Page 2 – Wise Investor Path

In this blog we will highlight the meaning of three most fundamental and crucial variables that even a person with little or no knowledge of finance can manage to become financially independent. Proper control over these three variables can change the financial well being and make any individual rich if proper management and control is exercised over these important aspects of personal finance. We will be covering the entire genre of personal finance with a systematic approach in this series of blogs covering the entire spectrum and will enable our readers take their finances to the next level.

We will use the data centric approach to give our readers a complete understanding of what they should do in order to increase their potential of growing financially. We would also be focusing on the strategies and techniques to understand how any individual can manage these crucial aspects and use various management concepts to exponentially grow their wealth over time.

So let us understand these three most familiar terms in personal finance:

Income

A simple way to define income is what is earned or received in a given period. Now in this definition let’s focus on the words “earned or received”.

Deciding factors for Income management

If we just ask ourselves three fundamental questions which are –

What are various ways in which I can earn or receive income?
Why I am finding these ways to earn or receive income or we can ask what is my goal for finding these ways to generate or receive income?
How I will be able to generate multiple income streams, that is what kind of knowledge I require or what are the skills I need to acquire?

If you are able answer these three fundamental questions you have done half the work you need to do in order to amplify your income. Answering these questions will give you a clarity on what you need to do, how you will do it and why are you doing it. For example, your goal can be to be a successful businessman, generate wealth beyond your imagination or to generate a passive income source while you relax a particular domain or field where you can plan to be the next big thing. And trust me no one wants to die poor, the only difference people who excel and people who don’t is strategic planning and flawless execution.

How to get things done?

Developing new skill sets takes time, dedication, effort and money. A comprehensive and exhaustive analysis is the key factor in deciding how far you will go and how much stable your income streams will be in future to support your expansion and investment needs. No matter how you are earning income today your income of tomorrow depends solely on your choice of action in selecting what you will be learning and doing for a given period decided by you and in what domain or field you will be moving into once your goal for a given time is accomplished.

Staying ahead of the curve in Income management

“People who fail to plan have actually planned to fail”. Your planning should be through and flexible enough as well in order to adapt to future trends in the market. People who transition early right at the beginning of any upcoming trend will always have the first movers’ advantage and will reap much greater benefits than the people who are following the trend, so one should always be aware in which market a new trend can emerge to gain the advantage of being in the few percentages of people who started early with the trend.

Any individual who is good in planning, executing and changing his plans as per the needs of the market will always have an edge over others in generating income various streams for himself.

Saving

Saving means putting some money aside gradually for a period of time to cater your goals or emergencies. Concept of saving can be understood from the concept of scarcity which means that we all have limited resources and unlimited needs and all those cannot be dealt instantaneously.

I personally view saving as a habit of systematically planning for your goals and a failsafe mechanism for emergency situations. Savings generally come from the income you have, so more you earn more you can save and more prepared you can for your future goals and emergencies. Saving is the only controllable factor in financial planning for beginners as you have control over what you earn.

Again, savings can be done in a systematic and planned ways, but I personally prefer the art of asking the right set of questions to reach a conclusion for savings as well. You can define the right set of questions to design and develop a saving mechanism for you. These questions can be:

What are your projected future needs long term and short term?
How much amount you can allocate each month towards these defined needs?
What are various ways in which you can save?

Why it is Important?

The habit of saving can help you in developing a discipline and can motivate you for your future goals. The importance of saving cannot be overlooked as it is serves as an ultimate failsafe mechanism in times of financial, medical and personal emergencies.

The habit of saving requires prioritization of your needs which in turn can help you in deciding what are the most important expenses that you should spend your money on and what are the expenses that you avoid.

Crucial variables for saving management

The art of saving money does not require you to live a life a miser but it focuses on the fact that you should spend your money on what you need not on what you want. We all have basic needs like food, clothing, shelter, education, health, entertainment etc. Again, you can ask relevant questions about these various needs like:

What percentage of my income will cover these basic needs?
How much optimum amount should I allocate towards each of these basic expenses?
What are various ways in which I can optimize for each of these expenses.

You will see gradual increase in the amount you save each month if you are tracking your monthly expenses and projecting your upcoming expenses in advance each month. By optimizing these variables, you can become proficient in income management.

Finally, the most important element is discipline in execution you can plan various strategies to increase your income and saving but you will only be able achieve your goals if you are disciplined in your execution. Remember Rome was not built in a day and great things do take time.

Every business has one goal which is to earn as much profit as possible by providing solution either by a product or a service. The ability to run operations and manage sales is not enough to ensure the sustainability and growth of business. Ensuring profitability requires efficient decision- making and maintaining financial health along with operations and sales. Monitoring financial metrics and taking decisions in accordance with the current situation indicated by the insights from the metrics is crucial to manage financial aspect of any business. We would be elaborating important financial metrics which every business owner must understand and apply to ensure growth and profitability.

Revenue

Definition: In simple words revenue is the money generated by your business by sales of either goods or services.

Why It Matters: A company whose products or services are performing well in the market would generate more revenue that its peers. Hence, revenue can be used in analysing a company’s position with respect to its competitors.

Calculation: Revenue=Number of Units Sold × Unit Price

Gross Profit Margin

Definition: It is obtained by taking out cost of goods sold from the revenue and dividing the difference by the revenue. The ratio is expressed in percentage which gives the efficiency of a company to convert its resources into goods and services.

Why It Matters: As defined above it indicates the percentage of money that a business or a company retains from its revenue. Higher the percentage greater is the amount that a company actually retains from each dollar of revenue on a unitary comparison basis. Hence a higher gross profit is desired from operations of a business.

Calculation: Gross profit margin = (Revenue – Cost of goods sold) ÷ revenue × 100

Net Profit Margin

Definition: Net profit margin can be understood as the revenue left in percentage of total revenue after taking out all expenses, including cost of selling goods, taxes, interest and operating expenses. It is just ratio of net profit to revenue expressed as a percentage.

Why It Matters: As given in the definition we can observe that it is simply the ratio of net profit to revenue expressed in percentage. It means how much net profit a company is able to extract from the revenue after taking care of expenses, costs, and taxes. Hence this metric indicates the efficiency of a company to manage its expenses from the revenue earned.

Calculation: Net Profit Margin= (Net Profit/ Revenue) × 100

Operating Margin

Definition: Operating margin in simple words is the ratio of operating income which is revenue after taking out the operating expenses like wages and raw material but before paying taxes and interests. It indicates how much profit a company makes after covering the operating costs.

Why It Matters: If operating margin is high, it means that company is efficiently managing operations and controlling operating costs effectively.

Calculation: Operating Margin= (Operating Income/ Revenue) × 10 Cash Flow

Definition: Cash flow represents the flow of cash or cash equivalents in and out of the company through operations, investments and financing activities. A company can only generate value for its stakeholders if the company is able to create positive cash flow and maximize the free cash flow which is noting but the free cash left after accounting for the expenses and capital expenditures.

Why It Matters: Positive cash flows mean the business is generating cash from operations and investments which indicates that company can take care of its financial obligations and can also have a cash buffer to tackle tough times.

Calculation: Cash Flow= Cash Inflows−Cash Outflows

Current Ratio

Definition: Current ratio is a measure of liquidity of a company it is simply the ratio of current assets like cash, account receivables, inventory and other current assets to current liabilities. In simple words current ratio is a comparison between current assets and liabilities which informs analysts and investors about the capability of a company to take care of its current liabilities.

Why It Matters: Current ratio is basically a snapshot of current liquidity of a company. A value less than one indicates trouble in maintaining current obligations and a value greater than one indicates a better short-term solvency for a company.

Calculation: Current Ratio= Current Assets/Current Liabilities

Quick Ratio

Definition: Quick ratio is the ratio of a company’s assets which can be quickly converted into cash and is used to analyse a company’s liquidity and financial health. It indicates how quickly can a company use its near cash assets to take care of its financial liabilities. The advantage of quick ratio is its sensitivity in terms of analysing the short- term solvency.

Why It Matters: A higher value indicates greater liquidity and stable financial health. A lower value indicates less liquidity and hints that the company may struggle while repaying debts.

Calculation: Quick Ratio= (Current Assets−Inventory)/ Current Liabilities

Debt-to-Equity Ratio

Definition: Debt to equity is ratio is calculated to compare the weights of debt and equity in a company. It is mathematically just the ratio of total debt to shareholder’s equity in a company. This ratio is also known as gearing ratio as it gives the idea about leveraging debt to run operations. If this ratio is greater than one it indicates that the company is using debt to run its operations which is a good thing if company is able to generate a positive cash flow.

Why It Matters: If the value of debt-to-equity ratio is higher it means that the company is running its operations majorly on debt which indicates greater risk for investors. However, higher ratio for a company bringing in positive cash flow is a good thing as it is efficiently using debt but higher ratio for a company with negative cash flow is a big red sign for the investors and shareholders. A company with a lower value of debt-to-equity ratio indicates less obligations and financial stability.

Calculation: Debt-to-Equity Ratio= Total Liabilities/Shareholder Equity

Return on Equity (ROE)

Definition: Return on equity in layman’s language gives profit made per dollar on shareholder’s equity. For a fiscal year return on equity is calculated by dividing net income made annually by total shareholder’s equity. The ratio is then expressed in percentage which represents the profit made on the equity capital and is crucial in estimating the capability of the company to turn equity investments made by the shareholders into profit. It is also an indicator of decision-making capability of the management as we are measuring how much a company efficiently gives back to its shareholders as profit.

Why It Matters: A stable and increasing trend in the return on equity value with time indicates how wisely and efficiently the company is utilizing the shareholder’s money and producing stable and sustainable profits for them and hence is creating value for their invested money. A lower and declining value indicates poor decision-making ability of the management to generate value for shareholder’s investment. A declining return on equity value also indicates that the company is losing competitive edge in the market as it is not able to provide the profits for shareholders.

Calculation: ROE= (Net Income/Shareholder Equity) ×100

Conclusion

A thorough understanding of these financial metrics is essential for business owners in United Kingdom. Business owners who have a complete understanding of financial metrics identify issues early and are able to take actions to rectify these issues. When these metrics are monitored and controlled by using various process improvement concepts like pareto analysis and PDCA cycle strategic excellence is achieved in business operations and financial stability is ensured for the business. Acquiring knowledge of these metrics empowers business owners to take charge of financial and strategic aspect of business.

Financial ratios can be viewed as indicators of various financial aspects of an organisation. Liquidity ratio can be related to the short-term liability handling capability of a company and profitability ratios can be understood as an index to measure profit making capability at various levels of inspection. Liquidity and Profitability are important aspects which must be measured for a business, but there are other financial attributes which are important to check solvency, efficiency, and market value of a company to efficiently manage a company and to make investment related decisions in the company.

Solvency Ratios

As the name suggests solvency ratios are used to estimate solvency of a company. The word solvency in financial context means the capability of a company to maintain long-term operations and meet long-term obligations towards creditors and shareholders. Mathematically solvency ratios can be understood as the ratios used to compare forces of money generation and money consumption which are commonly known as profitability and financial obligations. The general relation for solvency ratio can be summarised as:

Solvency Ratio = (Net Income + Depreciation) / All Liabilities (Short-term + Long-term Liabilities)

a. Debt to Equity Ratio:

Formula: Debt to equity ratio = Total Liabilities / Shareholder’s Equity

Significance: Debt to equity ratio in simple words is a measure of financial leverage of a company which actually quantifies the degree to which a company is using debt to fund operations. The mathematical value can be obtained by dividing total debt by total shareholder’s equity. A lower value of this ratio is preferred as a lower value indicates that company is using debt to a lesser degree to run its operations.

b. Interest Coverage Ratio:

Formula: Interest coverage ratio = Earnings Before Interest and Taxes (EBIT) / Interest Expenses

Significance: This ratio in layman terms can be described as a company’s capability to cover interest on debts by profits from day-to-day operations. Mathematically it is obtained by dividing the earnings before taxes by interest expenses. A higher value will indicate sufficient operating profits to pay for interests on debt hence greater sustainability.

Efficiency Ratios

Efficiency ratios in simple words are ratios which indicates the efficiency of a company to generate profits using resources, capital, and assets. These ratios are basically for comparing the expenses with the profit generated for business operations.

a. Inventory Turnover Ratio:

Formula: Inventory turnover ratio = Cost of Goods Sold / Average Inventory

Significance: As the name suggests this ratio computes the number of times a company sells out the stock it has in a particular time frame. The higher this ratio is greater number of times it sells out its stock hence greater is the profit as average inventory for that time is less.

b. Accounts Receivable Turnover Ratio:

Formula: Accounts receivable ratio = Net Credit Sales / Average Accounts Receivable

Significance: This ratio in simple words is actually the number of times an organisation collects its accounts receivables over a particular period of time. This ratio in simple words calculates the efficiency of revenue collection for a given time period. It is calculated by dividing net credit sales by average accounts receivables where net credit sales is sales on credit minus sales returns and sales allowances and average accounts receivables is the average of starting and ending accounts receivables balance.

c. Asset Turnover Ratio:

Formula: Asset turnover ratio = Revenue / Average Total Assets

Significance: In simple words it is the measure of how sales in pound every pound invested in assets is generating. It is calculated mathematically by dividing net sales which is sales allowance, sales returned, and sales discounts subtracted from total sales by average total assets.

d. Accounts Payable Turnover Ratio

Formula: Accounts Payable Turnover ratio = Net Credit Purchase/ Average Accounts Payable

Significance: Accounts payable turnover ratio is a number which is actually average number of times a company pays its creditors in a particular period. This ratio is also an indicator of short-term liquidity as higher value of the accounts payable ratio means that the company is able to hold the cash for longer time. This is also correlated to the working capital funding gap inversely.

Market Value Ratios

Market value is simply the worth of a company or an asset in the financial market. Market value ratios are ratios which help in getting information about performance of a company in the market and the perceived value by the investors for the company.

a. Price to Earnings (P/E) Ratio:

Formula: Price to Earnings ratio = Market Price per Share / Earnings per Share (EPS)

Significance: This ratio is simply market price share of a company divided by the earnings per share which indicates the amount of investment an investor would be willing to invest per round of earning. A higher price to earning ratio will indicate higher odds for future as investors would be willing to invest more in the company.

b. Dividend Yield:

Formula: Dividend yield = Annual Dividends per Share / Market Price per Share

Significance: Dividend yield in layman terms gives the return on investment for shareholders. It is ratio of annual dividends per share to marker price per share which is an indicator of the company’s ability to efficiently make profit for the shareholders. A high value of dividend yield can attract investors who are income focused.

Conclusion

Profitability, sustainability and efficiency of any business depends the efficient decision making and financial planning in every aspect of business. Analysis of financial ratios helps in getting insights about various aspects of a business-like liquidity, profitability, solvency, market performance, and efficiency. Periodic review of these ratios helps business owners in process improvement strategies, identifying weakness and strengths, and adjusting plan of actions in accordance with the future goals of the business. Business owners in the United Kingdom can learn the fundamentals of these ratios and can implement these concepts to monitor, review and adjust their strategies to ensure growth and profitability of their business.

Modelling means creating analysing your data and creating a model for effective decision making when applied to financials is called financial modelling. It is a common misconception that financial modelling is only for financial analysts it can be used by anyone to improve personal finances. With the help of basic finance concepts and modelling software like Microsoft Excel anyone can track their financial progress. Create budget, track expenses, and monitor the performance of their investments to stay updated with their finances. It is your money so it is your responsibility to make informed decisions about it.

What is Financial Modelling?

In simple words it is just a numerical model representing the financial performance of a business in terms of money, asset based on output, or investment in terms of the results. The very same numerical techniques can be used to forecast income in future, future expenses, calculate savings, and investments. By constructing a model, you can easily visualize how various decisions will affect your finances in future which means that you can actually visualize the effect of various factors on your financial health. All you need is basic understanding of mathematics, financial factors and statistics.

Why is Financial Modelling Important for Personal Finance?

Learning financial modelling is essential to manage various aspects of personal finance like goal setting and tracking, informed decision making, risk management, budgeting, long term planning etc. Taking care of all these aspects make sure that finances are stable and progress is steady towards the financial goal.

Proper application of financial modelling realistic goals can be set up and progress can be easily monitored at any time. Financial modelling tools can be utilized effectively to aid decision making regarding expenses, saving and investing. Extrapolation techniques can help in understanding potential risks and steps required to tackle these risks. Budgeting can be made real simple using a financial modelling and it can be done even on spreadsheet tools available. Financial modelling provides excellent mechanisms to do long term planning regarding goals like retirement, buying a house and other goals.

Steps to Create a Personal Financial Model

Define Your Objectives: Defining your financial goal clearly and quantifying the objective is the first and crucial step in creating any financial model. The goals can be planning for a retirement, paying off debt, or creating a fund for emergencies.

Gather Financial Data: Once the goal is decided the next step should be to gather data for modelling including the income data which includes salary, bonuses, freelance income etc. The next data required to draw financial insights would be expenses that will require fixed (rent, utilities, insurance) and variable (entertainment, dining out, travel). The data regarding the assets which includes savings accounts, investment accounts, real estate can provide a lot of helpful information regarding financial planning. Critical aspects of financial modelling require data regarding liabilities like mortgages, credit card debt, real estate.

Choose a Modelling Tool: After the laborious task of getting data logical step would be to select a modelling tool which can be spreadsheet software like Excel or Google Sheets. You can also use personal finance software like YNAB, Mint or Quicken. The best thing about the spreadsheet software is that you can add functions and formula as per the need of analysis.

Process of Analysis

Create Income and Expense Statements: The factors used primarily for financial analysis are your income and expenses. The first step in the process of analysis would be to generate the income and expenses statements because it is essential to predict how much you would be saving in the future using the projected value for your income which will include all your income sources and your projected expenses.

Develop Cash Flow Projections: In layman terms cash flow means how much cash has actually has been moved in your account in a specific period. It is simply the income minus the expenses. It is a crucial metric to estimate your future savings and the projected amount available for investments.

Incorporate Assets and Liabilities:

Balance Sheet: Knowing your net worth is crucial in the making the decisions regarding your investments and savings and also in checking your progress towards your financial goals. Balance sheet is an excellent way of analysing your assets and liabilities to calculate your net worth for a specific time.

Debt Repayment Schedule: Financial modelling helps is efficiently scheduling your debt repayment. It is essential to make the payments on time for your debt obligations and maintaining the data regarding loan repayments, interest rates and timelines will enable to analyse and prioritize the debt repayments to ensure that you save money in terms of interest charged on the debt.

Scenario Analysis and Sensitivity analysis: It can be understood as the process of creating different scenarios and then finding how much your finances will be impacted by the change in various variables like income, expenses or major life changes like job loss, major purchases, medical emergencies etc. Knowing how your finances will change with the variation in variables is not enough managing your finances also requires the information about sensitivity of your finances which the knowledge of variables which have the major impact on your finances and how much sensitive your model is with respect to changes in these variables.

Review and Adjust Regularly: As the variables on which your personal finances depend are not constant due to factors like change in income, expenses, and other conditions like emergencies and economic conditions hence it become really important to regularly review your model whenever there is a change in the data and adjustments must be change to compensate the changes in the variable.

Example: Building a Simple Financial Model in Excel

Let us go through the process and steps to create a financial model in Microsoft Excel.

Step 1: Open a blank spreadsheet in excel and name it Income statement

In columns put the headings Month, Salary, Freelance Income, Other Income, Total Income

In rows write the months and provide the values as per the column.

Sheet 2: Go at the bottom bar add a new worksheet and name it as Expense Statement.

In columns put the headings for Month, Rent, Utilities, Groceries, Transportation, Entertainment, Total Expenses.

In rows enter the name of each month under the month column header and input respective expense values as per the column headers for each column.

Sheet 3: Create a new worksheet and name it as Cash Flow

In columns create headers for Month, Total Income, Total Expenses, Net Cash Flow (Income – Expenses)

In rows insert the data as per the headers from the income and expense statements.

Step 4: Input Historical Data

Use the data from past 12 months to create a reference base line for analysis.

Step 5: Create Projections

Now you can use the historical to create future projection by either using moving average method for forecasting. You must consider factors like inflation, and planned variations in expenses.

Step 6: Scenario Analysis

Create different worksheets for calculations discussed in above mentioned according to optimistic and pessimistic scenarios. Make adjustments according to scenarios to get the clearly reflect the impact of scenarios.

Step 7: Visualize the Data

Excel has various statistical visualization tools like histogram, line charts, bar charts, pie charts, scatter plot etc. which can be used to visualize the variation of cash flow, income, expenses and net worth with time. Visualization helps in analysing the past data to implement changes for successfully achieving the future projections.

Tips for Effective Financial Modelling

By keeping just few things in mind anyone can create efficient and effective financial models to ensure their financial progress. Your model should be realistic which means expenses should not be underestimated and income should not be overestimated. You must always update your model regularly as per the current conditions. There should always be a slack for unexpected fluctuations in income and expenses. You should always seek help of a professional financial advisor for complicated situations.

Having complete financial security is not just about making savings and investments effectively, protection of yourself and your financial assets from unexpected risks is also a very crucial aspect that must be taken care for complete financial security and for this purpose the need for insurance for safeguarding yourself, your family and business against emergencies like illness, accidents, property damage, business losses etc. Hence understanding the essentials of insurance is crucial for UK residents to pick the best insurance plan which covers their assets for emergencies.

Health Insurance:

In United Kingdom the general health insurance provided is National Health Service (NHS) which covers the basic medical expenses; however, it is beneficial to get a Private Medical Insurance (PMI) in the UK which can provide coverage for medical treatments and services which are not provided by National Health Services. Private medical insurance can provide additional benefits like faster access to specialists, elective procedures and private hospital accommodations.

Key considerations for health insurance:

Coverage Options: Healthcare insurance must be selected only after carefully reviewing the coverage options like inpatient care, outpatient services, mental health treatments, alternative therapies, private hospital accommodations. You have to evaluate your healthcare needs and then select the insurance which aligns best with your budget and needs.
Premiums and Deductibles: To make sure if the insurance you are going to take will fit into your budget or not its premium, deductibles, and co- payment must be evaluated. A careful review of these parameters also gives the complete idea about whether the benefits provided by the insurance are value for money or not.
Pre-Existing Conditions: Before making the decision to take the insurance it is really important to review the terms and conditions of the policy to make sure the health conditions the policy will cover because some policies do not include pre-existing conditions or have waiting period for the coverage of pre-existing conditions. A careful will save a lot of trouble regarding the coverage of any pre-existing condition later on.

Life Insurance:

Life insurance should not be just a task on your to do list which can be moved back, it should have the highest priority among mandatory expenses in your personal finance as it is regarding the most important thing in the world your family. In case of an unfortunate event of death life insurances make sure that expenses such as mortgage payments, living costs, funeral arrangements are covered and your family will not have to take the financial burden of these expenses. By securing the future of your family you can get peace of mind that their needs will be taken care even in case of your death. In United Kingdom there are many types of life insurance policies available like term life insurance, whole life insurance, and critical illness cover.

Key considerations for life insurance:

Coverage Amount: It can seem really analytical to decide the amount for your life insurance, but with little bit of financial introspection you make this choice easily. You just need to make sure that the premium for the amount decided will not put strain on monthly expenses and the amount will take care of future expenses of your family. It is essential to consider your financial liabilities like mortgage debt, outstanding loans and living expenses to ensure there is no strain on your mandatory financial obligation due to the coverage amount of the insurance. While deciding for the coverage amount factors like your inflation and future needs must be considered to ensure the financial security of your family.
Policy Term: Choosing the term for your life insurance policy must synchronize with your financial objectives and responsibilities. Different life insurance policies have different terms of coverage for an example term life insurance policy provides coverage for a specified period however whole life insurance policies provide coverage for lifetime.
Beneficiary Designation: It is as important as taking a life insurance. You should designate the beneficiaries for your insurance in case of an unlikely event of your death. You should also review and update regularly your beneficiaries to make sure that are as per your current wish.

Home Insurance:

Taking an insurance for your house is as important as buying your house as it is this insurance that will financially protect your house against damages to the house or belongings caused by events like fire, theft, flooding or any natural disaster. Any individual who is planning to buy a house must consider to get an insurance as well to safeguard the property against any kind of damage due to any kind of unexpected damage.

Key considerations for home insurance:

There are some factors which should be considered before getting home insurance. The first factor that anyone should consider is the coverages limit to ensure the proper protection for property and belongings. To evaluate coverage limit factors like value of the property, replacement costs etc, should be considered to make sure that your house is completely covered by the amount of insurance. Some additional coverage options like accidental damage, legal expenses and house emergency cover must also be taken care. Before enrolling for the insurance terms and conditions must be read thoroughly to understand what is covered under your policy and what is not. Most policies do not cover damage due to wear and tear, intentional damage etc.

The whole concept of getting insurance for anything revolves around the idea of mitigating the risk associated with the investment. Whether it is home insurance, life insurance, health insurance or any other insurance proactive planning and selecting the best option as per your financial status and future needs are the key factors in decision making when comes to insurances. Investing in insurances is definitely an important step achieving financial security and managing the unexpected future events efficiently in advance.