Nirmala is a successful teacher of 56 years and has gained respect for her services to society. She is very close to retirement. One day she happened to meet her former student Avinash, who was a financial advisor. She was very happy to hear of his achievements.
Being a financial advisor, he meets many people each day and educates them on the importance of financial planning.
Avinash asked his school teacher one simple question, ‘Madam, where have you invested your money? With a smile on her face, she replied, ‘I have not invested anywhere and just get the gratuity on my retirement’. ‘You could have done so many things in your life’, he replied. What could she have done? Here is what Avinash had to say.
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Teachers must pay attention to financial planning. Hope you have watched the Hindi blockbuster movie ‘3 Idiots’. When Amir Khan was asked to define a machine, he said, ‘Machine is anything that minimizes the efforts of a human being’.
Likewise, in simple words, financial planning is a systematic process of managing money to accomplish short and long-term goals. For instance, if you want to buy your dream car and house, you need money. A person who doesn’t do financial planning may face financial distress and not be able to accomplish financial goals. Financial planning is important to everyone, including teachers. It addresses the following questions:
In Nirmala’s case, the scope of financial planning is limited as she is already 56 and would retire in 4 years. After her retirement, she depends on her monthly pension. With this income, she has to lead her post-retirement life. She would have been in a better position, financially, if she had done financial planning.
See Also: Importance of Financial Planning
Nirmala enjoyed a healthy life. If she had faced any major health issues, say heart ailments or a stroke, she might have missed out on high quality medical treatment. Unfortunately, many teachers working in rural areas do not avail health insurance, which is extremely important to protect their health. Insurance Planning is an integral element of financial planning.
What if you do not have a health insurance policy when you are diagnosed with a chronic disease? There are two possibilities:
See Also: What Does A Financial Advisor Do?
Saving alone is not enough. You must invest. Make sure to invest based on risk profile. Invest in PPF, FD, NSC or Post office savings schemes if you are a conservative investor. Invest in equity like equity mutual funds or shares if you are an aggressive investor. Invest in mutual funds via SIPs. Do remember that equity is high risk at high return.
Retirement planning is the process wherein an individual must determine his/her retirement objectives and formulate an action plan to attain those objectives. Retirement planning is important because of the following reasons:
Save for retirement on the first day of the first job. Never make the mistake of last minute retirement planning. You won’t have the time to accumulate a sizeable retirement corpus.
See Also: Financial Planning: Do it Yourself?
Teachers must save, spend, borrow and invest wisely, tackle debts wisely and plan for a financially secure post-retirement life.
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