It is easy to get driven by plethora of financial advertisements and articles about various products offered by many financial companies and banks. Every individual should have his own financial needs mapped out and then schedule the financial savings/investments in that order.

But how do you do it?

The answer can be found in answering four important questions -

What happens if you die tomorrow? Will the living conditions of your family be the same after you?
If your answer is no – which is by the way for 90% of Indians, then the single most important thing to do is to take pure TERM INSURANCE, equal to the earnings of your dependents.

This is the cheapest way to financially maintain your family’s living conditions, in case you are not around. A typical term insurance for a 25 year old costs Rs.3,000 per annum for Rs.10 lakh cover.

Many people wrongly avoid taking term insurance thinking that you won’t get the money back if you are alive. But the true purpose of insurance is to protect you from extraordinary circumstances for which you can’t normally be prepared. It is difficult to assume that a person who is just in his early work life can save so much as to protect his family’s living conditions. Meeting needs like child’s education, rent or EMI, parent’s health and other important money needs which are fulfilled by an earning member, become impossible in case of sudden demise.

A cost of Rs.3,000 per annum or Rs.8 per day is a very low cost for protecting your FAMILY FINANCIAL SECURITY.

What if you fall ill?
Falling ill is something unpredictable in the era of high stress. India is a country with all the world’s 2nd largest number of diabetics, large number of cardiac patients, and an ever rising number of various diseases like hypertension, cancer, etc. Need for hospitalization can set back any middle class family by Rs.1-5 lakhs for any major procedure. Add to it the stress of arranging money in difficult times, is itself a challenge. Also, compromising on the quality of healthcare for someone closely related is not an option.

Hence Medical Insurance is the best way to be prepared for contingency. A cost of Rs.10,000 per annum or Rs.30 per day for Rs.5 lakh cover, takes care of your and family’s various health needs for one year.

The earlier you enter into this policy, the cheaper it is and is hence in your favor.

What if you meet with an accident?
Meeting with an accident is one of worst nightmares one can face. Besides the pain and suffering, one has to endure significant financial loss for the family. In case of disability or loss of life, the financial needs of the family will be severely compromised. Though life insurance will cover some part of it, a low cost accident insurance is a recommended add on. At a very low cost of just Rs.3 per day, one can get insured against accidental events for about Rs.10 lakhs.

What if you lose your job today?
The world is dynamic and nothing can be taken for granted. Last few years have shown job losses are a reality which leads to severe cash crunch and increased stress. People can be out of jobs and hence salary for as long as 12 months, if economic conditions are not good. Hence, taking salary cheque for granted is a risk you must insure against.

A prudent way to deal with this phase of an individual's life is to keep aside 3 to 12 months of expenses, which buys you peace of mind to allow focus your attention for looking out at new jobs.

The first step to an individual’s FINANCIAL LIFE is about answering the above 4 questions and satisfactorily meeting ones needs for LIFE, HEALTH, ACCIDENT and CASH needs.

Anything else in financial planning like investing for the future through any vehicle which promises long-term benefits should start after meeting the above needs. After all, to enjoy the benefits in the long-term, you have to survive the short-term.

Next steps:
Don't read this article and forget it. Make a resolution to protect your family by taking care of these 4 things. Even though you know what you need, don't underestimate the time and effort to put this in place the first time. Make a commitment to take care of these 4 areas. Follow up and set a goal to complete them over the next 30 days.

Print this document and use it as checklist for execution.

*Already have/taken a new term insurance plan for my family
*Already have/taken a new health insurance plan for my family
*Already have/taken a new accidental insurance plan for my family
*Already have/started setting aside for 3-12 months living expenses

Author's Bio: 

The personal financial planning section at provides unbiased information to guide you to make the right decisions with your personal finances. Here, you can get tips on various topics right from how to save money to where to invest your savings.