Farmers – How they have to do “Financial Planning”?
Farmers also will be having “Financial Goals” like child higher education, house child marriage, etc. So, they have to follow “Financial Planning”.
But no farmer knows what is “Financial Planning”.
Here, in this article, I will explain how the farmers can plan their financial goals.
Farmers must have Insurance Planning…
Life Insurance Planning…
People living in the village usually take Endowment or Money Back kind of Life Insurance Policies.
Where the insurance coverage will be low and return on investment is also low when compared to the inflation.
Most of these people do not know insurance and savings should be mixed.
Farmers also should plan to take term insurance only.
But I have seen these people not depositing money in the banks and filling the Income Tax Returns.
As life insurance companies do not know the income levels of the farmers, they will not give high insurance coverage or no insurance coverage.
So, these people should start transacting with banks and should file IT Returns in order to get high insurance coverage from Life Insurance Companies.
In addition, Farmers fear of taxes if they ITR.
But according to my knowledge, the agricultural income in India is tax-free.
I will write about the taxability of agricultural income in some other article.
Health Insurance Planning for Farmers…
Most of these people will look for Government Hospital or ready to sell their assets in case of health problems to their family members.
In addition, they do not the importance of Health Insurance needs, and they feel it as unnecessary expenses.
As a result of this, they end being poor by selling their agricultural land in such health problems to the family.
Actually, these people also should have health insurance coverage as high as possible depending on their financial capacity.
Accidental Insurance Planning for farmers…
Accidents can happen to these people like others.
In addition, if that happens, and he or she is alive and permanently disabled.
Then, survival will be difficult.
If the farmers take accidental insurance, in case of such a disability, he will be having some kind of income for his survival.
So, the farmers also should have accidental insurance depending on their financial situation.
Crop Insurance Planning …
According to my knowledge, the majority of the farmers do not know the importance of crop insurance too.
This insurance is also very important for them to take.
In addition, this insurance will give a claim in case of damage to the Crop.
So, the farmers should have their insurance planning in order for their future financial health.
Goal-Oriented Investment for the Farmers…
Almost all farmers do not know goal planning like child higher education, child marriage, house, and retirement, etc.
Most of these people will be having land in their village.
But they do not know that How much cost they have to spend on building a house.
As a result of this, they may end up spending a big amount of money on private loans too, and it may ruin their Financial Health in the future.
Nowadays, people in the villages are sending their children by selling the agricultural lands also without thinking the future consequences.
What is the guarantee that the kid will definitely get a job?…
Is it worth selling the land for the sake of child education also they do not know?
In addition, all these things are possible to know in “Financial Planning”.
Investment Planning for Farmers…
I have a village background. I lived in a small village in my childhood days.
In addition, I have seen people lend their money to their relatives and know people in the village for Rs.1.5 interest to Rs.2 interest per month.
Moreover, in this process lending, the villagers lend many to a single person or a few people only ( 2 to 3 ).
Here, I will tell you my own experience with you about this lending of money in the village.
One of my relatives has lent 3 lakh to another relative of mine for Rs.2 interest.
But the borrower had given back principle only after 15 years.
I agree that Rs.2 interest is a very good interest per month.
But the real problem, If you do not diversify the money that you are lending to maximum people, then if one person defaults and failed to repay the money along with interest, then you will be on losing side.
Again, instead of creating more wealth, you may end up losing existing wealth in such a situation.
So, its better for the formers not to give money for interest.
Instead, you can keep some portion of money in postal deposits.
What is Priority Investment for the Farmers?…
Just like in the towns, most villagers after interest businesses prefer to form land for investment purposes.
Agricultural Land ( form land) is also coming under real estate investment.
Many times farmers also buy these agricultural lands with loans, the interest rate is as high as Rs.3 per month on Rs100 borrowed.
But Please beware if the return on investment in agricultural land is lesser than the interest that you are paying, then wealth will not be created.
Instead, wealth will be destroyed. Please do not read the article whey you should not buy real estate with a loan.
But both these real estate and interest businesses are so risky for the formers.
It is better for them to invest in a combination of postal Fixed Deposits and equity mutual funds in order to achieve their future financial goals like child education, child marriage, and retirement, etc…
Retirement Planning in Financial Planning to Farmers…
A typical former will always depend on the Agricultural Land lease income in the olden days.( from 60 to 65 years age)
In addition, formers depend on the social security pension given to the governments.
Some formers may get some income if their children send their money from their earnings.
But it will put lot of burden on their children and the income from the renting of agricultural land and social security by Govt is also may not be sufficient.
So, it is better for the formers also to plan their retirement from their younger age.
However, it is not easy to plan all these for the formers on their own.
In retirement, farmers also may require to stay in a Town in order to go to a hospital in case of emergency health situations.
But the costs in the town will be different to the village.
So, the proper cash flow and investment planning required for a better retirement life for the formers too.
In addition, Formers also can take a professional ( Sebi Registered Investment Adviser) to plan their future.
Conclusion about Formers Financial Planning…
The awareness about “Financial Planning” is still not there in town people like Employees, business people, and professionals, etc.
Then expecting this awareness from the Formers will be a mistake.
But let’s hope that the formers also will realize the importance of financial planning and will start to follow it and will live with peace of mind.
In addition, as of now, no or few Sebi Registered Investment Advisers are giving “Financial Planning” to the formers.
But in the future, Sebi Ria may start to giving services to the Formers also.