is imperative that the defence personnel have a solid plan in place, so that their family is never at a disadvantage in times of distress.
Here are some of the things that can help a defence personnel get a grip on his finances.
- Hire a certified financial planner – Mostly, people who are in defense, especially armed forces, are busy and inaccessible folks. As they are usually away from the home, working on a financial plan may not be that convenient for them. In such a case, a defence personnel can engage the services of a financial consultant. Take some time out and sit with the financial consultant and pencil your future goals, like your retirement planning, children’s education, insurance planning and real estate goals. Assess your risk appetite with him; he will guide you with options for the best investment instruments that provide good returns in the future. The financial planner will not only help you with investment, he will also help you with money management, budgeting, cash flow and managing your liabilities.
- Retirement Planning – Apart from funding your children’s education, the other major goal for most people in the defence force, is proper retirement planning. The times when government servants believed a retirement corpus would safely take care of their post-retirement needs, are over. When we take into account the rising inflation, improved lifestyle and higher longevity in terms of life-span, the pension money falls short of expectations. Even investment in Bank FDs, RDs, PPFs etc; that have been used traditionally for investing and tax-planning fall short, because the earned returns fall tragically short of rising inflation So, it is important to invest in a well-chosen mutual fund which has the propensity to tide over inflation.
- Following the Mutual Fund Route Sensibly – Use the monthly SIP route to reduce market volatility and benefit from rupee-cost averaging. Ideally invest in a mutual fund with high exposure to equity during your working life. As a defence employee, you have an advantage of a job that is more secure than that of a private sector. So, you should invest in equities that have the ability for long-term wealth creation. Defence personnel receive various types of allowances from the government; they can invest the surplus as one–time investment in the mutual fund too if the valuations are attractive. Remember, when the market is going through a low-phase, you should invest even more, because you can buy more units at a low price. Invest in mutual funds keeping a clear eye on the financial goals – retirement planning, children’s education, travel etc; with a long-term perspective.
- Insurance – Insurance products are often mis-sold as investment products to defence personnel because they usually do not keep themselves informed of personal finance. Do not use insurance for investment purposes. The insurance should be taken only to cover you and your family. For investment and tax-planning, consider taxing-saving mutual funds. The government usually offers insurance for its defence employees. Check out the extent of coverage, inclusions and exclusions and then buy an insurance or mediclaim, according to your need.