The importance of Savings, Insurance and Emergency Fund!


Read this article (attached) this morning and it shook me a lot! Life is extremely uncertain, and we need to be prepared for the worse and get back stronger. A layoff had ruined a family, it’s devastating. This is not yet another blog, but a write up to show my angst to those people who don’t take the very basic things seriously. The two very basic things we at Droplet tell people repeatedly is that – have adequate life/health insurance first and a minimum of six months to maximum of 3 years of expenditure as emergency fund to take care of your family needs in case your life hits with an extreme uncertainty. All others can wait.

However, many people argue with us as to how can we save when we live paycheck to paycheck with expenditure running over our head and why do we need a term/life insurance when I’m healthy. The problem here is not about savings, but our behavior. Even I/we had the same problem 5 to 6 years back, our spendings were messy (but I saved a mandatory 5% of my income back then). But what we did is, we started tracking the expenditure for couple of months and found that we are spending a good chunk of money on unwanted things. Apart from rent and household expenditure, rest of the money got vanished in thin air (clothing/weekends/all impulsive spending and so on). Upon monitoring, I started to slow down the expenditure and made sure I either don’t use credit card or if I used it, I would pay it back immediately and not waiting for the billing cycle. This helped me bring down my expenditure and savings rate started to inch up. I saw savings moving from 5% of my income to 30% in couple of months, today I could save anywhere between 35-50% of my family income. All this is due to a shift in my spending behavior. There is always a way to anything and everything. Keep a tab on your spendings and you would see wonders coming in your way. The moment this is fixed, you would be financially stable. 

Once you have control over your spendings, make sure you allocate budget for the two basic things which we discussed above. As soon as the basic thing is set, all you must do is, not being so GREEDY and being sensible in handling your finances and investments. Within 8 to 10 years, you would see a good shift in your financial life for sure. 

Thanks for reading. Pls do re-read and reflect. You can reach out to us for any questions/suggestions.

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