Considering a change in profession? Here’s how you can financially prepare for it

https://www.financialexpress.com/money/considering-a-change-in-profession-heres-how-you-can-financially-prepare-for-it/2865587/

India is increasingly becoming an entrepreneurial nation and the younger generation is looking to nurture their own ideas into viable businesses. Among the chief concerns marring their passions is uncertainty over financial continuity in absence of a consistent income stream that a salaried job promises. Without a comfortable financial cushion, most people shy away from pursuing their business ideas. So, what’s the solution? Create a second income stream!

As per recently available data by Global Entrepreneurship Monitor, India’s Total Entrepreneurship Activity rate increased to 14.4 per cent in 2021 from 5.3 per cent in 2020. This rate is only likely to increase over the years as the expanding gig economy in India indicates a rising entrepreneurial spirit among working adults.

Starting a new business is a daunting task, primarily because you need to put in a significant amount of capital into building its foundation and getting it into an operational phase. While you are doing this, you can hardly expect a solid income from the business. So, how can you prepare yourself financially if you are pursuing your passion?

Here are some thumb rules that you can follow:

● Plan for it: The first one is a no-brainer. You can’t take a career break and pursue a new business unless you have done sufficient financial planning for it. Look at your savings, investments, and current expenses to figure out how much money you will require and what time frame. Be honest about your spending habits – undermining your expenses will only prove to be detrimental in the longer run.

● Create a second income stream: What is instrumental to the success of your business is the fact that you have a comfortable financial cushion as long as you are staying away from your salaried job. A great way to prepare for such a time period is parking your money with financial instruments that can offer a consistent payout over the longer term. A great example is participating life insurance products that offer not only help multiply your money but also offer a bonus payout every year as per the pre-determined framework of the product. Such a product can help you create a second income stream and enable you to build your business stress free.

● Life Insurance is a must: A career break can cause significant financial burden on the family as any new business idea typically translates into debt. In the event of the death of the breadwinner, this can create longer term complications for your dependents. So, ensure you purchase a term life insurance while you are drawing a steady income so that your family can stay protected in case of any unforeseen circumstances.

● Planning for contingencies: Certain events like illness in the family, caregiving responsibilities to aging parents or babies can incur significant expenses and derail your financial preparedness. It poses a risk significant enough that you may require to close your new business and go back to a salaried job. To avoid such circumstances, it is important that you have a substantial corpus for emergencies. Certain guaranteed life insurance products as well as participating plans can serve as a great method of preparing for contingencies.