When we think about our long-term life goals, we normally think about our retirement, whether we work in the private or public sector. It is important for us to plan our retirement carefully so that we can attain a financially secure and stress-free retirement.
All of us understand the importance of keeping ourselves, active, healthy, and above all engaged so that we never retire in life. The book ‘Ikigai’ written by Hector Garcia clearly states the need for us to never think about retiring and living together, the Japanese secret for long and happy life. He has mentioned basic things like what we love or are passionate about, understanding our strengths, and doing things that the world needs by understanding the reason for our life, which is a great way to plan for a long-term life with people who matter to us.
However, at the same time, we should also plan to protect your loved ones when we are living as well as when we are not around. Financial education and planning play a major role here. Someone said that life is a race, yes, it is, however, it is marathon race wherein a calculated plan for future not only helps us to manage our present but also helps us in planning for a secured future.
When we talk about legacy or inheritance it is important for us to create a long-term legacy of financial as well as non-financial things like values and experience. It is quite possible for someone to leave behind a wealth of inheritance, but no legacy.
It is interesting to note that we generally think of positive legacies, but we can also leave negative ones. Our personal traits, habits, our actions, and inactions can all be moving to our future generations as an inheritance.
So how do we leave a good financial legacy? We need to remember that whatever we do has an impact, that remains for a long time. There are many different aspects to leaving a legacy including personal, social, environmental, and spiritual/religious.
While there are many approaches, one way to look at legacy planning is through the below mentioned approach. This approach offers a simple framework to begin the planning process and also serve as a great conversation starter when discussing legacy matters with family or friends.
- Consider getting a personal risk assessment done– getting a financial or personal risk assessment helps in understanding/assessing our current situation and helps in preparing a blueprint for the future. Remember time to time financial health checks will help in preparing well for our financial life cycle.
- Discuss with family, pass on the information about your financial health to your immediate family– It is important for us to be transparent with our immediate family about our finances and personal choices. I have seen cases wherein the main earning member gets hospitalised; the family needs to sell their jewellery and other assets for expenses although they have an existing health insurance which was never informed to the family. Not only that, there are cases wherein the family is not aware of the investments of a deceased person and the same never gets claimed for as the family never knew about such investments. As is true with financial assets and investments, do not leave any surprises regarding financial liabilities. Share information on credit cards, loans, bill payments, etc., with family and/or legal representatives. No one wants to be left cleaning up a financial mess. Providing clear instructions and contact information regarding all liabilities will make it that much easier for your family.
- Start learning about finance and its management right from school– Lets start learning about finance from school say from class VI onwards only, using art integrated or sports integrated learning methods and ensure that our children’s plan and manage their present and future better in the long term.
- Importance of finance and accounting for Entrepreneurs of new start-ups as well as family businesses– When running a business, we always think about leaving a great legacy for future; however, it is not only important for us to acquire funds, but we need to focus on management and growth of those funds too. Most of the times when someone asks an entrepreneur about his financial situation, s/he says that I am not aware please ask my CFO/CA etc. It is important for entrepreneurs to learn finance and accountancy and be on top of their business/financial health. As a business owner you also need to have clear and explicit instructions in place regarding any sale of the business and/or property. Co-owned businesses need special consideration and agreements as to any transfer or sale of ownership shares.
- ABC Analysis for your investments/Assets- We do ABC analysis for our stocks in inventory management. Do we do the same for investments and insurance (Life and general both)? A-Top priority, B- Medium priority and C-Least priority. For example, getting a term life/health insurance or critical illness cover can be listed as a top priority item for us to manage our present and future. You can look at doing the same for all your current and future investments. Consider items of financial value. Inventory high-value items such as art, antiques, and jewellery, and determine what will happen to them. Will they be designated through your will to pass to a specific person? Left to a museum? Sold and the profits distributed to your family? Getting these items appraised, if they have not been recently, may also help provide additional clarity as some items could be higher – or lower – in value than anticipated.
- Living arrangements post retirement– We need to think about our post retirement living arrangements. Should we look at individual unassisted life, or should we consider assisted living with family or with support of retirement homes etc? Is there family nearby to help if needed rather than being several thousand miles away? Is a nursing home or hospital nearby in case of an emergency? Also consider working for life- a life without retirement.
You may need to consider protecting your legacy against costly medical treatments in India. Understanding the importance of insurance can be key, and you should also consider adequate critical illness insurance that will give you a pay-out, if you are diagnosed with a critical illness covered under the policy, without having to dip into your savings or liquidate assets which you may have already designated for your beneficiaries.
Remember that if you have a comprehensive legacy plan in place it will be your first and most meaningful step to leaving a lasting and positive legacy. The earlier the process begins in speaking with family and working with a team of professionals, the more comfortable all people involved will be in ensuring a legacy. Above all, planning for present and future together is the key to our long-term legacy.
Best wishes.
