Skip to main content

Expenses that can set your financial plans back

Originally published on BeingFinWise
__

 It is good to have a financial plan. It enables you to have financial resources ready when you may need them. At the same time, it enables you adapt your lifestyle in alignment with the desired goals.
But the ride is not always as straightforward as the excel sheets with projected expenses & rate of returns suggest.
There can be several factors that can set back your financial planning, even by several years. While one may not have a foolproof mechanism against all eventualities, one can definitely mitigate the impact of several uncertainties by having proper safeguards in place.

Here are some factors that can set your financial plan back by several years

1. Major Health Issues

Arguably the biggest thing that can wreck your finances. A week's hospitalization can probably set you back by few lacs of Rupees in India or few tens of thousands of Dollars if in US (healthcare in US is really expensive). Add to that need for medical intervention needed in case you need to undergo treatment for a heart condition (say, angioplasty) or surgery post accident or hospitalization for dengue fever or cancer treatment.
Major illness or serious chronic conditions can wipe off your savings. And they usually come without prior warning.

2. Death in family

In addition to the emotional toll it takes, such unfortunate event can have financial implications - immediate as well as long term. More so, if there are dependents and/ or the person dying is the sole breadwinner in the family.

3. Unexpected expenses like house repairs

If you own a house for long (and live in it also!) you are likely to have some regular maintenance & repairs that need to be taken care of. And sometimes these can be more than what you budget for. Oftenz this is not just a financial decision but an emotional onez which can lead to cost overruns.

4. Expenses like kids education

While this should be a part of your financial plan, you may sometimes be in a situation wherein the actual expenses may more than the projected expenses (e.g. MBA from an expensive foreign university, or medical education from an expensive private university - which may be more than what you have budgeted for.

5. Loss of income

Hearing of layoffs is not uncommon. Layoffs can put an immediate strain on your finances, as suddenly you can be left without a paycheck, especially if you are unable to get any suitable job later on. If you are in business, you will need to deal with increased uncertainty. The lack of consistency in income can be daunting, especially during the "slow" times

6. Taking Debt

With debt, you can make compounding work against your rather than for you. More so in case of debts like personal loans or credit card debts. At the same, the fact that you have taken a debt indicates that there may not be enough savings to dip into (or you are in a virtual debt).
Avoid debt. And if you have debt, try clearing it off as soon as possible.
(You may also be interested in – How can compounding work wonders for your financial life)

7. Legal issues

Got in trouble with law? It may be an expensive proposition. Unfortunately, fighting legal battle can drain you and your finances. And this worsens if you have (financial) claims to settle.

How can you prevent financial setbacks?

Well, there may not be any foolproof method. However, some of them can be (partly) addressed by means of proper planning.
  • If you have good health insurance, you can probably avoid medical condition from poking a major hole into your pocket. By having a proper term plan, death may not have major financial implications on your family.
  • If you do goal based planning, an event of major cash outgo (e.g. buying a car, house repairs, kids' education etc.) is unlikely to be a financial shock for you.
  • Having a handy contingency fund can help you tide over any unforeseen emergency.
Financial planning is not just about aligning your finances to your financial goals, but also planning out for various eventualities that may arise. To draw analogy from football, it is not just about scoring goals but also saving goals!.
__
Have something else in mind, which can have adverse effect on your financial lives? Do share.

Comments

Post a Comment

Shop @ Amazon

Popular posts from this blog

Rich, yet bankrupt

Originally published on BeingFinWise __ Tennis legend Boris Becker is in news - for wrong reasons. He is having auction off his trophies to pay off his debts . Even then, the debt will not be fully repaid. To think of it, he was the youngest Grand Slam champion & considered one of the greats in tennis. He won Wimbledon when he was just 17! At that level, tennis does pay a huge amount of money! So we can safely assume, that he would have had no dearth of money. Boris Becker is not the only celebrity to be rich, yet bankrupt. There are ample examples. For example, Michael Jackson died, he was in huge amount of debt.
Post a Comment
Read more

How can you get cashback while shopping on Amazon?

eCommerce is changing the way lot of us shop today. And websites/ Apps like Amazon, Flipkart, Myntra, Bigbasket etc. are now extremely popular among internet users in India. Most of these come up with regular sale & offers, often linked to a payment method (Amazon Pay, Credit Card, UPI etc). But there is something more that can help you squeeze a better deal - using affiliates to get cashbacks. (as discussed in one of the earlier articles)   Here is how you can get cashbacks on Amazon (and several other eCommerce sites) Sign up with an affiliate partner. Cashkaro , Gopaisa , JioMoney , Jetprivilage , Payback etc. are some of them.  Use their website App to go to Amazon website (not Amazon mobile app) Shop normally, checkout and pay. Please ensure that your shopping cart is empty before shopping & your don't close the browsing session in between.  Amazon gives a commission to these partners for referring traffic, and these partners pass on ...
Post a Comment
Read more

What's the purpose of investing?

"Investment" - This word is much used and often much abused one. One keeps on hearing this almost all the time be it in office or catching up with friends or attending a family functions - almost everywhere. More so when we are fed with lot of information about how one needs to make money work to get more money. However, for a lot of people, the clarity on one question is often lacking - What is the purpose of investing? And even if one knows his/ her purpose of investing, it is often not implemented in real life. For instance, purpose of one's investments may be having sufficient funds in times of need. Yet they may opt for a personal loan when faced with pressing need for money. Based upon my observations, below are some of the most common purpose of investments (in no particular order) I invest because there is some sufficient funds lying with me and I can get great returns. I am investing for some specific goal - buying a house, education of kids, m...
1 comment
Read more

Loans you should avoid

Originally published at BeinfFinWise __ Giving loans is a risky business. Business of banks and financial institutions rely on people taking loans and then repaying it, thus giving them profits. Many have built a fortune based upon giving loans. Loans also serve an important function for the economy by being a facilitator to businesses, housing, automobiles and other elements of consumption.  However,  what is good for financial institutions may not necessarily be good for you, especially when it comes to loans. While some loans may be good loans and help you prosper, there are several others which may derail your financial plans, if any! Taking loans can also lead to compounding work against you - a situation which anyone with long term financial goals would like to avoid. (Lot of the below is based upon Indian context. However, variants of this will be applicable to many places across the world) 1. Credit card debt Credit card defaults cos t a lot...
Post a Comment
Read more