Thread by @WiseDonkay

#Thread: If you're a young professional who doesn't understand insurance and savings, this is for you.

Disclaimer: I'm not a finance expert. These are suggestions. You should make your own decisions based on your needs.

Okay first things: You may already be covered medically and saving money. How do you find this out? Look at your CTC in your appointment letter or your payslip

Do you have something called PF on it? That's a saving!

Did HR issue you an insurance card? That's your Mediclaim.

Things to ask: How much PF is being deposited into my account each month?

What's my sum insured? Is it just me who is covered or my dependents too?

e.g. You have 3 lacs for self plus dependents (parents/spouse/child). This means upto 3 lacs to be used by any of you per year

If you're a student, most universities have a group insurance of at least a lac included in fees. Look for that. Keep that card with you at all times

Now coming to if you don't have any of this

Mediclaim in India is devastatingly cheap for young professionals in good health. At 31 i pay less than 2k/year for a policy that covers me for 3 lacs.

It doesn't need any health check-up to get one

It's cheaper for younger people

Mediclaim covers accidents from the time of issuing the policy, and critical illnesses (like cancer) from the first month.

If you have pre existing health conditions most of them will start covering you after a certain period of time where you don't claim anything

So that's health insurance.

You can get one that covers your parents and you (Usually called a family floater in the sense anyone from the family can use it and the sum assured is a floater meaning whoever needs it can avail it)

I'd advise getting one for yourself separately

You can get your parents one policy and another for yourself. Ideally everyone has their own

That means instead of 3 lacs per year to be used by one member/collectively, each one is entitled to the full amount

My parents 61 each. Their policy costs about 30k annually now

But for 30k annually now, I get an assured coverage of more than 10 times that amount every year for them and the sum increases each year there's no claim made.

So well that's a month's salary each year if you earn around 30k a month. You need to save 10% of your salary each month if this is the liability on you.

Coming to life insurance usually the formula is that your sum assured is 80-100 times your premium. So if you pay 5-6k annually as premium, your life insurance is around 50 lacs.

But unlike Mediclaim where your premium can go up as you age, life insurance premiums don't

My current policy was bought 4 years ago and it will last me until 2054 at the same premium

I pay around 6k a year for this. I plan to up my life cover to a crore at least which would mean my premium is 9-12k per year. So far, just me, that comes to ~15k a year for 3 lacs of Mediclaim and a crore for my family as my life cover

Life cover for parents is slightly tricky as the older you get, the more chances that you won't be given life cover. If they have a LIC policy from the time they were young, best to keep it alive

Coming to savings. R and i pooled all our cash wedding gifts into investments and MFs. At one point i was investing 5k a month in mutual funds. That year the markets did well and by 18 months time i had over a lakh in my savings. 36 months later the return was around 20% growth

We used the amounts to buy our first vehicle (our scooter) and clear off credit card debts. We reinvested the rest.

Mutual funds again can be for as little as 500 a month with no penalties for missing a month. Most of them allow you to break the mutual fund without any severe penalties like a fixed deposit.

So let's go back to our math

Mediclaim - Approx 2k
Life cover (1 crore) - Approx 10k
Mutual Fund (let's say 1.5k a month) - 18k

Total - 30k

Or basically a month's salary for someone making 30k

You need to save ₹2500/- a month to be able to do this

Best part here is that all these investments are tax exempt meaning you can prevent TDS deduction and pay zero tax by showing these as investment proofs

And not to mention, you're literally saving money by putting it into Mutual funds, so in a good year, the value of your mutual fund may be equal to or greater than the sum invested. If your mutual fund earns a dividend you can choose to either reinvest it or take the money

If you reinvest, your mutual fund value is now inclusive of the dividend. Let's say I invested 18k and the dividend was another 2k, my principal amount is now 20k and I earn interest on that.

If you choose to cash out your dividend, you can keep it aside as a policy premium!

So basically, the magic of having a small investment ongoing makes it easier for you to make bigger investments later and stay insured health and life wise, while at the same time, saving a bit of money.

I want to clarify that I was doing this while running a household!

This of course meant I used trains to go everywhere in Mumbai. It meant I only shopped for clothes once a year for mostly my work
clothes which were fabric materials which were stitched at the local tailor. This meant I was getting 2-3 pairs at the cost of a ready made pair

It also meant I rarely went to expensive places, and if I did, I ate, and I didn't drink. Drinking was exclusively at house party scenes where alcohol was bought with money pooled together and bought at MRP.

And of course, this is a big one - I carried my lunch to work every day. It wasn't a very lavish lifestyle, but it was comfortable.

Little stuff adds up. I managed to squeeze in presents for loved ones, cheap vacations (by sleeper trains and buses and flash sales for airlines)

Disclaimer: I lived in rent and EMI free house. But that too was in Virar because I insisted my parents bought a house that we could afford instead of undertaking a home loan. If you don't have that, see what you can save on rent by living in a less expensive suburb

Like for example, I never understood why kids from TISS lived in cramped overpriced houses in Deonar whereas they could easily have lived in bigger houses for cheaper in kurla, vikhroli, bhandup or navi mumbai and travelled to college

When we moved to Bangalore too, I used the metro while I was employed, and then ensured my workspace was accessible easily by two wheeler when I set-up AltStory..
I obviously had privilege, but what I'm saying is that it's possible to save money at a low salary

So to conclude, I'm happy to talk to other social sector folks and students who need help on this individually in my DMs. Again there's no tailored way to do this for you. You'll have to figure out what works best for you.

Happy to help in my personal, non professional capacity