Wednesday, 10 January 2018

Our Connect with money at each Life Stage


Every specie on this planet earth has a life cycle. We humans are no exception. We also have a life cycle and within this life cycle we pass through different life stages. There are certain responsibilities which we perform at each life stage and somehow most of these activities are related to money. Let’s see our life’s connect to money and how it impacts our life cycle.

I.                    Childhood and Education
We remain in this life stage for approximately 20-25 years (from birth till graduation/post-graduation). Though we don’t earn money here, but our life is quite dependant on the kind of money our parents earn. Money lessons learnt from the surroundings in this stage form the foundation of our money behaviour going forward.

II.                  Career Development
This is the stage where we get directly connected to money. In the beginning of this stage, most of us splurge, party, and enjoy our earnings as we are accountable to none. People who understand savings at this stage are clearly the winners, because they will save more money due to early beginner advantage and it will have compounding effect on the savings as well.

III.                Family Formation
In this stage we get married, have kids, buy house, etc. This is the stage where most of us have dependants – wife, kids or even old parents. There are also needs like house hold expenses, medical expenses, kids school fees, parent’s medical expenses. At this stage we truly get to worry about future and start saving for kid’s college, our retirement, contingency planning, and tax planning. People who have prudent planned savings at this stage can catch up with the early savers.

IV.               Pre-retirement Phase
This phase is the best monetary phase for most of us. Here, the kids are already into their jobs, most of the debts are paid, and most of the people are at peak of their careers. This phase gives the maximum surplus to invest for retirement needs. It is a very important phase to create an emergency health corpus other than the health plan to cater to health needs in case of an unforeseen illness.

V.                 Retirement
This is the final destination. We all have plans for retirement. This phase makes us realise the value of all the savings done earlier in our lives. But, not all of us retire, some of us still work in areas of our interest may be for full-time or part-time, which provides cushion to the retirement corpus and might add on to the legacy corpus.

In all the life stages, money forms an important factor that cannot be ignored. The earlier we teach our kids about money management, the better it would be for them as it would help them define good relationship with money for all their lives.



Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/

Thursday, 4 January 2018

2018: 5 Money Lessons we need to unlearn



I. FD’s are the Best Investments
Post Demonetisation Banks have reduced their deposit rates. Following which Fixed Deposits now are not an attractive debt investment option.
Moreover, If you fall in 30% Tax Bracket then the return which you will earn from your FD will fall further.
II. Time the Markets

They Say, Time and Tide waits for none. Well, you can say the same for equity markets as well. So, don’t try to time the market, stay invested for the long term.

*Sensex moved from 26595 to 34056 in the year 2017

III. Save only during Tax saving season
As Benjamin Franklin rightly said, “You may delay, but time will not.”
You should not save only in the Tax saving season, you should invest systematically with discipline at regular intervals. This way you can average out your returns.

IV. Rely on your Company Health Insurance
Most of us don’t take Personal Health Plan, thinking that our Company covers us. But have we ever thought of a scenario when we are out of job, or when we are old and retired with some ailment AND WITHOUT ANY HEALTH INSURANCE because no one will insure us in our old days.

V. Not having a Consolidated Portfolio
We get so unorganized with our finances, we keep one document in one cupboard and another would be lying somewhere in the drawer. Worst of it, we have our mutual funds in different demat accounts which makes it impossible to consolidate the portfolio.
One should have a consolidated portfolio to see the correct picture. 

Tuesday, 28 November 2017

How to check your Insurance need?




These days I’m seeing an eye-catching advertisement on Television that you should check the returns of your Insurance before buying the policy. It made me both laugh and cry at the same time. I laughed because they are actually fooling the viewers by telling them to compare returns of Insurance policies. And, I cried thinking of all the people who after seeing the advertisement will actually go ahead with buying an insurance policy for returns.

Even if you look at Dictionary, it clearly says, ‘Insurance is an arrangement by which a Company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified period.’ Yes, you read it right, there is no mention of the word “RETURN” in the definition. Then why are we all hell bound to look for returns in a product which best functions as a risk cover.

Insurance should never be taken from the perspective of gaining returns. It is like you are paying premium for getting returns on the premium and not risk cover. There are insurance policies available in the market which give returns on the premium paid, but for those policies either the premium would be high or the cover would be too less. To buy the right insurance plan, you should first know how much of cover you need depending upon parameters such as your expenses, your liabilities, your assets, your family goals, etc. Once you know the amount of life cover required, only then you can choose the policy with least premium and high claim ratio.

There are two ways in which you can calculate the amount of life cover required by you – Income Replacement method or Expense Replacement method.

In income replacement method, total income of an individual which he is expected to earn over the remainder of his working life is calculated in present terms. Important parameters such as non-negotiable goals, outstanding liabilities, family assets, etc. are also taken into consideration. After factoring in all these details, the cover which an individual requires is calculated.

In expense replacement method, as the name suggests, total family expenses till the time of individual’s working life is calculate in present terms. Again, parameters such as non-negotiable goals, outstanding liabilities, family assets, etc. are taken into consideration. After factoring in all these details, the cover which an individual requires is calculated.

Financial Planners use any of these methods to come at the required life insurance need of an individual. Once this need is defined, an insurance policy should be chosen depending upon the quantum of premium and Company’s Claim history.

Hope this helps you choose an insurance policy with the right need in mind. And, when next time you see such advertisement on the television, you choose to ignore it rather than looking for returns in an insurance policy.

Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/

  

Thursday, 26 October 2017

5 ways to encourage yourself to Save More

We Indians have always been good savers with our gross savings rate at 31% of GDP in the year 2016. Savings rate is the share of gross savings in Gross National Disposable Income (GNDI). But, as per IMF(International Monetary Fund), its gross savings rate has actually fallen from 37% in 2007-08 to 31% in 2016.

                                                                                                           (SOURCE: DBS Group Research)

This decline in the savings rate is a gradual decline which could be due to multiple reasons like low income, high expenses, tough economy etc. Household sector is highest contributor to the gross savings. In household sector, there has been decline in savings in the physical assets and increase in savings in financial assets, but the share of financial savings is still too low. Let’s look at the ways in which we can encourage ourselves to save more in financial assets.

1.       LEARN
We normally tend to avoid something we don’t understand. And with variety of financial products available at our disposal, one obviously gets confused. Many a times we blindly follow our friends and relatives for investments and then burn our hands. The key is to learn, understand, and then take action.

2.       SET GOALS
You just have a fair idea that you need to save. Having no specific goal in your mind does no good benefit, it rather distracts you from saving. Create realistic goals to give purpose to your savings, be it buying a new car, saving for vacation, or your retirement. To see your savings, grow and meet your set goals will be a real motivation to save more.


3.       AUTOMATE YOUR SAVINGS
We are living in digital space these days with the world in our mobile phones. Then why not bring this automation in our savings as well. You can set an auto-debit from your bank account towards your savings fund for the required date. By doing this, your money will get invested automatically on a pre-set date every month. It will save you the hassle to getting to do the work yourself, and you won’t even know that you have shifted to INCOME-SAVINGS = EXPENSES mode.

4.       STAY IN CONTROL
As per research, people who feel powerful around money are much better with their money decisions. There is no need to fret if you have made some wrong financial decisions. You can always sit back, think through, and take corrective action. It will not only enable you to save your money but will also give you a lesson with regards to your future savings.

5.       KNOW YOUR FINANCIAL APPETITE
We all are different individuals with different choices, and the same relates to our savings as well. Some of us are risk-takers and some of us prefer risk-aversion. Only if you are comfortable with your portfolio instruments, will you invest more. In the long run, equities have performed much better than any other asset class. Having little bit of equities in your portfolio will only benefit you provided you stay invested for the long term. Seeing your money grow will obviously nudge you to save more.

Saving money for your future is important. Once you are in savings zone, you will be having money for all your important milestones like kid’s education, your retirement, or any other goal that you need money for. You just need to know what motivates you to keep saving.


Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/

Tuesday, 8 August 2017

5 most common Savings Hiccups: And how to avoid them



Hiccup No. 1: Let my salary grow

We always wait for our salaries to grow to start saving, but that day seldom comes. We all have commitments, and we as individuals keep our commitments before our savings which obviously is a wrong thing. Even if we start saving we don’t increase our savings not keeping them at par with our increasing salary.

Solution: Later you start, lesser will be your savings growth. You can actually accumulate more wealth if you start saving early. Even if you have less money left after you are done with your expenses, try to save. You can start from as low as Rs. 1000/-. This will not only help you in kick-starting your savings but once you see your savings growing, you will feel like adding more to your regular savings kitty.

Hiccup No. 2: I am earning enough to serve my needs, why should I save

If we are earning a comfortable salary and are able to meet ends, and still there is some amount left at the end of every month, we assume that we will be in this comfort zone for all our lives. We don’t think of situations we might get in like sickness, job-loss, old age. We always think nothing would ever happen to us.

Solution: Nothing is permanent. Some understand it in earlier stage of their lives while some take time. However, it will do no harm if you plan for your future and save accordingly even if you think you are earning sufficiently. Because we often tend to miss inflation and the way it will haunt us once we retire.

Hiccup No. 3: Let my loans get over

When we have any of the loans on us, we think of it as a burden and try to get rid of it as soon as possible. Even if we get a very good investment opportunity, we think of first clearing our loan and then start the investment.

Solution: All loans are not bad. You should see the interest rate you are paying on your loan. If the investments you are doing are fetching you better rate of interest than your loan, it is better to start your investments as well. For e.g. For someone having a home loan at 8% interest rate gets an opportunity to invest in long term equities where he can easily get 10-12% on his investments (long term). He should start his investments along with, as they are fetching more returns on his money and also, he is getting tax rebate on his home loan.


Hiccup No. 4: I don’t know where to save

‘Give me too many options, and I get confused.’ This situation is true for everyone. The moment we get too many options, we get confused and delay our decisions which might result into inaction. Many a times since there are too many financial products on offering, we all prefer inaction rather than any action at all.

Solution: Ask a Financial Planner. It is true, that there are many financial products available but each product is defined/designed keeping a set of investors in mind, some might be aggressive, some might be long-term investors, or others might be regular savers. One needs to know, what category he/she falls in and invest accordingly. And none other than your financial planner can help you on defining your financial aspirations. Here we are talking about a financial planner and not a distributor.

Hiccup No. 5: I am waiting for the right opportunity

When the market goes down, our dialogue is, it will fall further, I will invest then. When the market goes up, we say it has gone too high, let me wait for a fall to invest, and the vicious cycle continues. Even if it is a debt product, we don’t invest much because the lock-in is too high or some other cause comes to our rescue as a reason for not investing.

Solution: Start with Systematic Investment Plan (SIP). No one can ever time the market, we all make assumptions, sometimes they are correct and sometimes they are wrong. But the key is to START. And what better than investing systematically at regular intervals, and trust me you wouldn’t even know how well you have accumulated once you start your regular investments.



Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/

Thursday, 22 June 2017

How Financial Planners plan your Retirement expenses?

If you are 30, married and living in some Metro, chances are that you are spending close to 30,000/- every month on your household. You pay every month for services like phone bill, dish TV, maintenance, groceries, milk, maid expenses, and so on. While the rule of thumb says that we should save close to 30% of our monthly income but the truth is that something or the other keeps coming up and we end up saving very little. And on top of it majority of us have loans on us, be it a personal loan for maintaining our life style or a home loan for that dream home of ours.


Chances are that as your family grows and your lifestyle improves, these expenses will also grow along with. As a matter of fact, your growing salary will compensate for your growing monthly expenditure. But, what will happen when you stop working. How will you adjust your increasing monthly expenditure with your never growing or static pension?

Let’s assume your expenses are Rs. 30,000/- per month and will grow at only 7% every year. For a 30-year-old, this is how the numbers will be when he turns 60.



If today, a 30-year-old is spending Rs. 30,000/- per month, he/she will be spending 2.28 lacs per month in the year 2047 when he will be 60 years old. Don’t confuse expenses with inflation which is currently at 2-3%, because our expenses vary on other factors also like our lifestyle, growing kids, aging parents. So, inflation is not the only parameter.

If he lives till 80 years for your age, how much lump sum will he need at his age 60 to maintain the current lifestyle (30,000/- p.m.)? And, let’s assume that his expenses will get reduced to half once he retires. For anyone a clean guess would be: maybe 1 – 2 crores.
But, In Actual the Total Lump sum corpus which he will need to sustain his retirement is 3.7 crores.
And, how much should be saved monthly to achieve this amount. It can be easily achieved by saving Rs. 11,000/- per month for the coming 30 years (assumption: saved in an instrument which has 12% rate of return).



What we just discussed above are assumptions based on one scenario, and cannot be applied to each and every one. Every individual is different and has different spending pattern, life goals, etc. Hence, there is no size that fits all in case of financial planning. Some might be spending more than the assumed scenario of Rs. 30,000/- per month or for some the needs might be less during retirement years like there won’t be any rent or EMI, or kid’s expenses. So, the right approach is to get your financial planning done as per your aspirations and situation.

There is no doubt that you need to plan your finances well in advance to avoid any major setback which might jeopardize your retired life. There are two things where everybody gets stuck – WHOM TO ASK? And another thing is INACTION. We leave it until tomorrow which never comes.

For the first question, you can check with any practicing Certified Financial Planner who knows his maths well to understand your queries and resolves them amicably. For your INACTION, only you can be the driving force for your secured financial future.


Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/

Thursday, 15 June 2017

Best Father’s Day Gift


It is a well-known fact that Fathers are their children’s first Hero’s. We all love our father and treasure the things they did for us during our childhood and even now when we are parents ourselves, they still love us like kids and are ready to help us in any situation we face. These are Online times, where you can get almost all the stuff at a click of button. Not only products but if you look at the services also you can finish most of the chores online, be it paying electricity bills, paying your phone bills, or even banking. Gone are the times when our parents had to stand in the long queue waiting for their turn to pay the bills. We are the ones born in the digital era, where we finish all stuff on our smart phones itself. But have we ever wondered that our parents are the ones who still struggle doing all these things physically. How many times have you received a call from your dad asking you about how to operate something online? And we get irritated and tell them to call later. While many of us must be helping their parents becoming digitally literate, most of us ignore it with open eyes. Remember the times when you were small and were unable to ride your bicycle, how many times did your dad help you riding that very bicycle until you became expert. Not only bicycle riding, it could be anything your parents had helped you with during your childhood. Let me give you an idea – don’t buy fancy gifts, or a bouquet of flowers for your dad this Father’s Day, but try to help them on digital front. Teach them how can they complete various tasks just by sitting in the front of their computer screens for few minutes.

Teach them how to pay their Bills online
These days all service oriented companies accept online payments, and we pay most of our bills online but same is not the case with our parents. They still go out in the scorching heat, and stand in the queues to pay the bills. With demonetization and Digital India drive, things have become more difficult for them. There are so many digital wallets like paytm or freecharge and even apps like BHIM which makes money transfer/transactions easier, but our parents either don’t know about them or don’t know how to operate them. This Father’s Day, we can teach our dad how easily can he pay his bills online or through digital wallets/apps. This will not only help him save his time but also make him more digitally inclined.

Teach them Internet Banking
I don’t remember the last time when I had visited my bank, must be a couple of years back. Banks have become so digitized that there is no need to actually visit the branch for any bank related transaction. You can easily manage your account online. We can teach internet banking to our parents. They still visit the branch for most of their queries. Yes, they must be having accounts with the nationalized banks, but nationalized banks are at par with the private banks when it comes to internet banking. So, you can help them understand it better.

Help them with their Old Investments
Many of our parents would be holding their investments in physical form which can now be stored in a digital format. It could be anything – Insurance, physical shares, mutual fund holdings, or Fixed Deposits. You can check the process of digitizing these investments and help your father in arranging all these investments in a systematic manner online. Your father might get irritated initially, but at the end, the pleasure of seeing all his investments and their current values in a click of a button will make him forget all the trouble of giving you his investment details.

Tax Filing
If your parents are filing their taxes and are following the old model of going to CA paying him to file their returns, you can help them here as well. There are numerous websites available where you can file your taxes in a matter of minutes, you can do that on Income Tax India portal also without any charges. Even those CA’s file the taxes online post taking details from your parents. Plus, there are so many things that have come up like linking the Aadhaar with the Tax applicant’s PAN. Your parents will surely appreciate a helping hand in this zone. So, help them manage their tax filing online.

Many of us would just send gifts to their parents on occasions like Father’s Day or Mother’s Day, but there would be very few who will spend time with their parents telling them about new technologies hence enabling them to face this new Digital era with confidence. And parents will definitely appreciate the latter better than any of the other gifts. For parents, time spent with their dear children is the best gift they could have ever received. So, what kind of gift have your decided to give to your Dear Dad on this Father’s Day?


Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/