POSTED BY June 27, 2013 COMMENTS (44)ON
Are you ready for the bad phase in your life which might come anytime? How prepared are you? We should not be pessimistic in life and always look forward to thinking positive, but that does not mean, we should not be prepared for bad times. Bad things happen in life and you must have seen many bad things happening in others’ lives. We don’t prepare for these bad times, because we have somewhere believed that we are more lucky or privileged than others (if you don’t agree, ask yourself what are changing of your accident, and you will surely say, much lower than 95% of other people on earth).
When something bad happens in our life (or financial life), we suffer, our families suffer, lots of confusion arises (and many times we are not there to fix it back) and if we are alive, we regret about not preparing for small things which could have eased the situation. So let’s see how much prepared, are you? I want you to not just read, just keep asking at every point if it’s true in your financial life or not?
Situation 1 – What if you die?
Someone asked me a few months back to not use such direct words, but unless I do that, no one reads seriously. Now ask yourself
Does your family know how to take out money from your bank accounts? Do they know your ATM password? Will they be able to access everything you have in your head right now from passwords to remember how much money you need to get back from a friend, to where exactly your whole net-worth lies? Will they be able to arrange for the next 1 yrs of expenses if you are gone? What about the next 30 yrs? Have you prepared a BlackBox emergency kit for your family?
Situation 2 – If you lose the job?
I want you to imagine you lost your job right now at this moment. Now – Can you pay your next 6 months EMI? Will you have the guts to take your family out for a late-night movie and a nice dinner costing 3k Or will you tell them – “Its a flop movie, we can watch on a laptop ?”. Can you sleep well after you are rejected in your new interview ? Will you be able to say – “Sorry, I am forced to take this job because … “. What if the job does not match your liking, will you still have that power to say NO to the next job? Now your answer for all these things can be YES or NO, and its a clear indication of how well prepared are you for these situations. Its time to think about it?
Situation 3 – If you need Rs 5 lacs suddenly?
Lots of people I know cant arrange Rs 1 lac given some emergency situation, can you? If yes, then what about Rs 5 lacs? If I give you 24 hours or 1-month deadline, then can you do it? Have you been preparing for this kind of nasty situation in your life? Now, why would you need 5 lacs? There can be many things which can happen like – some medical emergency situations in the family, or because you found your dream home and have to make down-payment.
So, If you cant arrange for 5 lacs, then ask yourself how much you can? 3 lacs ? 1 lac ? Rs 50,000 ? The good news is that you don’t need 5 lacs at the moment, but the situation can come anytime? Start working on it.
Situation 4 – If you were to be hospitalized?
If you were to meet an accident and hospitalized, things would still be in control, if you are conscious, because you can guide your family on what is to be done and from where to arrange for money and where are your health insurance documents, but Imagine you are unconscious and can’t communicate to your family – Does your family know how to arrange for few thousand rupees to start with ? Do they know where is your health insurance card or how to access your emergency fund? Do they even know the name of your health insurance company, how about the TPA phone numbers? Have you ever stored an ambulance service number on their mobile or , your mobile which takes not more than 1 min exactly!?
Do you have any black box kit prepared for your family which has some useful information for them in financial life which makes their life easy? In my 2nd book – “How to be your own financial planner in 10 steps“, In the last chapter, I have discussed this matter at length and also told the importance of documentation for a stronger financial life, do order it right now, just takes few hundreds of bucks.
You don’t have to feel overwhelmed because you are not ready, A lot of others are also in the same position, you are lucky to realize this now and have lots of times on your side to work on it. Do not look for perfection and strive to complete 100% of what is asked, but at-least identify core issues in your financial life and situations which you feel you should be ready with?
By the way, how many months can you survive without a job? Tell me in the comments section and how you feel about it?
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44 replies on this article “How prepared are you for these 4 bad situation in your financial life?”
I can survive as long as I wish since my wife works in a government bank as an officer :). But surviving on someone else’s money (whether it is my wife or parents) is an unbearable thought for me. Anyway, I can survive for over a year in my own savings since I had been saving almost 40% of my salary for the last one year. Besides, I do not have huge EMIs such as home loan. Going forward also it will not be a problem since our home purchase plan calls for the EMI not being more than half my wife’s salary. I have a 4406/- personal EMI, which will be over in the next 7-8 months.
Really an eye opener article!! Answers to all these 4 situations are:
Adequate life cover (term insurance)
Adequate health cover (health insurance)
Enough emergency fund in cash and liquid fund &
Few investments in RD/FD etc.. These will make life simpler in case of unforeseen situations.
Thanks Manish for eye opener article, I cannot survive at least 1 months if now I lose my job, because recently I have taken home loan.
Yea . better try to fix it !
You are absolutely right Manish.. I should be Financial Emergency ready.
Really i cant survive atleast 2 months if i loose my job.
From few days back onwards, i started following your blog.
Definitely i will plan everything as early as possible.
Thank you so much for this nice articles.
Good to hear that 🙂
Hard hitting article that will surely make a lot of people think….
Thanks 🙂 , hope more and more people read it !
even though we all subconsciously know these things .. we always ignore rather than preparing for this situations .. nice article .. it was an eyeopener ..
Thanks Pratik !
Very apt !!
great artical ,hope u don’t mind if i share this contend with many others…
YOu can send this on email to anyone and paste the links anywhere . But dont copy the content and put it on some other website as it as .
Please share !
I suspect, if I died ,my family members may not able to withdraw money through ATM..even though its joint account co-holder will need its own ATM card.
Withdrawals made in deceased bank account may be a crime as bank will want you to prove the succession first & after officially money is claimed then only make withdrawal.
Yes. it can happen . What are you doing regarding this ?
I think this topic require high level of attention if your family members are financially dependents on you.This is not case for me till we have tried to make some provisions under emergency / bad situations.
As far money under bad situation is concerned,apart from having individual accounts… we have opened separate saving joint account.. adding father as a joint holder as well.
We regularly contribute in this account & won’t make any withdrawals for general purpose.We have separate debit cards / cheque having names of all for this account…so any one of us can make withdrawals under bad situation.
I invest amount above some apprx threshold limit in liquid / cash funds.I have activated HDFC insta-sms invest & online quantum liquid fund account with this account…
I am hopeful that this account will take care of some immediate bad situation.
My family don’t like discussions on such topics like death etc.To make a way .. I have created one file on common desktop with attentive name “Nothing is mine” with all my details..
What else I can do?
I don’t know how word:”Admin” comes?
Can you please edit?
Thats ok , leave it for now
blackbox idea is wonderful !! I thought about this long years back, but now it has strengthened my idea from your good advise. Thanks. I do have a habit of writing all the financial details in a diary which so far my family members does not know!!! In a crucial moment they will get it !!!
Nice .. better do it asap !
Hi Manish, very apt and it hits where it is supposed to..Just out of curiosity, where do you get all these wonderful ideas from? Would surely like to meet you one day in personal
When you are passionate on something, ideas flows in like anything 🙂 . Would love to meet readers 🙂
I can survive max 2 months without a JOB. In your previous articles also you had mentioned this thing and after that only i reached to 2 before that it was zero.
I am trying to make it atleast 5 and it will take me another 6-8 months to reach there.
Thanks for emergency kit Idea 🙂 .
A very nice article indeed…:)
Thansk Tarakesh !
loose -> lose
I am a regular reader of jagoinvestor. (Even a member of wealth club.) I remember you mentioned about keeping a file for listing out the documents, the procedure of claiming insurance if something happens to me, and the important phone numbers etc. somewhere in your first book.
Well , I did that right away and have that file ready and informed my spouse about all the procedures, all our investments, all the log in ids and passwords(for online access — I have made everything on line accessible and automated as well !!!). She was so happy about that and now taking regular interest in all such activities. Thanks to you.
I went one step ahead and prepared an excel sheet for all the above mentioned info !!!
Anything can happen to a physical file but a soft copy can not be destroyed (only if your account is hacked.). I am regularly updating this file and same thing I did for my parents financial details as well.
It was a long and detailed process but as a responsible husband, son and now a father I had to do it.
Well I really thank you for the initial push and inspiration your blog provided me and mentioned all the above details as I could not do it before.(Am a little lazy guy !!!).
I will work on this black box emergency kit idea as well. (I feel its just an extension to what I have prepared till now. Need to buy your second book as well.)
And to answer your question about how long I can survive if I loose my job, I will say at least 4 months without disturbing any of my savings. And if we take savings into consideration, I think it will last for around couple of years.
And my hearty thanks for all your help to me and so many other people.
Good to hear that you did this and took your financial life to next level !
‘What if you die ?’ is not direct enough! Most people walk around the planet like they will die only after they grow old! Idiotic.
Most people also think that just because they have Mediclaim they will automatically enjoy cashless hospitalization and need no liquid money (besides the emergency fund). This is plain stupidity.
Financial planning requires a temperament to think of the worst that can happen and prepare for it. Discipline is secondary. Knowledge of investments is tertiary.
Bang On , Pattu. I like your saying:
“Financial planning requires a temperament to think of the worst that can happen and prepare for it. Discipline is secondary. Knowledge of investments is tertiary.”
I am always of the view that – Financial planning is more about intention than resources, you have put icing on my thoughts.
Hope investors or general public for that matter understand its deep meaning.
“Financial planning is more about intention than resources” also conveys quite a lot.
A very nice article indeed. I started arranging my data in files after reading your earlier article “Personal Finance Emergency kit : A gift to your Family”. I also informed my family about the location of all the important documents, and told them how to use them in-case of emergency.
However the idea of writing your passwords and ATM Pin might not be a very good one, as in-case of a burglary, these things can be misused.
However the idea of ‘Personal Finance Emergency kit’ is indeed very good.
Great 🙂 .. You can do some encrypted thing to note it down in excel sheet ! .
I can survive 4-5 months and confident that I can get another job within that time frame. If nothing works I will have to sell my flat, close home loan, pack everything and go back to my home town. Start something small and together with other income at home we can manage.
But I am wondering about the situation about getting unconscious after a accident or dying. I should share all the financial information with my wife, keep soft and hard copies of all documents. Also planning to take a life insurance, as you have mentioned not for that tax saving purpose but for the insurance.
BTW I came across you blog recently after buying book “Step by step guide to start investing”. The book was very useful and this blog too. I am now going through all the old articles in this blog during my free time.
thanks for sharing that 🙂 .
Thanks for the Blackbox Emergency Kit idea.. Will start implementing it from today… You are right.. Kal kisne dekha hain??
Awesome article and a must for everyone to read. I will share this link on my website for the parents to read. Thank Manish.