7 Reason Why You Should Buy Insurance
INSURANCE! What comes to your mind when you think about insurance? Is it returns and investment? Well all these things are a part of the policy, but what is the actual meaning of ‘insurance’? Insurance covers ‘risk’. We can’t predict the future, so the possibility of an uncertainty happening with our life remains. Insurance was introduced to cover the risk of that uncertainty happening.
Having said the above, people buy insurance thinking it’s like an investment, which is not true. You can profit from an investment, which is not true in the case of Insurance. One cannot profit from insurance. This is the main reason why people end up with the wrong policies and then spread the word that insurance is a waste of money or the insurance agents are cheaters. It’s very important to understand the purpose of financial products before buying them. If you are not sure of the insurance policy, then it is advisable to seek an expert’s or a consultant’s advice.
Insurance, if taken for the right purpose, will suit your needs and work in your favor. For example, a person who wants to secure his family’s future, in case he’s not around tomorrow, the right choice would be a term plan as the situation is purely based on risk cover. Now, what if he doesn’t have much knowledge on the different policies and goes for a ULIP or an endowment, thinking of it as an investment avenue. Here is where people make mistakes. You always have to identify your needs first and then look at the features of the policy that will suit your needs.
Another reason why people buy wrong policies is because someone else has the same policy, maybe their friends, relatives, etc. Every person’s need is different. So obviously the insurance policy which someone else has, won’t be relevant to my needs. So it’s always best to find out your needs and then plan accordingly.
Read More :- How To Solve The Biggest Problems With Term Insurance
Let us see why do we need insurance:
1. Covers Risk:
Insurance means ‘risk cover’. As I mentioned earlier, we can’t really predict the future. The classic example is the current situation of COVID-19 pandemic which no one could have ever predicted. Of course you can’t put a price on the life lost, but you can put a price on the income that was coming in. The family may not get the whole income but, they can get part of it which can help the family get back on their feet.
2. Secure family’s future:
With the increase in prices and everything, people find it difficult to manage their current lifestyle, even though they are earning. What happens when the earning stops due to an uncertainty or in case of death of the earner?
Again, we can relate it to the current situation where people are facing pay cuts or job loss due to slow economic activity. This is a result of country wide lockdown owing to coronavirus. To avoid such a situation, where it can take a toll on the family financially, insurance is required.
If you have insurance, it brings peace to the other members of the family that they do not need to worry financially.
3. No compromise on future goals:
With insurance, one doesn’t have to compromise on their future goals. Everyone has goals that need to be achieved, it could be family goals, children’s future goals or even personal goals. So if a person has planned accordingly for funds to reach those goals and due to an uncertainty that resulted in death, now the family has no emergency funds.
Thus, they will now have to compromise on their existing savings, which were originally maintained for funding their goals. To avoid such hassles, insurance is required.
4. Child’s education:
Nowadays, even education prices are increasing rapidly. Everyone wants to do their higher education abroad. This puts a lot of pressure on the parents as they want to give their children the best. Education is something that cannot be compromised with. So there are many insurance policies that cater to this need. It secures the child’s education and future.
5. Financially Stable:
Having insurance also brings stability in the family. A person doesn’t have to worry about the finances. They can have peace of mind that they won’t have to arrange for funds to cater to their needs. There are policies that cater to the needs of the family immediately when the insured dies. As mentioned earlier, it all depends on the needs of the person.
6. Better to plan before hand:
Planning is something that everyone must do. It can be financial, investment, goal based, etc. Planning is mostly done to make sure that the goals of a person are achieved. Same way, Insurance planning is a must. You need to know how much money you need to replace in case you’re not around tomorrow. So that your family can live a better life.
7. Saves you the burden of worrying:
After the loss of a loved one, who is the only bread earner in the family, it is of course an emotional loss for the family, but there is also a financial loss. The family has to now worry about how they are going to manage the future expenses. So having insurance, reduces the financial burden of the family.
Read More :- Family Floater Or Individual Health Insurance Plan – Which One To Opt?
So these were the 7 reasons why you must have adequate insurance for yourself. It is further suggested that you make sure that along with you all the other earning members of your family are also adequately insured. You can download the Fintoo App to start the process of investing into an insurance policy suitable to your needs.
Are You Getting Good Investment Advice? Here’s How to Find Out!
Seeking out the assistance of financial advisors for investment advice seems like the easy way out while dealing with financial troubles. However, the real problem starts while gauging whether your advisor is actually taking care of your corpus. You might face several questions while dealing with the same. Are your friends and relatives doing better than you? Has your portfolio showcased much growth? These are some common questions which might trouble you while thinking about the viability of experts handling your finances.
Financial markets do not perform equally well every year and the current year is one such year which reported record losses for most investors. However, if you are facing difficulty in accepting the loss experienced, then your advisor might not have correctly gauged your risk bearing capability. This is why you ended up taking more risk than what you could normally accept.
The blunders committed by financial experts become less prominent in those years when the financial market showcases a booming pattern. Investors also do not scrutinize the performance of advisors as long as they keep on making money every year. Today we are going to talk about some common pointers which you need to consider for determining the efficacy of investment advice imparted by your advisor.
- Risk Bearing Capacity
Investors usually get to gauge their risk bearing capacity only when the markets crash. Such downfalls cause most of the investors to report loss figures. But the ones who are left stunned by the rhetoric decline in their portfolio are the ones who had been taking more risk than what they ideally should.
It is the duty of your financial advisor to assess your risk bearing capability on a yearly basis. This needs to form an extremely crucial part of the annual review of your portfolio carried out by your financial advisor. Such a review can either take the shape of a short quiz or discussions conducted regarding the changes in financial standing during a particular financial fiscal.
Childbirth, marriage, death, divorce, job loss and higher education of children are some such factors which deeply impact the risk bearing ability of an investor. Although as an investor, it is your duty to educate your financial advisor about such developments, the reverse also holds true.
- Objective
Various mutual fund companies have started operating as investment advisors and in most cases, they refer to their own products while designing a client portfolio. Such forms of conflicted advice might be detrimental for clients in the long run. You should thus ensure that you are working with an advisor whose core business is just investment advisory services and not asset management, banking, accounting or insurance.
- Acting As A Fiduciary
Your financial advisor should actually act as a fiduciary thus taking all decisions on your behalf and for your betterment. But in most cases, investors do not have a clear understanding about the concept of fiduciary. Such advisors are under obligation of law to pay greater importance to your interests. Advisors working as representatives of banks, brokerage firms and insurance companies do not act as fiduciaries while advising their clients. This is why they provide advice which might even prove to be detrimental for their clients.
Non-fiduciary advisors on the other hand might recommend proprietary investment products which may not always be in the best interest of end customers. Thus, it becomes very difficult to analyse whether or not your financial advisor is acting as a fiduciary. In such a scenario, you can easily confirm the same by mailing a written request to your advisor. You should accept just written responses as vocal explanations to such complex topics are regarded as null and void. Your financial advisor is also under obligation to specifically spell out his or her fiduciary responsibilities in the contract signed at the very beginning of the investment tenure.
- All Inclusive Advice
Your financial advisor should consider all the other investments held by you as well as your spouse before recommending any particular addition to and deletion from your portfolio. The main intent behind this is avoiding over or under allocation of a particular asset class in your portfolio. Having a balanced mix helps an investor in making the most of his accumulated funds by effectively buffering from all associated risks. If you decide to have separate advisors for dealing with your and your spouse’s finances, then it is necessary to have effective communication amongst them.
- Clear Illustration Of The Process
It becomes easy for investors if a prudent, thorough and easily understandable process is demonstrated by the investment advisor before surfacing the various forms of investment options. The reports sent to them should contain a clear picture of the performance analysis and risk involved in the same. This needs to be prepared in an easily understandable manner which can be gauged easily by end customers and in the way in which it was intended by the financial advisor in the first place.
You can enquire your financial consultant about the viability of recommendations made by them and whether or not they are receiving any additional commission for referring the same. The purchase and sale of investment made by you should not be processed under any form of urgency and you can take as much time as required for evaluating the recommendations.
Read More :- How to check if your Financial Planning is on track
Conclusion
At the end of the day, a certain level of trust needs to develop on your advisor. In spite of that, you should also exercise prudence in every single step to determine the efficacy of the funds suggested by these advisors for betterment of your financial standing. Getting the backing of a financial advisor who possesses adequate degrees in the fields of economics, finance and investment can also be of great help in such a scenario.
A financial planning platform where you can plan all your goals, cash flows, expenses management, etc., which provides you advisory on the go. Unbiased and with uttermost data security, create your Financial Planning without any cost on: http://bit.ly/Robo-Fintoo
To Invest and keep regular track of your portfolio download: Fintoo App Android http://bit.ly/2TPeIgX / Fintoo App iOS http://apple.co/2Nt75LP‘
Disclaimer: The views shared in blogs are based on personal opinion and does not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Making an investment using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.
5 Essentials of a Financial Status Check List
When it comes to assessing our financial strength and weakness, many of us just remain clueless. It is partially because we are not aware of the importance of such an evaluation. Another reason for such ignorance is probably that we do not know where to begin with. Before everything else, we should know the consequences of not doing an analysis of our financial strength and weaknesses.
Just consider a situation when your income suddenly stops due to a contingent situation such as an accident, a shutdown of your company, a nationwide financial slowdown, or major turmoil or just your inability to work due to deteriorating health. We can even consider the current situation of people losing their job due to Coronavirus. This leads to unemployment for millions. In such situations, your financial strength is tested. Even when you have large liquid savings in a bank account or similar common accounts that do not offer any substantial growth for your money, they do not save you from utter financial crisis for long since the growth of money is not enough to make you stay afloat above the depreciating value of money.
So, you need to achieve financial growth with steady investment and corresponding financial planning. How can you know you have done it the right way? Well, this is why it is important to go through a time tested procedure to assess your financial status.
Here we introduce a must follow the checklist to assess where you stand financially.
Read More :- Financial Planning – A Need not a Choice
- How Much Insurance Do You Have To Meet Contingencies?
This is arguably the most important consideration when it is about evaluating your financial status. In case of death, disability and disease of the earning member of a family, a compensatory sum of money is immediately needed to meet the contingent situation. Your financial planning should begin with this. Before making investments that provides you growth, you need to make provision for assured financial support for your dependents in case of any contingency.
- Is Your Investment Returns Secure From Inflation?
If you have put all your money in a regular bank account considering your money to be safe and growing with the regular interest rate, you are actually killing your hard earned savings.
Yes, money not achieving growth over and above the inflation is actually a degrowth of money.
So, What is inflation?
To explain it in common man’s term, inflation is the depreciating value of money which in regular life reflects the rising cost of goods and living. Thanks to inflation, what your money can buy now may not be enough to buy the same thing a few years down the line. Naturally, the financial growth you achieve should beat this rate of depreciation of money.
If with stocks, PF, bonds, Mutual Funds, annuity schemes and other investments together you achieve a growth of 10% per annum, while the inflation rate is 8% for the same period, your actual growth of money boils down to only 2%. Now you need to evaluate the return of your investments against the projected inflation rate.
- How Secure Your Financial Instruments Are?
Now you need to evaluate the security of your money with the chosen financial instruments. Obviously, you neither can gamble with your hard earned money by investing all your savings in stocks nor can remain satisfied with the depreciating growth of very secured financial instruments like bank FDs, PF, etc.
You need to take the best of both worlds while avoiding the negative factors from both ends. While your money in selected stocks and MFs can earn a better return year on year, your secured investments in other instruments help you keep your investment portfolio secure. Thus with diversification into various instruments, you can achieve both security and growth.
- What About Liquidity?
What happens when you need a few thousand rupees in hard cash? Obviously, in emergency situations nothing comes as immediate help as the hard cash. So, beside securing growth and ensuring security for your money over a period of time, you need to make provision for liquidity.
In case of emergency you should be able to withdraw cash to meet your immediate and emergency needs. Savings and investment instruments vary in their liquidity. Savings bank accounts, some bonds, some mutual funds and stocks offer high liquidity while endowment policies, unit linked insurance plans, many mutual funds, annuity or pension plans are low on liquidity.
- How Much Shortfall Is There To Achieve The Financial Target?
Like everything in life, success with your financial planning obviously requires fixing your objective for the long term and targets for a shorter span. Now as per the target you can easily assess the shortfall in the required fund.
For example, if you need to buy a property, you constantly need to evaluate and keep a close tap on the growth of your investments and accordingly measure the value against what you need.
Conclusion
So, evaluate this Checklist at regular intervals to be sure that your goals are met without much hiccups in between. These are just the immediate steps to keep you on track in your financial journey. For any further advice, you can get in touch with our financial advisors who will guide you to achieve all your goals effectively.
Financial Planning – A Need not a Choice
Financial planning paves the way to achieve financial independence and plan a smooth retired life while one is still earning. Early planning provides a long horizon to multiply the investment. People of different age groups have different priorities, hence, each of them needs to plan accordingly to achieve their financial goal. Financial planning can have varied horizons and purposes for varied individuals; say, X is planning for his retirement by 40 while he is still 26 and Y is planning his child’s MBA program abroad after 16 years. Financial planning is a very thrifty affair. Proper financial decisions can result in amass disposable income.
Everybody has a desire to earn high, spend high and live a lavish life, but only a few can actually make that happen. Seriously, living a lavish and elegant life is not just a matter of destiny, but a result of proper financial planning and effort made to make it possible. Financial planning is very much necessary for an individual in a similar fashion as much it is for any business. It is simply about analysing where one is currently standing and then determining how he would like his future financial condition to look like. It is simply because of unending financial obligations and unpredictable journey of life, financial planning is required to be set in priority.
Why must Financial planning be taken as a need not a choice?
Financial planning is crucially required as there are limited sources of funds that need to be diligently allocated towards necessities and luxuries, also setting aside savings and paying off the debts from the same source. Since sources are finite, thus, financial independence can be achieved through routing the idle or accumulated funds into a proper channel which can help it multiply. It is always better to start early so that the benefit of compounding can be availed which acts as a driver in enhancing the investments with multiplying the effect.
One needs to be fully disciplined towards the financial planning mechanism. Developing a habit of regular savings and investment through proper planning is very essential for building a strong financial foundation.
Financial planning must be done with the view of achieving social security and financial independence even after retirement. Since nobody is aware or has the least hint of what is going to happen in the future, hence, financial planning can prove to be a favorable tool for tackling such unpredictable and dynamic phases of life. Proper planning can help one make provision for contingencies and build a sturdy financial status for oneself and family.
Read More :- Financial Planning For Newlyweds
How to start planning?
While planning for a delightful financial future, it is advisable to take help of a professional financial planner who has handsome experience and expertise in providing such services. Proper consultancy can lead to an effective plan. Financial planning can be done by making an investment in mutual funds, fixed deposits, endowment policies, equity and debt securities etc. Foremost thing in financial planning is setting the financial goal in accordance with the purpose and investment horizon; then comes the most critical part which is the risk profile of an investment; then choosing the investment avenues which can serve the purpose of such a plan. It is always safe to develop a diversified investment portfolio which can provide balanced risk and return. The financial objectives and investments need to be perfectly synchronised to avoid any financial distress.
Save yourself from manipulators- Do a reliability check
Financial planning, nowadays, is becoming popular among the younger generation who have just started earning with the vision of gaining independence and a bright financial future. The crowd of daydreamers has also resulted in an evolution of self-proclaimed financial planners who seek the most prominent opportunity to quench their unethical thirst. An investor shall use his discretion while hiring his financial planner who can keep his investments safe and secured. He should not fall easy prey to the mean-minded vultures that set up a pompous financial consultancy business to attract innocent investors. Most of them just turn out to be salesmen or agents who have the least knowledge about what they are selling and aim to earn part-time income. An investor should try to discriminate between a real and a fake financial planner by comparing the way each of them interacts with him; their counselling attributes; manner of gathering data; clarity in concept about financial planning; how prominently they are able to present the technical comparison between various financial plans, etc. Efficient and effective counselling can be done by market research and understanding the financial goals and requirements of a particular investor.
In a growing and rapidly evolving economy like India; financial planning by its citizens can be an aid to economic development. At least it is better that the economy receive funds internally than borrowing funds from foreign investors. Financial planning by people from all walks of life should be encouraged so that even the person who has the minimum can also feel the vibes of financial independence and security. A persisting myth among the masses today is that financial planning is only for those people with higher income or who have wealth in abundance. People from generations have been a victim of this misconception and grow older with the same mindset. Financial planning has nothing to do with the rich or the poor, one who has a surplus or one who has minimal; it’s all about managing what you have. Financial planning provides an opportunity to take control of your financial life, make diligent decisions and achieve desired financial goals.
Everything You Need To Know About Wealth Management
What is wealth management?
Wealth management has a wider scope and has long term wealth creation as its primary motive. As such, wealth management can be described as a wealth creation process where a team of professionals analyze the financial needs of the client and suggest the appropriate financial products. Such a process would include wealth protection (risk management), accumulation of wealth (growing asset base), putting your wealth to work (creation of income from such asset base) and later wealth distribution (post-retirement and succession planning).
What constitutes wealth management?
1. Identification and analysis of values and financial goals
This step consists of various other sub-steps as below.
- Asking appropriate questions which will yield what actually the client expects in the long term and also financial goals of the client.
- Testing and understanding the risk appetite of the client.
- Understanding the liquidity needs at periodic intervals or at a particular point of time.
- Understanding family values and issues thereof
- Lifestyle enhancement and maintenance concerns
- Wealth transfer and succession plans
2. Recommendation and devising plan of action
Based on step 1, where the needs and objectives of the client are analyzed and identified, the wealth manager will devise and recommend the plan of action. Such a plan will entice an appropriate mix of assets, which will be recommended for generating income as well as for long term wealth creation. This step also digs deep into the actual asset creation and allocation of these assets seeking diversification for inherent risk management. Wealth manager also analyses the position of current investments and assets of the client. The wealth manager then will address any tax or liquidity concern and will also check if there appears any gap between plan of action and current investment scenario. This plan is then consulted with the client and if he is satisfied, then the wealth manager will go on to the next step. The different wealth managers will employ different techniques and models for devising the plan of action like after tax profits model, or discounted cash flow model etc.
3. Implementing the wealth management plan
Once the plan is approved by the client, then the wealth manager documents the plan of action along with the investment strategy and asset allocation strategy. This manual also explains the income generation pattern and long term wealth creation strategy. It will also throw light on succession plans and transfer of wealth and assets. Implementing the wealth management plan will require a little while. However, this plan is revisited several times by the wealth manager to match the plan real time with happenings in the economy and financial markets.
4. Continuous evaluation and consistent communication with client
The Efficient wealth manager will evaluate the way the plan responds to the current market scenario and will try to modify it to remain updated and reap benefits from the current scenario. It may require to rebalance the portfolio and ascertain changes to the tax structure and its impact on the wealth creation. This step would ensure uninterrupted communication and consistent support to the client, which will help build rapport and trust.
Now let us see some Wealth management mistakes which you should be aware of and should avoid.
Selection of right wealth manager
Where the wealth manager is assigned portfolio management and not the whole wealth management, then he would be responsible for only that part. This will harm the synchrony and synergy effect, which would have resulted if whole wealth management was carried out by a single wealth manager. While you select the wealth manager, keep in mind to select the one who has the ability and willingness to answer the questions asked by you.
Revisiting the wealth management plan
Once implemented, your wealth management plan needs to be modified and revisited periodically. This will include asset allocation pattern, restructuring decision and liquidity analysis on the basis of the current economy and financial market status.
Communication Gap
Asking questions and ascertaining the position of your assets at any point of time would be your duty. This will allow you to monitor and evaluate the asset allocation and accumulation. Wealth manager has to ensure that he is delivering updated information about client’s wealth by maintaining confidentiality.
Retirement or succession planning
This is a delicate issue which involves a lot of family trouble, because the property and wealth quarrels may turn bitter once the client is gone. Hence, it is important to pay attention to succession planning and retirement planning.
CONCLUSION
Now you must have got a clear idea as to what Wealth Management all about. It combines both financial planning and specialized financial services, including investment planning, estate planning, legal and tax advice, and investment management services. Better late than Never. You can now get in touch with our financial experts for your wealth management needs.
A financial planning platform where you can plan all your goals, cash flows, expenses management, etc., which provides you advisory on the go. Unbiased and with uttermost data security, create your Financial Planning without any cost on: http://bit.ly/Robo-Fintoo
To Invest and keep regular track of your portfolio download: Fintoo App Android http://bit.ly/2TPeIgX / Fintoo App iOS http://apple.co/2Nt75LP‘
Disclaimer: The views shared in blogs are based on personal opinion and does not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Making an investment using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.
Financial Planning for Contract workers
Financial planning is considered to be essential for those people having contract or commission jobs or their income being seasonal or unpredictable. Proper planning can help to ensure that the ends are met adequately throughout the year. At the same time, it also helps to reduce stress, especially during times, when there is consistent low cash flow.
Financial planning – An Essential Requirement For All
There are many people who are said to face irregular income and this is considered to be quite common. From contract workers to retail staff and even independent physicians and psychiatrists, it can be really tough to maintain a steady income throughout the year. There are few months when the sales will be high and a few months when sales will be low depending upon the nature of the business. So it is uncertain.
The fabulous news is that income irregularity in itself is regarded to be predictable, in case, you fall into such a business bracket. Hence, you need to undertake proper and timely Financial planning for those times or months, when your business is low. It is also equally crucial to be realistic with regards to the fact that there can be an exceptional huge commission. Hence, a huge boost in the lifestyle is not to be warranted.
Some points to be considered in Financial planning to maintain cash flow and income
Plan for savings
Probably taking a casual approach towards savings might not work. The amount of money that you plan to save each month will entirely depend upon you. This way, you can make sure that you can live comfortably and pay all your bills without having to worry about anything when your income is low. As soon as this number is derived, you can start planning or simply transfer the amount automatically to a separate account or perform this task manually.
In case, you notice your income to significantly fluctuate every month, then saving a similar amount every month can become a real tough task. Hence, it becomes essential on your part to have a quarterly amount ready. It is suggested that this specific number is to be targeted over several months.
Also read: Financial Planning for Beginners
Know Your Patterns
The amount of money that you plan to make during the year and the expenses to be paid are to be known very clearly. In case, you are in a specific field or similar job for quite some time, then checking out the expenses and income of the previous years’ can actually give you a clear idea of how to prepare yourself. A realistic approach is an absolute must when talking to your contacts and peers, especially if you are new to this industry. As soon as you have gained some wonderful sense about the overall annual income, then it is high time to calculate your overall expenses.
This can be derived from the past created budget and can assist you to determine the right figures. Any big payments which you may perhaps have to meet during the tough times should be taken note of. For instance, if rent is to be paid on certain installment numbers or school tuition fees are to be paid, then you are to plan much ahead before the advent of these upcoming payments.
Not To Lean Much On Credit
Even though you may rely upon your credit cards for taking care of your immediate cash flow problems, it can be much easier to drag you into living much beyond your means. This will actually push down your credit card-related balances further and can be termed to be a much slippery slope. This will only lead towards starting the debt trap which is actually a vicious cycle. You may perhaps be expecting some big payment to be received perhaps within a month. But the amount will have to be used to pay off the credit card amount that you had taken. It is indeed a wonderful way to have the expenses navigated, especially if there is noticed low income.
Effective scheduling of payments
People who enjoy monthly and regular income will find making monthly payments to the best deal. In case, the work is found to be seasonal, then stress to schedule the monthly payments is to be reduced. To achieve this, it will be useful to plan the different payment schedules. Advance payments can also be sought for by deposits placed for specific services. For instance, the bank might allow you to pay up several car loan installments much ahead of its intended due dates. At the same time, your landlord will also not mind getting advance rent before the scheduled date.
Managing everything on time is a great way to manage your finances properly and avoid any kind of mistakes regarding the same. Scheduling your payments within due dates will also save you from penalties. Although you may face some burden on the finances, having some big payments scheduled can help you to be in a much better position.
Conclusion
So if your income is not regular and constant, some planning in terms of finance can prove to be useful and beneficial. As it is rightly said, even the tiny efforts count and make the picture larger, similarly even small steps taken for planning finance done from the right age can prove to give you a larger amount at maturity for you to enjoy the fruits later.
A financial planning platform where you can plan all your goals, cash flows, expenses management, etc., which provides you advisory on the go. Unbiased and with uttermost data security, create your Financial Planning without any cost on: http://bit.ly/Robo-Fintoo
To Invest and keep regular track of your portfolio download: Fintoo App Android http://bit.ly/2TPeIgX / Fintoo App iOS http://apple.co/2Nt75LP‘
Disclaimer: The views shared in blogs are based on personal opinion and does not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Making an investment using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.
Financial Planning For Newlyweds
Marriage may be your bliss from heaven, but financial planning is what you have to do next. Such financial planning may now involve so many things like setting up of financial goals, debt restructuring, budgeting, tax planning, etc. This article will deal with financial planning for newlyweds.
Identification of financial goals and objectives
- Most Important thing would be to discuss what you both want in the context of financial planning. Clear discussion of expectations and segregation of financial responsibilities would definitely be helpful.
- The second most important point in financial planning would include short term, medium term and long term financial decisions. Short Term financial planning would involve credit card payments, medium term financial planning may include vacation planning, etc. and long term planning may include retirement planning or planning for home etc.
Budgeting
- This may seem like a futile idea because we tend to know our income and expenditure. However, once you get married, the situation may change. Now is the best time to lay the budget and analyze your surplus or deficit position. If you have a deficit, that means you are spending more than what you are earning. This means that you should cut down on your spending pattern and borrowings.
- The reverse situation occurs if you have a surplus. In such a case, you have to invest such surplus to build wealth for short term as well as long term.
Rethink on debt burden
- Post marriage, you may think of availing bigger loans which may need a clean credit score. Cleaner and better credit score can be built by reducing your debts. Suppose, you have bought the TV on EMI payment method and are still due to pay off almost half of the total amount. The loan which is due will show as a liability which will limit you to take additional loans to some extent. This will reduce your credit score.
- Also, one more problem is that if you have any personal loans which you may have borrowed from your friends or relatives. This won’t show up in your credit score. However, it may equally hamper your disposable income which would have been utilized for fulfilling your other needs and goals like planning for a house.
- So you should think of clearing such debt off your balance sheet. This will not only improve your credit score but will reduce your cash flow also.
Updating of financial documents
- This is one of the vital things to be done at the earliest. However, it is always done in a rush when it is super urgent. Instead, you should think about updating the financial documents once you get married. One of such documents would be a Marriage Certificate which is vital proof that you are married. If the spouse is planning to change her name post marriage then she should get it updated with the name and address in the Passport, Pan card, AADHAR card etc.
- If you are willing, then you may carry out a nomination facility in the name of your spouse. This may avoid future inconvenience in case of any emergencies.
Emergency Fund
- You may have seen in your childhood, that in the last week of the month, your father was left with very less money. And whenever he asked your mother, she immediately would bring in some cash, hidden in some grocery box or prayer room, etc. This is what we actually call an “ Emergency Fund”. However, the Emergency fund has to be quite bigger now, keeping in mind inflation and other lifestyle needs.
- Ideally, an Emergency Fund should be equal to minimum 3 months of expenses which will help you to be afloat in case of sudden job loss or accident etc. If the spouse is not working, then increase this amount to meet at least 6 months of your expenses. This fund can be maintained in liquid assets. It is suggested to invest such an amount in the Flexi Savings account, where you get a rate of interest on Fixed Deposit and can withdraw money from any ATM in case of any emergency. Another good investment option is Liquid Mutual Funds where you will get better returns as compared to FD and it is also tax efficient in the long term.
Also read: Quick tips for financial planning in 2021
Financial Planning
- When you are done with your budgeting, goal setting and discussing your financial health, you are advised to seek professional help for financial planning. This would include Retirement Planning, Investment planning (for parenthood or for tax saving or for wealth appreciation) and Protection planning (Term Insurance and Health Insurance).
- Financial Planner may stress upon equity intensive investment for long term objectives. And for short term financial planning, he may advise Debt investments. So depending upon your financial objectives, your financial advisor may advise accordingly.
Re-evaluation of your financial planning
- Financial Planning is not a one time thing, hence it needs periodic revisiting. Changes are the only permanent thing so you have to change your financial planning to adapt such changes. It may happen that both of you might be working, but suddenly your spouse may stop working due to pregnancy. This may take a great hit, if your spouse decides to quit. Your finances may go for a twist. So it is advised that you should revise your financial planning periodically to ensure that it is along the lines and is appropriate for your current position.
CONCLUSION
Newlywed finances can be a bit tricky and overwhelming at times. We hope that you now will have an idea about a few financial things you and your partner should know as you plan a future together. This is the perfect time to get to know each other financially. Marriage is a two wheel vehicle and hence both have to consider finances to save yourselves from any future issues.
For any further guidance, you may feel free to get in touch with one of our Financial Advisor to plan your finances in a much better way customised to your needs.
A financial planning platform where you can plan all your goals, cash flows, expenses management, etc., which provides you advisory on the go. Unbiased and with uttermost data security, create your Financial Planning without any cost on: http://bit.ly/Robo-Fintoo
To Invest and keep regular track of your portfolio download: Fintoo App Android http://bit.ly/2TPeIgX / Fintoo App iOS http://apple.co/2Nt75LP‘
Disclaimer: The views shared in blogs are based on personal opinion and does not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Making an investment using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.
7 Habits Of Financially Inefficient People
No one is immune to making mistakes as we are human after all. But we should learn from our mistakes as well as other people’s mistakes. If you want to learn faster, learn from other’s mistakes specifically in personal finance as making mistakes in personal finance can be very costly. The purpose of this article is to learn from the common mistakes made by financially unorganized and inefficient people. Everyone suffers from one or all of these habits discussed here. We can identify some of these mistakes which we have made and accordingly change our habits to not repeat them again.
Overspending
Overspending is a habit when we spend more than we earn. Spending on luxurious habits like buying gadgets, shopping, eating out etc. are some of the examples which leads to overspending. Impact of overspending on personal finance can be disastrous. It can lead to financial mess and debt trap. The best way to overcome this habit is to keep a track of cash inflow and outflow. By preparing a monthly income expense sheet and budgeting for future expenses will help us to control our cash flow efficiently.
Unplanned Financial Goals
One of the important parts of financial planning is prioritizing financial goals. We may allocate more resources to unnecessary or less important goals if we don’t prioritize them. We may spend more money on financial goals like buying a car, a bigger house, etc. but it should not be at the cost of other important goals. To deal with such problems it is advisable to identify and prioritize financial goals. As per the principle of personal finance, we should first allocate resources to basic necessities and financial needs of life. If we have additional resources then we can think about splurging on other aspirations of our life.
Lack Of Contingency Planning
Many people are not prepared for contingencies. Loss of Job, unfortunate events like death, disability, hospitalization of self or family members has huge financial and emotional consequences. Human behavior has a tendency to run away from difficult events. If you are not well prepared to deal with such a situation then it can have an unimaginable financial impact on your life. One of the behaviors of an individual is to assume that it won’t happen to you. It will impact people around you but not you or your near & dear ones. The day it happens it changes our financial life and future goals. It is always advisable to start financial planning by identifying risks in our lives and ensuring those risks sufficiently.
Chasing High Returns
Investors tend to invest in high-risk asset classes while chasing high-return investments. Two of the most common behavioral emotions involved in investment are greed and fear. We tend to make mistakes by not thinking logically or rationally instead we use greed and fear to make investment decisions. It’s important to control these emotions and invest as per your financial plan. To negotiate this habit it’s important for investors to invest according to their asset allocation. This will help investors to deal with market volatility as well as help them to achieve their goals more comfortably.
Also read: How to check if your Financial Planning is on track – Fintoo Blog
Debt Trap
A debt trap is a scenario in which we are unable to repay debt from available resources. People have habits to utilize easy money to fulfill their dreams. The easiest way to define debt is it’s a charge on future income. People take loans to fulfill their short-term or long-term goals. But it’s important to check our repayment ability and its impact on our financial life. We should ideally take a loan where it can be used productively and helps us to increase earning ability. Business loans, property loans for investing in income-generating property, etc. are few examples of good loans. A few of the examples of bad loans can be loans for buying consumer goods, credit card loans, etc. We should try to avoid high-cost loans and borrow in case if necessary.
Copy Paste (Ctrl C + Ctrl V) Approach
Copy-paste approach won’t work in personal finance. Just copying successful people’s style of investment by following it as it is can be disastrous. Every individual’s goals, objective, as well as their risk appetite, is different. Proper planning and goal-based investment is an important ingredient of a successful financial plan.
Lack Of Succession Planning
There are so many instances in recent days we came across where legal heirs and family members are fighting for family assets and properties. It’s important to nominate, prepare a will, or trust to transfer your estate to your beneficiary. Many people fail to write a will or do their succession planning. Later on, their family members fight among themselves for property and assets. There is no specific age to plan for succession. Preparing a will is important for succession planning. It’s an important aspect of financial planning.
How to overcome these habits?
Financial planning helps us to overcome these habits and to be more organized in managing our personal finance. It’s important to follow best practices while managing money. Making a financial plan and keeping a track of financial fitness are key ingredients to financial success. Financial Planning is nothing but goal-based planning.
A financial planning platform where you can plan all your goals, cash flows, expenses management, etc., which provides you advisory on the go. Unbiased and with uttermost data security, create your Financial Planning without any cost on: http://bit.ly/Robo-Fintoo
To Invest and keep regular track of your portfolio download: Fintoo App Android http://bit.ly/2TPeIgX / Fintoo App iOS http://apple.co/2Nt75LP
Disclaimer: The views shared in blogs are based on personal opinion and does not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Making an investment using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.
FINANCIAL PLANNER, the need of the hour
Everyone has some dreams in life – whether it is starting a new business, buying a new house, traveling the world, planning your family’s future, or retirement. All these are called financial goals. As these goals have emotions, it also has a monetary value. Financial awareness, therefore, becomes a vital ingredient to effectively plan all of the above. Being aware of your requirements early in life leads to better financial planning.
Whatever activity we perform today will definitely have a strong effect on our future. Let’s understand this in detail.
You can’t predict the future. If at all you think earning more will secure your future then I would say that it’s only a myth. Only earning more will not assure you a better future but planning your future will definitely assure that your future is secured.
Earning money for a better future is important but saving a part of your income and capitalizing on the savings made will definitely assure you a secured and better future.
What is our approach towards saving?
INCOME-EXPENDITURE = SAVINGS
What should be our approach towards saving?
INCOME-SAVINGS = EXPENSES.
In the layman’s term, one thing I want to say is 1st save and then make any expenses and only saving is not enough, channelizing your savings with your future goals is something we should do.
The second most important step after Saving is
“START INVESTING”
I know that when we hear the word “INVEST” we think to invest in lumpsum but we can also start today itself by investing rupees 500 or 1000 per month.
Now the question that will surely arise in your mind is how shall we plan our future? How much money should we save? How much money should we invest? Where should we invest? How to invest?
Keeping in mind the importance of savings and investment for a better future the concept of “FINANCIAL PLANNING” was started to make sure that whether time changes or not we are safe from all the risk that may or may not occur.
I know that we are very busy in our life but we also cannot ignore the importance of financial planning and thus the need for FINANCIAL PLANNERS arises.
Read More :- 5 Things To Do In The New Financial Year
WHO IS A FINANCIAL PLANNER?
Financial planner is a qualified investment professional who analyses the current financial position of clients and helps them to reach where the client wants to go in future. A financial planner is a qualified experienced person who will fill the gap between where you are and where you want to be.
A financial planner will analyse your assets, liabilities, short term and long term goals, will advise you in a systematic manner that will help you to achieve all your goals and will review your goals from time to time.
Financial Planner is a guide who will step in your shoes and advise you what is better for you. Customer satisfaction is the main motive of every financial planner.
The basic difference between a financial agent and a financial planner is that an agent is only interested in commissions but this is not the case for a financial planner. An agent may sell you a product and might get vanished but a financial planner’s job starts after he has advised you to make the following investment in order to reach your goal.
A financial planner is a person who will help you to attain long term financial stability even if you are retired and there is no source of income. He will plan your investments in such a manner that you don’t have to be dependent on others financially as your investments will give you handsome returns.
He is a person who is a keen market observer and who analyses the market and then would take the investing decisions for his clients.
So it is very important that you have a Financial Planner who guides you and handhold you in your financial life journey.
A financial planning platform where you can plan all your goals, cash flows, expenses management, etc., which provides you advisory on the go. Unbiased and with uttermost data security, create your Financial Planning without any cost on: http://bit.ly/Robo-Fintoo
To Invest and keep regular track of your portfolio download: Fintoo App Android http://bit.ly/2TPeIgX / Fintoo App iOS http://apple.co/2Nt75LP‘
Disclaimer: The views shared in blogs are based on personal opinion and does not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Making an investment using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.
Sovereign Gold Bonds – Should you invest?
Sovereign gold bonds are government securities with prices linked to the value of the underlying asset i.e. gold. They are issued by the Reserve Bank of India on behalf of the government. In the current financial year 2020-21, RBI had introduced six tranches of the government’s sovereign Gold bond. The first issue happened in the month of April. Now the time has come for second tranche. You can check the details of all the six tranches in below table: –
As you can see from the table that series II will open for subscription from 11th May to 15th May. So Should you invest in SGB bonds?
Before moving ahead with understanding the features and advantages of SGB bonds, let’s first understand how gold is an investment option during a current volatile market.
Gold as an Investment
1. It is a safe haven at the time of crises. Gold has outperformed all the riskier assets in 2019 and it continues to do so in 2020 as well. In 2019, gold was up by 20-21%. Since the start of 2020, Gold has been performing well compared to the equity market.
2. It is used to hedge your portfolio because it has a negative relation with equity markets. So when the equity market is down, one can benefit by having gold exposure.
3. Uncertainty combined with the current low interest rate scenario boost gold demand leading to an increase in gold prices. We have seen in the past that gold performance increases in periods of moderate to low interest rates. So a lower interest rate scenario is always supportive to Gold.
4. We understand that when the economy is in stress, Gold moves up because of investment demand. This is happening currently. But that’s not the only case. Even during expansion, We see gold moving up due to jewellery demand. Currently, as per SPDR Gold trust, gold demand is at 2013 high.
5. It is convenient to invest in Gold as it is highly liquid.
6. It improves the overall portfolio performance as it acts as a hedge. It can be treated as an asset diversification strategy.
7. Gold performance in the 2008 bear market is similar to current movement. During the 2008 financial crisis, Gold dipped along with equity initially but later we saw a sharp rally in gold. Similar pattern we see currently in 2020. We are witnessing an upward trend in the Gold market.
So now we have enough reasons to make an investment in Gold. We have also understood that Gold has outperformed other assets amid the uncertainty caused by the Covid-10 pandemic. So we should definitely invest in Gold.
So the next question arises – How do I invest in Gold?
Gold is the only commodity where you have many different options to invest. These are:-
1. Physical Gold
2. Gold Mutual Funds
3. Gold ETFs
4. Sovereign Gold Bonds
5. Gold Derivative Market
Let us now see what are the features of SGB bonds and it’s comparison with other Gold investment avenues:-
1. Returns: You get higher returns in SGB bonds compared to all other options. This is because in addition to the capital gain, you also get interest of 2.5% p.a. payable half yearly. In all the other options, you are entitled to get only capital gain arising due to price movements.
2. Expenses ratio/charges – In Gold ETF and Gold Mutual Fund, there is a charge of approx. 1-1.5%. There are making charges in case of physical Gold. In case of derivatives also, there are some brokerage and transaction charges. SGB bonds are the only option where there is no expense or charges.
3. Liquidity – SGB bonds have a tenure of 8 years and there is a lock-in period of 5 years. After the completion of 5 years, you can trade these bonds in the market. Therefore, these are not liquid. All other gold investment avenues are highly liquid.
4. Tax treatment – If you hold the SGB bond till maturity i.e. 8 years, you will be exempted to pay capital gain tax. Interest income will be taxable as per your slab rates. So, SGB bonds have an edge over other options because of tax free capital gains. Capital gains are taxed at 20% with indexation benefit in all other cases.
5. Loan facility –These SGB securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). Also, in case of physical gold, you can apply for a Gold loan.
6. Availability – Apart from SGB bonds, you can invest anytime in any of the options. SGB bonds are available for investments as per notification from RBI.
From the above points, we can conclude that SGB bonds outshine in comparison to other alternatives. Liquidity is the only disadvantage so if you have at least 5-8 years in hand, you should definitely go for SGB bonds. But if you are a short term investor then you can opt for Gold Mutual funds or ETFs.
Also note that minimum investment that has to be done in SGB bonds is 1 gram of gold and maximum in case of individuals and HUF is 4 kgs.
Conclusion
It is recommended for long term investors to invest in SGB bonds for hedging purposes. One should atleast have an exposure of around 10-15% of the portfolio in Gold. You can invest one time or in a phased manner in every series till the month of September.