What is a good financial plan for a lower-middle-class family?

good financial plan

Generally, the lower-income group people do not worry much about financial planning because they exist on a day-to-day survival basis. Secondly, they do not have many loans to worry about repayment. So, a significant proportion of the income is available for meeting their regular requirements. The middle-class struggles with its finances, primarily because of two factors.

  1. They aim to live the sophisticated life of the upper-class
  2. However, they do not have the necessary income levels to achieve their ambitions.

So, the middle class is now bifurcated into two sub-classes, the upper-middle class and the lower middle class. As the name suggests, the upper middle class comprises families with decent income levels. The lower middle class struggles the most because they strive to lead a financially secure life, but their lower income levels keep pulling them down. So, this article suggests a good financial plan for lower middle-class families.

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  • A

    Bank and post-office deposits are the best.

    The lower-middle-class has comparatively lower income levels. So, it is not ideal for them to invest in high-risk investments. The bank and post-office deposits are the best because they are stable, risk-free, and give nominal returns. Mutual funds can provide higher returns but come with a higher risk profile. The lower middle class cannot afford to risk their hard-earned savings on the comparatively riskier mutual funds. Bank recurring deposits are better saving opportunities.

  • B

    Chit funds are good options to explore.

    Surprisingly, the lower middle class invests in chit funds more than the upper-middle class. One of the prime reasons is that chit funds allow for easy sources of credit while offering good returns on their investments. Typically, the lower-middle-class invests in localized chit funds that can be risky. Instead, they should entrust their funds to registered online chit fund platforms like Money Club. Besides being one of the most accessible platforms to participate in, Money Club offers excellent returns higher than bank deposits..

  • C

    Pension Plans are advisable

    Usually, the lower-middle-class do not have much social security in the form of pensions because the government employees constitute the upper-middle class. So, investing in pension plans should be a priority for the lower-middle-class population. One of the ideal schemes to invest in is the Atal Pension Yojana. This plan guarantees a monthly pension ranging from Rs 1000 to Rs 5000. Accordingly, you contribute towards building the corpus..

  • D

    Mutual funds can be risky but invest carefully.

    Compared to bank deposits, mutual funds are riskier. However, they deliver better returns on income. The lower middle class generally does not have the risk appetite for investing in stocks and shares. One reason is the lack of sufficient knowledge of how the market works. So, a better option would be to invest in mutual funds. Mutual funds have a fund manager who does the research and hard work. We advise the lower-middle-class to start with safe mutual fund investments like debt funds that invest in government securities and other secure debts.

  • E

    Insurance is crucial for all income classes.

    The lower-middle-class live in areas that have comparatively less hygiene than the upper-middle-class. So, the chances of incurring medical expenses are higher for the lower-middle-class than their counterparts in the upper-middle-class segment. So, medical insurance is crucial for this category. Therefore, we suggest every member of the family have health insurance. It can help them tide over medical crises comfortably.

  • F

    Employee Provident Fund (EPF) and Public Provident Fund (PPF) are excellent investments.

    Usually, the lower-middle-class salary would be less than Rs 15,000 monthly, making them eligible for EPF. Statistics show that most people working in this segment do not have EPF accounts because their employees manage to dodge the law. However, if they have EPF, it is one of the best avenues for enhancing their social status in society after their retirement. Moreover, the lower middle class can always invest in PPF, which guarantees a decent social standing in society after retirement. The PPF account allows for variable savings starting from Rs 500 to Rs 1.50 lakhs annually. It is indeed an excellent avenue of financial planning for the lower middle class.

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Final Thoughts

The lower middle class is precariously placed on the societal status ladder. They have the potential to go up, but a slip can push them down to back from where they came. So, an ideal financial plan should include a healthy mix of all the instruments suggested in this article.