Seven Money Resolutions for 2011:
#1 — Strengthen My Core Personal Finance Portfolio

by Vinaya HS on December 25, 2010

in Finance

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Resolution #1:
I will strengthen the core portfolio of my personal finances.

I consider the following elements to be the core building-blocks of my personal finances:

  1. Emergency Fund,
  2. Health Insurance, and
  3. Zero-Debt.

A big emergency fund, adequate health insurance, and freedom from debt, are what let me sleep peacefully at night. I still recollect that night, about six years back, when I couldn’t sleep because I’d taken a loan from my employer for paying my credit card balance. I don’t want to experience that ever again. That said, here’s what my core portfolio looks like at present.

Current situation:

  • I have an emergency fund equal to 4-months worth of monthly living expenses. Three-fourths of this serves as my job-loss emergency fund and the remaining quarter serves as my general-purpose emergency fund.

  • I have individual health insurance policies plus work-provided health benefits for me and D from my employer.

  • I have cleared all my debt.

Much of this was done in 2010. From here, I’d like to move-up into the position outlined below.

Desired situation:

In 2011,

  • I’d like to first increase my emergency fund to cover 8-months worth of monthly living expenses. The 3/4 : 1/4 split between my job-loss emergency fund and general-purpose emergency fund would still continue. (Then, in 2012, I’d like to increase this further to cover 12-months worth of monthly living expenses.) I define 1-month’s worth of living expenses as the amount of money that I believe to be adequate for my family to lead a decent lifestyle for 1-month.

  • I will continue our present health insurance cover. Additionally, I will look for individual health insurance policies to cover D’s parents (they’re covered right now through D’s work benefits).

  • I will continue to remain out of debt.

If I manage to do all these, then by end-2011, my core personal finances will be twice as solid as they are today.

Over to you now. How strong is your core personal finance portfolio?




Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.

{ 9 comments… read them below or add one }

Girish December 25, 2010 at 7:34 PM

Wow… A very good resolution..Number 1…
I have a small emergency fund…
But need to think of the other 2–individual insurances and debt free!

Keep the blogs flowing…
Girish

Vinaya H S December 27, 2010 at 10:17 AM

@Girish:

Thanks. :-) Probably you’d want to increase the size of your emergency fund in 2011. By the way, what outstanding loans do you have?

Shankar December 27, 2010 at 3:42 PM

Hi Vinaya,

First, your blog is amazing. Thanks for all the information you provide.

Coming to this post,
Is the whole point of having “personal health insurance” additional to the “Employer provided health insurance” to have health insurance cover during job changes/job loss? OR Is there any other reason?

If that is the only reason, does it make sense to buy it when you plan for a job change? I am asking this because in most scenarios the “personal health insurance” is redundant and is it worth spending around 2000 rupees a month for a not-so common scenario?

On the same note, I notice that my contribution for “Employer provided health insurance” premium has increased around 20% each year from last 4-5 years. I am not sure if this is the case with individual policies also? I mean, has the premiums increased so much over years?

Regards,
Shankar.

Vinaya H S December 28, 2010 at 6:30 AM

@Shankar:

Thanks for your kind words. :-)

It’s always a good idea to have health insurance cover that’s separate from what’s provided by your employer. Reasons:

#1 — As you correctly pointed out, having personal health insurance cover ensures continuity while you’re unemployed or are in the midst of a job change.

#2 — Your new employer might not even offer health benefits (since it’s not a MUST provide) as part of your compensation.

#3 — Employer provided health insurance can’t be converted into a personal health insurance cover (like the way it can be done in the United States). So, if you delay purchasing personal health insurance till you’ve retired, you’ll find that either you’re ineligible for buying one or the premiums are astronomical.

So, it’s a good idea to view your employer provided health insurance as simply an icing on the cake (which is your personal health insurance cover).

I believe Group Insurance premiums have increased because of the level of fraud associated with the claims. Personal insurance premiums have however reduced greatly over the years.

Sandriano December 30, 2010 at 9:14 PM

Hi Vinaya,

Apart from the Emergency Fund, do you have an investment fund?

Regards,
Sandeep

Sandriano December 30, 2010 at 9:14 PM

Hi Vinaya,

Apart from the Emergency Fund, do you have an investment fund?

Regards,
Sandriano

Vinaya H S December 31, 2010 at 7:09 AM

@Sandriano:

Yes. I do have an investment portfolio that’s primarily geared towards achieving financial independence. I wrote about it as part of this series — Seven Money Resolutions for 2011: #4 — Work Towards True Financial Independence.

I’d like to hear your thoughts on this.

amol December 14, 2011 at 11:08 PM

Hi Vinaya,

what is 3/4 : 1/4 split here ?

Vinaya H S December 18, 2011 at 6:40 AM

@amol:

It means:

“Three-fourths of of my overall emergency fund serves as my job-loss emergency fund and the remaining one-fourth serves as my general-purpose emergency fund.”

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