Invest or Insure?

Did the title make you stop and think about the time when you faced this dilemma?

Or, are you one of those for whom both these words are gibberish?

Wondering how to use that first paycheck?

Have only a limited amount of money to spare?

Confused which of the two options will guarantee you a peaceful night’s sleep?

Well, let me enlighten you with what they mean and guide you in taking a decision on where your money should go.

Invest:

What does this mean?

The first search result on Google says it all – “invest means to put (money) into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit.”

Why should you put your money aside?

The idea of saving money helps inculcate better spending habits. Or you may tell me it’s a chicken and egg situation. And that, good spending habits leave room for savings. I’ll leave that call to you.

In either case, you end up with some money left over which hasn’t been spent.

Savings help you meet life goals such as buying a home, marriage, child care, education, taking care of your parents, vacation. The list is endless.

And when life throws you a curveball, you can thank your wise-self for having enough savings to duck down or smash it right out of the park.

If you’re still wondering where to put your savings, click on this link and get your answer.

Choose an instrument in line with your financial goals and risk appetite.

Saving is important for multiple reasons and investing early only works in your favour.

Investing early helps one maximise the benefit of compounding.

  • It gives your money a longer horizon to work for you by giving you interest on interest and thus letting you invest smaller sums periodically.
  • You also have a better risk appetite to invest in a riskier instrument that guarantees higher returns because you have a longer horizon to average out the negative impacts with the positive fluctuations.

Saving also has a huge impact on mindful spending habits. The habit of savings, when inculcated from an early age, helps one make conscious money decisions rather than rash unthought-of calls.

Think about this:

Would you want to invest Rs 5,500/month starting at 22 or would you rather invest Rs 1 lakh/month at the age 45 in order to get the same value of Rs 5 crore when you’re 60.

Did you realise that despite investing for 38 years in the first case you only had to save Rs 25 lakhs unlike the Rs 1.8 cr investment that had to be made if you started at 45?

Isn’t the benefit of investing tempting and that of doing it early even more attractive?

So, whatever stage of life you’re at, start investing NOW.

I’ve made investing a lucrative proposition, but can there be something as beneficial, if not more, than investing?

Let’s talk about Insurance and see if it lives up to the hype.

Insure:

What is an Insurance?

As per the Oxford dictionary “Insurance is a thing providing protection against a possible eventuality.” It is a risk protection plan that seeks to secure you and/or your loved ones if and when that eventuality becomes a reality.

Having adequate insurance relives the financial stress in unexpected difficult times.

It is very important to take a Health and a Life Insurance cover.

The former takes care of the financial implications of a health incident not leading to death, which could drain out large sums of savings due to skyrocketing medical costs.

A Life Insurance helps take care of your family in the unfortunate event of your death. It is a safety net for your loved ones and also provides you peace of mind from worrying about your family’s financial security.

In addition, the Income Tax Department offers you a tax benefit of up to Rs 1.5 lakhs helping you save taxes on your risk protection investment.

Did you know?

Taking an insurance at a younger age has multiple benefits:

  • The premium amount is low

The insurance company rewards you for your astute decision to mitigate risks at a younger age. The premium you pay for the same sum assured at the age of 30 is lower than what you would pay at 40.

  • The premium remains the same throughout, you pay less in total.

Win-Win isn’t it. If you continue with the same policy, the premium amount remains the same for instalment number 26 as it was for the first instalment. So, you’ll ending up paying the lower amount for your entire policy period.

“Fun is like life insurance; the older you get, the more it costs.” – Frank McKinney

  • Your family’s security is taken care of early on.

The sooner you buy a term insurance, the sooner your family gets covered.

  • Your Savings are protected

By taking appropriate insurance, you are creating a cushion for your savings, ensuring that they aren’t drained in times of a health crisis.

I’m hoping that you’re a little more aware about Investment and Insurance now than when we started.

The next question is, how should you split your limited resources?

You must Invest partially and buy Insurance at the same time.

Split your budget between the two so that you do adequate justice to both based on your financial goals and your role as a breadwinner in the family.

Investment and Insurance are equally important and only when you’ve taken care of both will you sleep like a baby.

Happy Insurevesting!!

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