5 Steps To Help Armed Forces Personnel Put Their Finances In Order
- Frequent transfers and early retirement makes it imperative for armed forces to plan well
- From having adequate insurance to doing goal-based investments, they should take care of all aspects
- Moreover, writing a Will and involving the spouse in money matters can help secure the future
Armed forces personnel often end up ignoring their financial lives—sometimes due to lack of access to financial advisors during remote postings which also hinders continuity and at others due to inadequate knowledge or information since they hardly interact with the outside world. However, the nature of their jobs—the risks involved and retirement at an early age (in most cases)—makes it important for them to take care of their finances and plan well.
Here are five things they can do put their financial lives in order.
Take Adequate Insurance
A job in the armed forces automatically introduces a risk factor in the lives of the personnel. And this makes it important for them to create a protection net for their family and dependants.
While the forces do offer insurance covers to the Army, Navy as well as Airforce personnel, they may not always be enough. It is important to take enough to cover all eventualities.
While providing for a robust cover, they need to keep two things in mind. One, they should not buy traditional policies as they may not provide enough cover and are more expensive than term covers that offer pure insurance. Two, they must take a separate disability cover as the one provided by the forces comes with certain conditions. It is also important to read the terms and conditions of the separate policy before buying.
Spell Out Your Financial Goals
The cornerstone of financial planning is setting financial goals. If you do not so, you would never know how much you need to save and invest. Saving too little or too much can both have their pros and cons.
Getting your partner involved in this exercise is a good idea. Make time to sit with your partner or guardian and chalk out a plan.
Organize Your Investments
Typically, the portfolios of armed forces personnel are skewed towards equities and traditional life insurance policies. They should keep in mind that too much equity can expose them to high risk, while buying too many traditional insurance policies may not provide them the desired returns as they are high on cost.
It is best to diversify investments across various instruments in line with their short- and long-term financial goals such as taking a vacation, children’s education and retirement.
Channelising any extra incomes in the form of bonuses and other windfall gains should be systematically invested. It is also important for them to ensure continuity with every transfer, whether it is to a metro or a far-off posting.
Hire A Financial Planner
One of the easiest ways of organizing your investments, without taking too much trouble, is to hire a professional advisor who can show you the way.
Independent investing should be taken up only by those who have adequate knowledge or time to do the required due diligence that investments require. For instance, investing in a small-cap company, in expectation of high returns, without doing enough research on it can spell disaster.
Moreover, portfolios require regular supervisions and reviews for them to work efficiently. For instance, every now and then, investors need to revisit their asset allocation to ensure it is in line with their goals. The allocation can change depending on the prevailing market conditions.
Revisit Your Will Regularly
The forces make it mandatory for their personnel to write a Will. Those in these jobs are also required to update their Wills every time there is an addition in the family or a new posting comes along.
However, a lot of personnel do not follow this strictly. Given the risk to their lives, this could be a grave mistake and leave your dependants in a quandary in case of an untoward incident.
At the same time, keeping your paperwork in order can help your dependants in the future.
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