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Personal Financial Planning

Notes The key things to look at when trying to determine your assets are:
1. Personal Property: Keeping a record and important documentation about the personal
property you own is a key part of insuring properly. Be sure to review your personal
property inventory annually.
2. Net Worth: What do you have in the bank and how much do you owe the bank? The more
investment and savings there is, the more there is to lose in the event of a liability claim.
Insuring for your net worth is an important part of strong financial planning.
3. Future Worth: Your life and your health. Loss in this area would have huge effects on your
family. Strong financial planning includes life and medical or health insurance as well as
a sound retirement plan.

Once these issues have been identified then you know how much insurance you need to have.
Protecting your assets basically means boiling things down to three categories:
1. The things that you have which could be lost in a huge house fire.

2. The things that you have earned and could lose if someone has a liability claim against
you.
3. The security of you and your family in the event of health, retirement or death.

Case Study How much Life Cover do you Need?

he primary purpose of life insurance is to provide risk cover that offers financial
protection to a policyholder’s dependents in the event of the policyholder’s death.
TOne needs to have enough life insurance so that his or her family can continue with
their current lifestyle even if the breadwinner passes away.
Like every financial decision, life insurance shouldn’t be and needn’t be arbitrary. There is
such a thing as ‘the right amount of cover’, which assumes greater significance in light of
the fact that there’s a price to pay for buying grossly less or grossly more. If you under-
insure, you risk causing financial hardship to your dependents; if you over-insure, you
waste money paying for something you don’t need.

The amount of insurance you need depends on your personal circumstances, which
comprises of many variables. The most important of these is dependents. If you don’t have
dependents (say, you are not married and your parents are financially self-sufficient), you
don’t need life insurance at all. Likewise, if your spouse is working and can live comfortably
without your income, you don’t need cover. However, if the two of you have taken loans,
then you need to provide a back-up for those loans. And if you have young children, you
will need to provide for expenses to raise them and support their higher education.
Therefore, to answer the question of how much cover, answer the question: how much
capital does your family need, both in the short-term and in the long-term? The answer
can be derived in three steps.
Step 1: Work out your Expenses

Living expenses: These include day-to-day expenses such as food and utilities, and non-
recurring expenses your family may have. Your current annual expenses, exclude your
own, can be a good indicator. If you have young children, chances are, their expenses will
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