Personal Finance lessons from Start-ups: How ULIPs hold the key to your long-term goals

For most individuals, there are some important milestones such as children’s education etc., but at times, an unplanned expenditure may pop up.

A dream or an idea — Or, probably both! For every entrepreneur, it starts with a dream to convert an idea into a successful Start-up venture. And, behind that success are some unique traits that help the Start-up be a winner. The good part is, even we can replicate some of those, especially when handling our personal finance matters. Yes, there are several lessons that we individuals can learn from a successful Start-up business in achieving our life goals.

Spend wisely

The way finances are managed by both has some similarities – When an individual starts earning, resources remain limited, but over time, the savings — if deployed properly — translate into a life goal fulfilment.

Similarly, most Start-ups, especially in the initial stages, are short of funds and other resources and, therefore, resort to working on shoe-string budget. Still, they deploy funds after carefully evaluating the available options and spend their available corpus wisely.

Facing uncertainties

Further, the environment in which most Start-ups work is largely unexplored and hence they face lots of uncertainties. In order to contain risks, a successful Start-up allocates the resources judiciously. And, on top of it, they keep money stacked up for a rainy day too.

Similarly, for most individuals, there are some important milestones such as children’s education etc., but at times, an unplanned expenditure may pop up and, hence, one should also have an emergency fund to tide over such situations.

Flexible approach

Another important and unique feature of a successful Start-up is its flexibility to adapt to a changing environment. Such flexibilities do not necessarily change the road map of the business, yet bring in an effective outcome for the long-term. For a Start-up to become a sustainable business over time, there are several things that are interlinked and work in combinations. When we plan our finances, we should also look for financial instruments that are flexible to help us adapt to the changing circumstances in life.

Start-ups & our personal finance

So, when it comes to our personal finances, is there any single financial instrument that an individual can use to meet his or her long-term goals?

Money doesn’t come easy and most of us have to toil day and night to earn it. But, to create wealth, using that money wisely and effectively is something we can learn from the way a Start-up works. You also need a well-crafted strategy that can help not only grow your money but also meet life goals at every life stage.

One such financial instrument is Unit-linked insurance plan ULIP, essentially a combination of insurance and investments. In a ULIP, you keep saving for a fixed term by linking it to your long-term goal. And, all this by keeping you protected with a life cover. A ULIP is designed to help you meet all this in the simplest, transparent and cost-effective manner.

Once you begin saving for long-term goals in a ULIP, you may make it one-stop investment platform. As you earn bonuses, get increments or have any other windfall, keep deploying into the same ULIP as Top-ups. Remember, a Start-up also does the same by pumping funds into the same business as it grows. Over time, when you need funds to meet your life goals such as children’s education, just withdraw money from the ULIP – it’s your savings after all.

Another facet of the flexibility in ULIP is about fund allocation. Similar to a Start-up that will carefully deploy more funds and resources in potentially rich customer segments, as a ULIP holder one also needs a somewhat similar approach. One needs to allocate money into funds that have the potential to maximise the returns over the long term. Therefore, you may choose to be in equities initially and let the power of compounding work in your favour. For better results, one may choose to take benefit of the equity and debt fund options in ULIPs or a mix of both in generating higher inflation-adjusted return over the long term. You can choose any option as per your risk appetite.

Akin to flexibilities in a Start-up, ULIPs provide the flexibility of switching between the asset-classes to take advantage of the opportunities in them. One can switch funds between equity and debt oriented funds to maximize the returns. But, remember, as you reach close to your life goals, start the de-risking strategy by shifting funds into less volatile funds. It helps in keeping the wealth preserved for the life goals to be met.

One solution for lifetime

So, in your journey of life, when life goals are to be met at different life stages, your savings in ULIPs come handy. As life goes on and if there are unexpected turn of events, your long-term goals don’t get derailed, but are achieved with ease. Bajaj Allianz Life Goal Assure is one such ULIP from Bajaj Allianz Life Insurance that may fit the bill to help you to get your Life Goals Done, in spite of uncertainties in life.

Insuring life for the benefit of the loved ones and having a savings plan to achieve goals – A ULIP Policy keeps it sweet and simple for you. As a ULIP policyholder, one can keep saving for long-term goals such as children’s education, marriage or one’s own retirement, and yet there is a death benefit to take care of the family needs.

To Sum-up

Still, there is an important distinction between the way a Start-up works and your finances. For a start-up founder, there are countless sleepless nights to deal with, while for a ULIP policyholder, it’s the opposite. One single ULIP may work wonders as the money keeps compounding over the long term. Taking a leaf out of the life of Warren Buffet, it’s often quoted that nearly 99.7 per cent of his wealth was created after he crossed 52, although he started investing at age 11. That’s the power of compounding! While there is no sure-shot way to succeed, ULIPs can be your friend for the long-term, provided you run them the right way.

(This article is sponsored by Bajaj Allianz Life Insurance)