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Wednesday, 14 August 2013

Celebrate (F)independence Day on August 15th

On the eve of Independence Day, I wish that people of India also vow for being financially independent. Let’s celebrate 15th August by not only feeling proud of being a citizen of Independent India but furthermore being a Findependent citizen. A Findependent citizen who is free of financial stress, is focused and in control of Personal Finance. Check if the measures mentioned below help.

v Earn-Plan-Spend. Do not Earn-Spend-Plan.
v Adhere to all your bill payment deadlines. Build your Financial character.
v Early start pays a lot when it comes to investing. However, it’s better late than never.
v Draw up a goal based Financial Plan on paper, put realistic figures against it and stick to it.
v If you cannot make the Plan yourself, seek help of a professional who is independent and unbiased.
v Take decisions regarding money matters. Do not procrastinate.
v Take loan within limits. Pay off early if you have surplus.
v Pay your Credit card dues diligently.
v Inflation is a menace bigger than you can visualize, do not ignore, fight it.
v Do some Tax Planning to take advantage of provisions made by law.
v Look at Gold as an investment asset class.
v Do not be shy of admitting mistakes with your money matters. Learn from it.
v Rebalancing of your investment portfolio is a sensible way to stay on track.
v Be financially savvy.
v Decide whether you are a speculator or investor.
v Know you Risk appetite and take/retain risk accordingly.
v Do not have emotional attachment with you investments.
v Take control of the behavioral aspect of investing.
v Timing the market is a futile exercise.
v Plan for your Retirement, NOW!!!
v Only Life Insurance you require is Term Life Insurance and that too if you have dependents.
v Analyze and get rid of traditional and junk insurance plans.
v Do not neglect having your own Health insurance policy although covered by employer.
v There is no alternative to Personal Accident and Disability Insurance.
v Consider Critical Illness insurance as well in case of family history of ailments.
v Read the fine print of any financial document and understand before you sign.
v Do not pay cash to your advisor/agent.
v Avoid dealing with multiple banks and multiple agents.
v Develop multiple sources of income, if possible.
v Allocate few hours in a quarter to look after your Personal Finance.


Friday, 5 July 2013

Why discussing about Personal Finance is a taboo?

I have always found that people are hesitant to speak regarding their Personal Finance. As if this information is going to be published by the listener in next days’ newspaper or will go live on a television news channel. However, why discussing Personal Finance is a taboo? Let’s try to find out.

·       Financial literacy is low. Many people although having a successful career feel shy to discuss Personal Finance because of lack of knowledge. It is certainly nothing to be shy about; you cannot be expert in every field.

·       The matter is Top Confidential. How can it be discussed in open? Do not forget that unless you discuss, how can anybody help? Find out the right person to discuss.
·       The indifferent attitude- I don’t know anything about it. My brother, father, ……….etc. take care of all Personal Finance matters. Remember the best custodian of money is the person who earns it.
·       It is a ‘Personal’ affair—meant to be discussed only in the family. If the family has a qualified and knowledgeable Personal Finance person then it’s fine.
·      The word itself says that it is ‘Personal’ Finance, how to discuss with every Tom, Dick and Harry? However, people with this attitude do not want to discuss it even with a friendly Jerry.
·       Personal Finance matters are to be dealt by Chartered Accountants. In majority cases Chartered Accountants are experts in Audit and Taxation matters. Their view will be from the point of saving taxes, which is only a part of Personal Finance.
·       Fear of being mocked for an incorrect decision. If a wrong decision is made it needs to be rectified. Unless the matter is discussed how the corrective action will be taken?
·       My secret Personal Finance strategy. Share it to know about the cons, being ‘your’ strategy you may be having a biased opinion about it. In this world of information explosion, knowledge is getting marginalized. However, knowledge will always prevail over mere information.
·       Personal Finance is never a high priority.  Although each individual strives for earning money to achieve his goals, family and workplace will always be on top priority. With no limit to working hours in today’s world, there is hardly any time left to manage own money.
·       Hiding of facts. If Personal Finance matters are on a poorer side then they are usually hidden from children/partners. Hiding Personal Finance matters will only result in strained relationships.
·      There is no way out of long contracts of Traditional insurance/ULIP’s I have subscribed. Check the policy conditions, there is a way out. Based on the conditions, your needs and feasibility take a prudent decision.
·      Agents/Relationship Managers/Stock Broker etc. have sucked my money out with wrong products and undisclosed charges. I am a victim of mis-selling. Now I cannot trust anybody for Personal Finance. You cannot remain a victim for long. Find a qualified, unbiased advisor and seek solution to come out of the mess.
My feeling is that Personal Finance should be discussed openly as a subject. Going down to micro level or not is entirely an individual choice. Do you think treating Personal Finance as a taboo and masking it with confidentiality really doing the individual any favor? Please find out for yourself. If you find it is not, bite the forbidden to experience that it is not really a sin.

Wednesday, 5 June 2013

Come to Term(s) with Life Insurance

Life insurance evokes negative outlook amongst majority of people because of the aggressive marketing and mis-selling. Purely from the risk protection point of view, however, there is no alternative to Life insurance. Let’s look at some of the common misconceptions, facts and answers to some questions related to Life insurance.


·       Life insurance is the best way to invest money.

·       Life insurance is only meant for claiming tax deduction.

·       Life insurance is the only way to achieve long term goals.

·       It is the only way my money can be safe.

·      Child life insurance policies are a must to plan for education of children.

·       Term insurance is a useless plan because the insured gets nothing if he survives the term of the policy.


·      Life insurance should be looked only from the point of view of ‘Risk Protection’.

·      Entering into long term contracts such as Life insurance with only aim of saving tax for a particular year, leads to imbalance in personal finance.

·      Traditional Life insurance policies do not beat inflation. Hence, they are not the ideal investment vehicles to ride for achieving long term goals.

·      With strict regulations, there are many investment avenues available where your hard earned money is safe.

·      Child insurance plans are only a product of marketing gimmick. It is easy to sell these plans because people get emotionally involved.

·      Term insurance is the purest form of Life Insurance. It sticks to the fundamental of ‘Risk Protection’ with which the concept of insurance was born. The Sum Assured is paid to the nominee in case of untimely death of the life insured.

·       If the policy holder survives till the end of the premium paying term of Term insurance plan, no amount is paid.

WHY get a Term Insurance?

·       It is the cheapest and simplest form of Life Insurance.

·       It provides a safety net for entire family.

·      It ensures that the family is not burdened for future liabilities like livelihood of surviving spouse/children, child education, marriage, outstanding loans, other goals etc. when a breadwinner dies.

·      Human being cannot be replaced, however financial difficulties arising due to the demise can be reduced with the help of Term Insurance.

·      People who think they are not getting any money in return if they survive till the end of term of the policy, need to think that Term plans come at a very low cost. They should give due consideration to the fact that by paying a low premium for insurance coverage with term plan and by saving the exorbitant premium for the traditional and other forms of insurance, they can in fact save much more. In turn, they can invest the savings in better instruments with better returns. This helps in planning and achieving long term goals.

How much Term Insurance is enough?

·      Thumbs are indeed ruling in these times due to their utility in sending sms and using smartphones. However, is it prudent to calculate your need for life insurance only with the help of thumb rules (like Life Insurance should be 10 to 15 times of your annual salary?).

·      Calculation in a more scientific manner by applying Human Life Value method should be adopted. It assesses a person’s value in light of his present earnings and his earning potential till retirement.

What to do with the current holding of Traditional plans or ULIPS?

·       Although the answer to this depends on case to case basis, however in majority of cases a way out may be found in terms of making the policies paid up, surrendering the policy or non-payment of further premiums.

·       Various clauses mentioned in the Policy need to be studied in detail to arrive at a decision.

·       Loss booking capacity of the holder also needs to be assessed before taking any decision.

·       People tend to get emotionally attached with the policies they hold. They need to get rid of this attachment and check in real terms if the policy is beneficial in the long run and is supporting any goal.

·       One should also check what return he/she is getting from these type of insurance + investment plans? Since these plans have the element of investment, it is necessary that the return factor is checked. Do not ignore this fact because the plan is also giving you the insurance protection.

Due to widespread availability of free advice and mis-selling, insurance portfolio of a person is the major cause of financial stress. Come to terms with it, sooner the better.

Monday, 15 April 2013

Worth the risk (of reading..)

“Twenty years from now, you will be more disappointed by the things you didn’t do, then by the things you did do. So throw off the bowlines! Sail away from the safe harbor. Catch the trade winds in your sails. Explore, dream and discover.”

                                                                                              -- Mark Twain

"A ship in harbor is safe – but that is not what ships are for."

                                                                                               --John A. Shedd

“The person who risks nothing, does nothing, has nothing, is nothing and becomes nothing. He may avoid suffering and sorrow but he simply cannot learn and feel and change and grow and love and live”

                                                                                              --Leo. F. Buscaglia

“Often the difference between a successful person and a failure is not one has better abilities or ideas, but the courage that one has to bet on one’s ideas, to take a calculated risk and to act”

                                                                                          --Andrew Malraux (French Statesmen 1901-1976)

"First you jump off the cliff and you build wings on the way down."

                                                                                                --Ray Bradbury

Meaningful as they are supposed to be, ‘Quotes’ have the ability to underline or highlight our own thought process. Probably that is the reason they appeal to us.

Majority people have negative thoughts and feelings about taking risks. Risk is considered a synonym with danger, uncertainty, gambling, speculation and the fear of loss. As a result, many people avoid risks. There is a thin line between avoiding risks and thinking that risks have been managed; AND actually managing risk proactively. Managing risk towards relationships, health, career and finance has the ability to keep life flowing easily.