Arjun and Amrit joined the same company after their post-graduation 3 years ago. Now, both were planning to switch their jobs for better career prospects. The new job offered higher pay, with other benefits. While Arjun planned to upgrade his car and purchase a new home, Amrit wanted to make the best use of the newly available resources and reached out to his financial planner to guide him through the process.
Adequate Life Insurance Coverage
The first thing Amrit’s financial planner did was analyze his insurance needs. Though Amrit had taken life insurance coverage for himself to protect his family financially, with a salary increase, Amrit’s current lifestyle will also go up. Keeping this in mind, the planner suggested Amrit take additional term insurance cover.
Continuity of Health Insurance Cover
Amrit was covered under an employer health insurance policy in his prior job. With a recent job switch, he and his family will be uninsured for the transition period. It is suggested that he take an independent health insurance policy separate from an employer-sponsored one, to have continuity of coverage.
Reprioritise Goals
Amrit’s financial planner had deprioritized a few of his financial goals as his previous cashflows were sufficient to meet only the high-priority ones. Now that his cashflows have increased, it is time to take stock of all his goals and redirect the extra income towards achieving them. Now Amrit can start investing towards purchasing his dream house which was not possible earlier.
Revamping Investments
Amrit has followed a disciplined approach to investments. He had SIPs running at the start of every month in investments that are tagged towards his goals. His financial planner suggested that he step up his SIPs to make efficient use of his increase in income. Amrit expects an annual hike in salary of 10%-15%, so a step-up in SIPs of 5%-8% would help him reach his financial goals a lot faster.
Revisit Your Debt Management Plan
Typically, job changes come with a joining bonus which you wouldn’t have planned for in your monthly finances. This unexpected lumpsum cash inflow can be redirected to manage your loans efficiently. Dynamic Management of Debt is one such process of efficiently managing your loans. To simplify, this means proactive repayment of the loan with the intent of reducing the amount of interest paid.
A dynamic approach is suggested over static repayment, as this means you are not deploying your money into less efficient avenues. When the investment avenues are attractive, your money will be put to efficient use if you invest it rather than using it for loan repayment. Constant monitoring and managing debt strategically will help you become debt-free and build a balanced portfolio by looking out for market opportunities.
Having an effective financial plan in place, especially when you are switching jobs, will help you reach your financial goals faster. Reach out to us to get started with your financial plan.