How to get Rich

Financial Stages of Life – Foundation Stage

How is your Financial Foundation Strong?

In the post ‘Financial Stages of Life – Which stage you belong to?’  I tried to relate real-life stages to Financial Life. So a Childhood is a basic stage when one needs to set a strong foundation. We call the beginning stage of Financial Life as Foundation Stage. This is a stage when mostly the basic things around future financial planning are taken care of. A person in this stage usually has a chaotic financial life and realizes that he needs to have some basic but important things in place. One can broadly understand that he is in a foundation stage of financial life if he is hovering around any or all of the following things-

  • He may not have bought a Term Insurance Policy
  • He may not have not a Health Insurance Policy
  • He might not be keeping track of what % of his income he is spending, what % he is paying as EMI and what % he is saving
  • He might have a multiple and unnecessary savings account
  • He might have multiple de-mat accounts with many brokers
  • He might not have started investing Mutual Fund SIP
  • He might be using multiple credit cards
  • He possibly still invests in Bank Fixed Deposits

To move out of Foundation Stage a person should first set right the things listed above. This requires him to buy adequate Term Insurance to protect his family, buy adequate Health Insurance, start saving (It can be a Mutual Fund Systematic Investment Plan- SIP) before he plans to spend, curb usage of Credit Cards, understand investing in Mutual Funds.

To read about the next stage of Financial Life, click here.

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