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Financial Checklist in your 30’s and 40’s

  1. Build an Emergency Fund

Build an emergency fund to assist with any unexpected expenses. It is recommended that your emergency fund be equal to 3-6 times your monthly income. Keep this emergency fund liquid in either cash or cash equivalents.

  1. Review Your Budget Each Month

Understand your cash flows that are coming in and going out each month. Organize your expenses in categories including discretionary and non-discretionary spending. Include monthly savings as a budget item.

  1. Calculate Your Net Worth Annually

Make a list of all of your assets and liabilities. Subtract the liability figure from the asset figure to calculate your net worth. Ideally the value of your assets should increase or liabilities should decrease year on year.

  1. Pay Down Debt

If you have multiple loans, start by paying off your loans with the highest interest rate. If the interest rate on your loan is higher than a potential return on investment, work to alleviate your debt rather than investing the same.

  1. Build a Relationship with a Financial Professional

Once you have established your emergency fund and have an understanding of your budget, take the next step and meet with a financial professional. A financial professional can help you develop a plan for your future saving, spending and investing. Review your plan with a financial professional on a regular basis.

  1. Participate in Employer-Sponsored Retirement Plans (EPF)

Does your employer offer a retirement plan? Understand the details of the plan(s) that are offered. If your employer offers a match, be sure to take advantage of that “free” money. If your employer does not offer a retirement plan, do not fear. Look at opening a Public Provident Fund (PPF) A/c with your Bank or Post office.

  1. Review Your Retirement Plan

Congratulations for taking the first step and participating in your employer’s retirement plan or funding your own Traditional PPF, NPS or any other Pension Fund. The next step is to understand the investment options and find an allocation that fits for you. Need help? Contact us for more details on Retirement planning and asset allocation.

  1. Review Your Credit Report and Understand the Components of Your Credit Score

Set a date and review your credit report each year on that date. You can download a copy of your credit report from the official website of CIBIL after paying a nominal fee, kindly follow the link to download your credit report.

  1. Coordinate Asset Titling

Look at how each account on your net worth statement is titled. Is it in an individual name, joint name, name of a trust? Confirm that each account is titled as you desire. Look at the title on your home, mortgage and insurance policies too.

  1. Create / Review Estate Planning Documents

  2. Will: Where would you like your assets to go upon your death? Who would you like to be the guardian for any minor children in the event of your death?

  3. Power of Attorney for Finances and Health Care: Who would you like to make Financial decisions and health care decisions for you if you are unable to do so?

  4. Beneficiary Designations: Review beneficiary designations to ensure they are in line with your estate plan and personal desires.

  5. Understand & Evaluate available options for Kids Education

  6. What kind of education are you planning for your child – domestic or foreign?

  7. Do you know how much money would be required for funding your kid’s education?

  8. Have you accumulated and aligned enough assets to fund the education for your kids?

  9. Would you prefer to opt for education loan?

  10. Do an Insurance Check-Up

  11. Life Insurance: Look at term life insurance for income replacement purposes. Be sure to look at replacing income for both spouses, even if one spouse does not work outside of the home.

  12. Review Health Insurance: Understand your deductible, your out of pocket maximum and any co-pay amounts.

  13. Review Home Owners or Renters Insurance: Is the coverage adequate?

  14. Understand Potential Inheritance and/or Potential Cost of Aging Parents

It is good to have a rough idea of the financial well-being of parents and in-laws. Do they have a plan in place for care as they age? Will they need assistance? Is there likely to be a transfer of wealth from one generation to another?

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