“A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.”( Suze Orman)
a) Insurance: Insurance is used to protect us against eventualities. Of particular importance is:
Medical Cover: An accident or illness can wipe you out financially without adequate heath cover. It is essential to have health insurance for yourself and your family.
Life Insurance: This is particular important if you have dependants. It ensures that that they will be taken care of financially in the unfortunate event that you should die. The higher the insurance the higher the monthly premiums.
b) An Estate Plan
It ensures that when you die, your assets will be distributed to those you love or your dependants according to your will. With a will you can direct who is to receive your property and how much.
Remember without a will the court will appoint an administrator over your assets. This administrator may not have been someone you have chosen.
Assets can be moved to a trust. A trust will ensure that the assets are utilized for a specific purpose.
This can be education for your children, maintenance support for your dependants etc. Trusts are managed by a trustee (i.e. someone appointed by yourself to manage the trust)
Insurances: Ensure that you have named beneficiaries to your life insurance policies.
c) An Emergency Plan or Emergency Fund
This is money you can access easily when emergencies such as illness, loss of income arise. It is recommended that you should have about 5-6 months worth of living expenses in a savings account or anything that can be easily be converted to cash.
This money should only be used in the case of emergencies and should be kept aside from your other investments or expenses.