Sabka Budget 2015-16 – Personal Finance Highlights

Hemant Beniwal
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Sabka Budget 2015-16 – Personal Finance Highlights

The finance minister, Arun Jaitley presented the Union Budget on February 28th 2015. There were lot of expectations from the budget as the BJP had promised a lot of things during the election campaign and after the won the elections. It has some steps that will take India on the path of growth. Let us look at the key highlights –

Sabka Budget 2015-16 - Personal Finance Highlights

Budget Personal Finance Highlights-

– There is no change in income tax slabs and no revision in income tax rates. Individuals with an income of Rs. 1 crore or more per year will have to pay a surcharge of 2%. It is proposed that wealth tax will be abolished.

– Exemption limit on health insurance premium has been increased from Rs. 15,000 to Rs. 25,000. (for senior citizen Rs 30000) Senior citizens above the age of 80 years, who cannot generally take insurance can avail of deduction for medical expenditure up to Rs. 30000. For specified diseases, the limit is  increased to Rs. 80,000. Tax deduction limit is increased by Rs. 25,000 for differently abled persons.

– Investments in the savings account launched for girl children- Sukanya Samriddhi Scheme is eligible for deduction under Section 80C and any interest earned in this account is tax free – EEE. (we will be reviewing it next week)

– Limit on pension scheme (NPS & Life Insurance) increased to Rs. 1,50,000 rupees. There is also an additional deduction of Rs. 50,000 rupees for contribution to new pension scheme (NPS) under section 80CCD. . EET (some clarity is needed in this)

– Transport allowance exemption has been increased to Rs. 1600

– Service tax exemption on Varishth Bima Yojna

– An individual has to quote PAN number for all transactions that are of value greater than Rs. 1,00,000. (no cash transaction of above Rs 20000 in property)

– Monetising Gold – Gold monetisation scheme to allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal account to be introduced. – Sovereign Gold Bond, as an alternative to purchasing metal gold scheme to be developed.

– Invest in Equities – Government to bring enabling legislation to allow employee to opt for EPF or New Pension Scheme. For employee’s below a certain threshold of monthly income, contribution to EPF to be option, without affecting employees’ contribution. Minimum 5% to maximum 15% investment in private EPF should be invested in Equities.

 – Tax Free Bonds on the table again

– Real Estate Investment Trust (REIT) taxation – Rationalisation of capital gains regime for the sponsors exiting at the time of listing of the units of REITs and InvITs. – Rental income of REITs from their own assets to have pass through facility. (taxation may be similar to Equity MF)

– No New Direct Tax Code (DTC) – Most provisions of Direct Taxes Code have already been included in the Income-tax Act, therefore, no great merit in going ahead with the Direct Taxes Code as it exists today.

 – Social Security for Poor –

  • Pradhan Mantri Suraksha Bima Yojna to cover accidental death risk of `2 Lakh for a premium of just `12 per year.
  • Atal Pension Yojana to provide a defined pension, depending on the contribution and the period of contribution. Government to contribute 50% of the beneficiaries’ premium limited to `1,000 each year, for five years, in the new accounts opened before 31st December 2015.
  • Pradhan Mantri Jeevan Jyoti Bima Yojana to cover both natural and accidental death risk of `2 lakh at premium of `330 per year for the age group of 18-50.

Budget Highlights for the Consumer –

– Service tax has been increased to 14% from 12.3% which makes services like stock broking, air travel, restaurants, financial planning etc. expensive 🙁

– Excise duty on tobacco has been increased leading to increased prices of cigarettes and other tobacco products.

– Excise duty on leather footwear has been reduced which can lead to prices lowering in leather footwear.

– Packaged fruits and vegetables, microwave ovens, mobile phones and solar water heaters can become cheaper as the processes/ parts involved in making them are exempt from service tax.

– Ambulance services and visits to zoos, museums and national parks will become cheaper as these are exempt from service tax now

– Visits to amusement parks will be costlier as they come under the ambit of service tax now.

Budget Highlights for Companies –

– Corporate tax for 2016 will be 30% but gradually reduced to 25% in next 4 years 🙂

– GAAR (General Anti Avoidance Rules) has been deferred by 2 years.

– GST from next year

– Law for checking Black Money & Benami Property.

– Custom duty on 22 items has been reduced

– Custom duty on commercial vehicles, import tax on iron and steel and metallurgical coke has been increased.

Other highlights –

– There will be an increase in investment in infrastructure by Rs. 700 billion

– A national investment infrastructure fund will be set up.

– Rs. 2.46 trillion is allocated for defence and Rs. 331.5 billion is allocated for the health sector.

– Food subsidies are set at Rs. 1.24 trillion. Fertiliser subsidies are set at Rs. 729.69 billion and fuel subsidy is set at Rs. 300 billion.

– The Government will set up Mudra Bank which will be funding the unfunded.

– It proposed improvement of national heritage sites and provide visa on arrival for 150 countries to boost tourism

– There will be greater devolution of resources to states in the form of tax revenues and not grants which will make states more responsible with the funds.

There was an overall positive reaction to the budget in the market but some specific sector announcements or non announcements like funds infusion for PSU banks and no changes for the jewellery sector seem to have upset some corners. (Budget Highlight – Complete Document )

How do you think the Budget affects you and do you think the Budget will support economic growth in inclusion in the country? If you have any questions feel free to add in comment section.

How to Stop Buying Things You Never Use?

Hemant Beniwal
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5
How to Stop Buying Things You Never Use?

When my friend did the annual Diwali cleaning ritual, he noticed that the cupboards had more stuff as compared to last year. Another funny thing he noticed was that there were plenty of things that he did not use for quite some time. Why did he buy them in the first place? Many times we end up buying things because there is a good ‘deal’ or discount on them. Sometimes we buy things which we think may be useful to us but then they never are. We even buy things because someone else has it! These habits lead to too many purchases, too many things to store and end up wasting of lot of money.

How to Stop Buying Things You Never Use?

Read – Smartphones are making us Dumb – Financially & Mentally

Here are some ways to STOP buying things that are never used –

  • Use cash to make purchases – When you use cash to buy things, you will be aware of the amount you spend. When you use debit cards and credit cards, you do not realise how much money you spent and tend to go overboard with spending. If you see something and feel like buying it, you will think hard when you have to part with cash. (its really “painful” to waste cash)
How to Stop Buying Things You Never Use? Click to Tweet
  • Delay the purchase – You see a fancy new phone and want to buy it. You have a car but feel like buying a new one as your neighbour has the latest model. Do not immediately buy. Wait for a day or two. Check your spending for the last 3 months and your current savings and debts. You might realize that you have made many other purchases or come to the conclusion that your car or phone is just fine for now. The purchase feeling was just an impulse which went away when you thought logically.
  • Do not make a mall visit every other day – Malls (including online malls) have amazing shops with great products on display. There are various deals offered too. Many shops have discounts when you buy 3 T-shirts. So a person who wanted to buy one ends up buying 3 as it is hard to resist a “good deal”. But most of the time, you do not need most of the stuff displayed there and you did not need the 3 T-shirts. If you avoid malls, you will not buy things that you do not need. You can go to the park, watch a movie at home or chat with your friends if you have free time. Go to the mall only if you really need something.

Read – Deals & Discounts – Good or Bad for your finance

  • Do not get tempted by advertisements – Advertisements tempt you to find happiness by buying the products advertised. They make you believe that you need to buy products to lead successful and exciting lives. But advertisements are there to market the products and services. They are marketing tools used to increase a company’s revenues and profits. You should keep emotions out when seeing advertisements or else you will end up buying things which you may never use.
  • Categorize things into needs and wants – Whenever you are tempted to buy something, ask yourself if it is a need or a want. A “need” is something you cannot do without. A “want” is something you would like to have but you will be fine without it as well. If it is a want, maybe you can skip buying it. For example, you need clothes to wear but does every piece of clothing need to be from an expensive brand? Do you need to buy clothes every month? This kind of thinking and questioning will help you stop buying unnecessary stuff.
  • Keep yourself busy – When you are bored, you end up splurging on something that you do not really need. You should use your free time creatively. You can read books, go visit places in the city that you have not been to like museums and parks rather than the new mall that has opened up. You can take up creative hobbies like painting to use your time effectively. A good piece of art done by you will definitely make you feel good. When you spend your time by doing things that you like or getting new experiences, you will have less time to watch T.V. or obsess over things that you do not have and lead a more content life.

Do take a look around your house and see which are the things that you do not use regularly or would be fine without having them. What led you to buy that thing? Next time, you are tempted to buy something, use the points above to decide if you really need it or can avoid buying it. Your will save a lot of money and have a less cluttered house and life.

How To Make The Best Use Of Section 80C?

Hemant Beniwal
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13
How To Make The Best Use Of Section 80C?

Section 80C of the Income Tax Act allows us to have certain investments and expenditures which can be exempt from tax. We can plan our investments such that we can invest in appropriate investment options specified in this section and avail of maximum tax benefit. Rs.1,50,000 is the maximum investment amount that can get us tax exemption in one year. 

How To Make The Best Use Of Section 80C?

 You can also read – last-minute tax guide

Instrument Definition Advantages Disadvantages
PPF Public Provident Fund is a safe long-term investment option backed by the government. It is suitable for all as the minimum yearly investment is Rs.500 and the maximum is Rs. 1,50,000. It is easy to open a PPF account as it can be opened in many of the nationalized banks and requires only Rs.100. PPF can be used to take a loan and is a high-safety investment option. It gives an interest rate of 7.1%

 

 It is not liquid The interest rate might go down in the future
EPF Employee Provident Fund (EPF) is a voluntary investment avenue for salaried people. The amount is deducted from the salary every month. There is no limit on the amount that you can invest. It is easy to maintain.

It gives an interest rate of 8.50% and you can save a big sum if you continue for a long time. The amount got at the end will be tax-free

 

 Returns are not market linked which might be a disadvantage if the markets are doing well. It is not liquid.
ELSS Equity Linked Savings Schemes are tax planning mutual funds that invest in the market. There are many types of tax planning mutual funds depending on the stocks they invest in. There is a lock-in period of 3 years. They usually give higher returns when the markets do well compared to other schemes. They are non-taxable There is risk/volatility involved as the funds invest in stocks.
Bank FDs You can invest in Fixed deposits in banks for interest. There are fixed deposits for durations ranging from 7 days to 5 years. It is a safe form of investment if you invest in reputed banks. It is hassle free to maintain.You can take a loan against FDs in some banks It is illiquid. The returns are taxable and therefore not the most lucrative.
Pension Plans Insurance companies offer pension plans and you can avail of tax exemption if you invest in them. You pay premiums and the corpus will pay out a pension to you post retirement. Capital is protected. You will have a steady flow of income post retirement. Investment is costly.Returns are not high as compared to ELSS or retirement funds from Mutual funds.

You cannot invest beyond the age of 60.
NSC National Savings Certificate (NSC) is a 5-year savings investment option. A minimum investment of Rs.100 is required and there is no upper limit on the amount. It is available easily. Interest rate is 8.50%. It can be offered as collateral for loan. If the interest is invested back in NSC, it is eligible for tax exemption. The returns are taxable as per the tax slab that you fall under.
Life Insurance policies If you buy a life insurance policy for self, spouse or children, the you will spend an amount used to purchase. The yearly premium can be included in Section 80C for deduction The life insurance plan is a good cover for the family in case of unfortunate events.One can avail of a loan against the insurance policy. Traditional life covers are only covered in this. Insurance policies should be bought as a cover for emergencies and unfortunate events. There are plans that are better suited for this purpose like term plans.
Home Loan –Principal Amount If you take a home loan, the EMI that you pay has 2 parts – Principal and Interest. The principal amount qualifies for deduction under Sec 80C. The amount invested creates a valuable asset and at the same time helps in saving tax payment. Buying a house is a big financial decision and one has to be careful in choosing the right property at the right time.

Most of us rush to make last-minute investments just before filing the returns. This is incorrect and can lead us to make investments without thinking about all aspects. We should make the investment plan at the beginning of the year and start making investments from the beginning. This will allow us to have a proper investment strategy that can be fine tuned throughout the year and will also get interest from the beginning of the year.

Tax Treatment on NRI/PIO Term Deposits

Hemant Beniwal
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5
Tax Treatment on NRI/PIO Term Deposits

Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs)  can have bank accounts in India. They can be of three types – NRE, NRO or FCNR accounts. NRE and NRO accounts can either be current, savings, or fixed deposit accounts. The FCNR account is only a term deposit account.

From an income tax perspective, if a person has stayed in India for 182 days in a calendar year or 365 days spread out over four consecutive years, he/she is considered as ‘resident of Indian and has to file income tax returns else the person is considered as an NRI/PIO for paying income tax. An NRI is a person staying abroad for employment/business. A PIO is a person who has residency in a foreign country apart from Nepal, Bangladesh, Pakistan, Afghanistan, Bhutan or Sri Lanka and has had an Indian passport earlier or has parents/grandparents of Indian origin.

 Tax Treatment on NRI/PIO Term Deposits

Must Read – It is not legal for an NRI to hold Resident Saving Account

Tax Treatment on an NRE Account

An NRI can open a NRE current, savings or term deposit account. The interest earned here is tax-free in India. The principal and the interest amounts have to be fully repatriated to the individual. (but there can be taxation in residing country – talk to your CA)

Tax Treatment on NRI/PIO Term Deposits Click to Tweet

Tax Treatment on NRO Account

An NRO account can be opened by NRIs and PIOs. The interest earned is taxable as “income from other sources” in India. The tax rate will be determined by the tax slab that the total income falls under. The bank has to deduct tax at source and then pay the interest amount. If the NRI is a tax resident of the country where he/she lives, a beneficial tax rate can be claimed provided certain conditions of the Double Taxation Avoidance Agreement (DTAA) are fulfilled. Depending on the rate at which the bank has deducted tax at the source, he/she can claim a refund or pay the balance tax as the case may be.

Tax Treatment on FCNR account

FCNR accounts are only for fixed deposits. Both NRIs and PIOs can open an FCNR account but only in certain currencies. The interest earned in this account is tax free and the entire principal and interest amounts have to be paid to the account holder.

If the NRO bank interest is the only source of income in India and no relief is claimed under DTAA, Income tax return (ITR) 1 form can be used. Even if the interest earned on NRE and/or FCNR  accounts are exempt from tax, it has to be disclosed in the ITR to be compliant from disclosure perspective if filing returns in India.

Note: Consult your Tax Advisor before taking any investment call.

This is a Guest article written by Vidya – she is NRI

5 Reasons Why Not to Invest in Mutual Fund NFO

Hemant Beniwal
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5 Reasons Why Not to Invest in Mutual Fund NFO

It is a common practice across the mutual fund companies to launch new NFO’s (New Fund Offers) when markets are doing well. As more and more people invest only when the market performs well, automatically it becomes an opportunity for Mutual fund companies to come out with the new product. In the last few months of Bull Run (oh! It’s there without announcement), many NFO’s has been launched out of which most of them are close ended funds. Hardly there is any company left which has not launched NFO. Also, the no. of NFO which were launched in the bear phase of 2009-2013 equals the no. of NFO’s launched in the last year.

5 Reasons Why Not to Invest in Mutual Fund NFO

Read – DSP Healthcare Fund NFO Review

So what exactly is New Fund Offer (NFO)

People are quite familiar with the term IPO which is a direct offer by the company to buy its share which can be later traded in the stock market. Likewise, NFO is the first time subscription offer for a new scheme launched by the mutual fund companies. During the subscription period an investor can buy the units at the fixed rate of Rs.10 per unit. If it is a close ended fund then investor can buy the units only during the subscription period and will have to hold the units for the said period, whereas in the open ended fund, one can buy units even after the  subscription period is over and can redeem it at any time.

Read: Should you invest in equity IPO?

The reason behind launching NFO’s in Bull Phase

It’s a common mentality of investors to invest while markets are at the higher level (be it any asset class including gold & real estate) and they try to find out opportunities where they can invest at a cheaper rate. As in NFO, units are allotted at a fixed rate of Rs.10 and thus people find it cheaper than other available funds (myth) and invest heavily into NFO to earn better returns. And to seize this opportunity MF companies come out with the NFO and try to increase their AUM. Infographics – It’s a bull run when…

Reason behind launching NFO’s in Bull Phase

Read: Mutual Fund Vs Direct Equity

Why not invest in New Fund Offer(NFO)?

Since NFO’s are opportunistic in nature, many Investment advisers and financial planners suggest to stay away from these funds. So, is it really risky to invest into NFO? Let’s find out:-

5 reasons why not to invest in Mutual Fund NFO Click to Tweet

1. No proven track record

Since NFO’s are launched with a new idea or a theme/sector it is very difficult to analyse the future of the fund. One can always find a similar kind of fund already running in the marketwhich has a rating from the experts and where qualitative/quantitative analysis can be done on the basis of its past record, which cannot be done in case of NFO.

Must Read: Magic of Mutual Fund SIP

2. It is not cheaper than its other peer funds

Many investor thinks that NFO’s are available at cheap price compared to other ongoing schemes, which is totally wrong. Suppose an investor invests Rs. 10,000 in an NFO at NAV of Rs.10 and invests the same amount into an ongoing scheme whose NAV is Rs.20. Now the growth of the NAV in both the schemes depends upon the kind of portfolio they holds. Here the percentage growth of the NAV is important rather than the value of NAV. So there is no point in investing in a fund which has a lower NAV.

Read – 11 Mutual Fund SIP Myths

3. Comes with high initial expenses

The marketing charges and other initial expenses are high in case of NFO’s. These expenses are capped to a certain percentage and are managed out of the NAV over the period and hence are responsible for the lesser return. So it’s better to avoid new funds as charges are high.

Read – Benefits of Mutual Funds

4. Limited Diversification

Generally NFO’s are sector specific (normally at the top of bull market) or have focus on certain category like Mid cap, small cap. People are advised to invest with a proper diversification because if one sector does not perform the returns are compensated by another sector and proper balance is maintained. So it is better to read the investment objective of the NFO before investing and avoid those which have limited scope of diversification. Your portfolio should be designed based on your goals……

Check – 5 Awesome personal finance sketches

5 reasons why not to invest in Mutual Fund NFO

5. NFO are not exactly like IPO’s

Many people are of the view that there is no difference between NFO and IPO which is not true. In NFO the NAV is fixed at Rs. 10 per unit and is not affected due to the demand or some other factors. While in IPO the listing price depends on the demand and expectation of the market with the company. So the price may fall or rise while listing. So please remember the growth of NAV in mutual funds only depends upon the growth of the underlying securities.

Please remember Mutual Fund companies launch different types of NFO to increase their AUM and to complete their bundle of products, to attract different kind of investors and to fulfill their needs. So this does not mean that every NFO will suit your profile. Sometimes a plain equity or balanced scheme will serve your purpose. So it’s better to avoid NFO and if required you can always check the performance of the other schemes already available in the market.

Earn money in the non-traditional way – your second income

Hemant Beniwal
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8
Earn money in the non-traditional way – your second income

All of us want to earn money and today with the advent of technology and innovation, there are various ways to earn money apart from the traditional ways like having a 9 to 6/8/10/11… job. You can start your own business. It need not be something that requires a huge amount of capital, human resources and material resources. You can start small, earn money and then expand.

Earn money in the non-traditional way – your second income

Here are some ideas that can be started small but can be profitable if done correctly –

Online Research – You have a good laptop and a good Internet connection and like to spend time surfing the net. You could get assignments related to research especially in fields of your interest and capability. Of course it is not as simple as conducting a Google search on the topic and compiling a report using the first few search results. You need to go through industry journals and research articles and back up your research with hard facts. Law firms, financial companies, marketing companies need lot of research material for their business and tend to outsource some of the work and you can take advantage of this.

Read – Money Vs Job Satisfaction

Hardware and Software Troubleshooting – If you are an expert in computers and friends and family come to you with problems in their cellphones and laptops, you could give your talent a professional twist by advertising your talent in the neighbourhood and charge a fee for resolving technology problems. It does not require too much investment in the beginning and if you are good at your work, there will be a lot of publicity through word of mouth among people in your locality and then you can take it further by advertising on the Internet and reaching out to more people.

Earn money in the non-traditional way – your second income Click to Tweet

Online Media Management – Most companies have an online presence with a website, social media page etc. They need someone to manage it as it has to be constantly updated and the company needs to respond to customers and visitors efficiently. They look for youngsters for this job who are more in touch with the market, its needs and aware of products and services around. You can contact companies using their Social Media pages or apply for part time assignments with them.

Content development – Content is King and with the whole world turning to the Internet for all kinds of information, there is a big need for good, authentic information online. You can freelance as a content developer for websites in areas of your expertise. If you have design skills like coding in HTPML, CSS, PHP and some database knowledge, you can design web pages as well. You can look for such roles in job websites or freelance assignment websites.

Baking – If you like baking cakes and cookies, you could take it up in a professional manner. There is a lot of scope here as Indians are looking at cakes and cookies as gifting options and many want customised cakes for birthdays, get-togethers and parties. You will need to invest money in a good cooking equipment, good ingredients and samples to pass around. You can start by asking your friends and neighbours to taste them. You can have a stall selling your wares in exhibitions or in events in your locality.

Tutoring – If you like teaching, talking and explaining things, you can try your hand at tutoring. It is a lucrative profession with little investment. Students require tuition for subjects like Math, English and Hindi. If you are good in these subjects, you can try it out. You can try with children of primary school and then take up tutoring for higher classes or even competitive exams. Online tutoring is a big industry where teachers teach in a virtual classroom on the web sitting in one location with students logging in the classroom from any part of the world. It does not require much investment and you can become part of a growing industry.

Few More: Medical Transcription assignments, opening online shop, becoming seller at any existing online store like ebay or amazon, property broker or rental agent, franchise in mall – please share your ideas in the comment section.

How can you start?

You can start off by taking a few assignments and evaluate on various parameters like money earned, costs involved, your interest levels, time spent etc. You will also come to know if you really like working on your own or are happy with a regular day job as each has its advantages and challenges. This can be done before you quit your current job so that you can fall back on your job if you do not like starting your own business. This has to be ethical which means your business cannot be in direct conflict with your company’s interests and profitability and cannot use company resources and facilities for your business. These assignments will help you know the skill gaps you have and take measures to update them via seminars, educational courses etc.

Read: Steps before you start your own business

Strategies to follow when you work from home –

Be disciplined – When you are your own boss, you can tend to while away time. You might not always stick to your tasks for the day. You should allot certain time during the day for your work and ensure that you only work at that time. You should stay away from all distractions like watching TV, surfing the net or making plans for the weekend.

Create a Schedule and stick to it – You should create a strict schedule of what task is to be done at what time and the duration of the same. You should schedule in some free time as well between the tasks to re energize yourself. It could be a break to play a game, have lunch, talk to your loved one etc. You should at the end of the day check whether you have followed the schedule or not. You will definitely accomplish more in this manner.

Network – If you work from home, chances are that you might isolate yourself. You should join groups of professionals in your line of business either online or offline. You should attend related conferences/ seminars so that you can get in touch with people in your industry, potential clients and be aware of recent news, innovations, ideas etc. in the industry.

 Read: 5 Reasons you should not retire

Stay away from social media – It is easy to while away time on social media chatting with friends, browsing their pages and lose track of time. If you work on the Internet, there is a risk that this might happen and end up losing revenue. You should strictly set rules of social media time for yourself. If you find it difficult to stay away from them, you can set up reminders on your phone to stop checking social media updates.

Work-Life balance – It is as important to switch off work completely post work hours just as you would log out of the office and do other things if you are having a day job.. Especially when you just start a business, you will tend to overwork. You will tend to do work related things when you are having dinner with the family or check your emails while shopping. You should not let work and personal life overlap. You should not cook while you are working and at the same time avoid checking your mails when you are in the park with your child. This will help you be effective in all aspects of life.

Be motivated – In the office, there are parties to celebrate successful projects or other events to motivate employees. It is important to motivate yourself to continue doing excellent work. You should celebrate milestones like getting a new client or getting most tasks accomplished on time. This will keep your energy levels and enthusiasm high.

Working from home is a good opportunity for students or housewives to earn money.  Retirees can use their time wisely with small businesses run from home, It will keep them active and at the same time give them a regular source of income. If you are staying at home due to family responsibilities, you can take some time out for a business depending on our schedule. This will make you feel good, your skills will get updated, you will have a professional network which is useful and of course you will earn money.

Impact of Career Instability and Insecurity on Financial Planning

Hemant Beniwal
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1
Impact of Career Instability and Insecurity on Financial Planning

Work life, personal life and financial life are interconnected. If there is an issue in any of them, the other two will be negatively affected. We all aspire to have a successful career with salary growth and promotions. This is essential to build our wealth and finances. If our career is stable and smooth, we can plan our finances properly. We can set financial goals and make investments and make our wealth grow. But if our career is not stable or secure, financial planning is adversely affected. An unstable career involves too many changes in roles and jobs or being without a job for long periods frequently.  If you are not secure in terms of whether you will be employed or not or have no idea about your career growth, financial planning can go for a toss.

Career Instability

Must Read: Money Vs Job Satisfaction – which is more important for you?

Financial Planning becomes difficult – If you are not sure as to how your career is shaping up, you will not be able to draft your financial plan as you may not be able to estimate many parameters like amount for investment, retirement age, insurance amount etc. which are required for financial planning. If your financial plan is not in place, your finances will be in disorder and you will not know how much wealth you have and how much you need to save and invest.

Retirement Planning cannot be done properly – In a proper career path, you will be able to estimate your income growth and number of years to work. Based on that you will make your retirement goals and estimate the amount you need for retirement. An insecure, unstable career will not allow you to do this.

Read: What is an Emergency Fund & how to create?

There will be no Financial Cushion – A stable career allows you to save money and increase your wealth. You will then have financial resources ready in case of emergencies like job loss or illness. If you change your job too often or are unemployed in between, you will not have enough money to have a financial cushion as a safety factor.

You will not be sure of meeting other life goals – Most of us have life goals like getting married by a certain age, having kids or taking up an educational course in a good university. An unstable  career that leads to financial distress will not allow you to achieve these goals.

Impact of Career Instability and Insecurity on Financial Planning Click to Tweet

Instability and Insecurity in career affects health – Being employed gives you financial security, purpose in life, income and potential to lead a good lifestyle. But job insecurity or unemployment can lead to mental stress, depression, anxiety and other medical conditions. Apart from affecting health, they can also affect finances.

Check – why Financial Planning is Important

Career Progression and getting Benefits is difficult – If you change jobs too often, you will not be given important projects or roles as you will be seen as someone who quits the company soon. This will affect promotion and salary raises, bonuses and stock options. Your insurance policy will not be in order. This leads to less income and wealth in your hands which affects finances and financial  plan.

Read: Steps before you start your own business

Sometimes career instability and insecurity is caused by macroeconomic factors like slump in economic growth or your company not doing well. In such cases, you should not lose heart but keep working on your skills and personal development –

1) Update your skills as per changes in market and the industry that you work in.

2) Look for other potential employers and industries.

3) Update your profile and add it to professional networks. Ensure that you network with the right people in your industry.

4) You should save money so that even if you are without a job, you can manage expenses for some time. If this is taken care of, you will be able to concentrate on building your career properly with less stress.

It is important to have a career that is secure and stable from all perspectives. It will help in planning your finances properly.

5 Sketches & 5 Posts

Hemant Beniwal
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5 Sketches & 5 Posts

5 Awesome Sketches

These Sketches are from Carl Richards book “The Behavior Gap” – simple ways to stop doing dumb things with money. This is by far the most interesting personal finance book that I have read.

1. Focus

There is so much we don’t control in life, but the things we can control and the things that actually matter deserve our full attention. Unfortunately, we often see people doing the exact opposite.

They get distracted by things they can’t control (like the stock market) and waste time on things that don’t matter (like finding the next Apple). The result? Disappointment and frustration.

focus-thingsthatmatter

2. Cycle of Fear & Greed

It identifies behavior we’re probably all too familiar with and provides a powerful reminder for why we want to avoid it. And its not only about equity – what about gold & real estate??

fear-greed

3. Investment Return Vs INVESTOR Return

Dalbar (US) published annual data about average investor and investment returns.  But something odd kept happening each year. The numbers didn’t match.

The average investment return was bigger than the average investor return. In other words, investors were leaving money on the table. What was happening? Chasing returns, timing the market, best fund syndrome, fear & greed…

behavior-gap

4. The ONE Thing – Planning

Planning process can make everything else Easier or Unnecessary in Financial Life….

goals-plans-investments-repeat

5. Between You & The BIG Mistake

It doesn’t matter our background or experience, when it comes to our money, it’s incredible difficult to remain objective. Three things advisor can do for us:

  • Help us clarify our goals
  • Remind us of our goals when we get emotional
  • Be the thing between us and the Big Mistake

between-you-and-the-big-mistake

5 TFL posts from 2014

  1. Equity Markets at All time high – how investors are reacting & what you should do 
  2. Financial Planning Infographics
  3. 10 big lies that Skew Retirement Planning 
  4. Yes, Money Can Buy Happiness
  5. Assess you financial health with these ratios

LIC Varishta Pension Bima Yojana – Review

Hemant Beniwal
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11
LIC Varishta Pension Bima Yojana – Review

The LIC Varishta Pension Bima Yojana is a pension scheme for senior citizens above the age of 60 years. The person has to pay premium once to get pension on a regular basis for 5 years. After that it can be renewed for 3 years. Premium can be received either monthly, quarterly, half yearly or annually. The limit on the investment amount and the pension amount depends on the frequency of the pension that the person requires.If the policy holder dies during the tenure of the product, the purchase price will be refunded.

LIC Varishta Pension Bima Yojana

Read – LIC Jeevan Akshay Review

There are many investment options for senior citizens. Let us compare some of them –

Features LIC Varishta Pension Bima Yojana Post Office Senior Citizens Scheme Post Office MIS
What is it? It is a pension scheme for people above the age of 60 years wherein the returns on the investment will be paid as pension depending on the frequency of payout required by the investor. It is an investment scheme for senior citizens that provides a regular income stream It is an investment scheme in which returns are guaranteed. The investor gets a return of 8% p.a. on a monthly basis from the date of investment.
Investment Limits Depending on the pension receivable frequency, the minimum amount is from Rs. 63,960 and maximum amount is Rs. 6,66,665. Minimum amount – Rs. 1,000Maximum Amount – Rs. 15,00,000 Minimum amount – Rs. 1500Maximum Amount – Rs. 4,50,000 in a single account and Rs. 9,00,000 in a joint account.
Eligibility You have to be above 60 years old to invest in this scheme. It is an investment scheme for people aged above 60 years or 55 years if the person has taken voluntary retirement. If the person has retired from Defence services, the age limit would be waived. There are no conditions on age criteria to invest in this scheme.
Returns/ Payout/Interest It gives an interest rate of 9% per year for the lifetime of the individual. The returns reach up to 9.30% per annum as it is compounded quarterly. Interest is paid on 31st March, 30th June, 30th September and 31st December of each year. An annual return of 8.50% is paid on a monthly basis.
Tenure There is no fixed tenure. It can continue till death or till amount is withdrawn. You can be invested up to 5 years and that can be extended by 3 years more. You can be invested up to 5 years.
Loan The policyholder can borrow up to a maximum of 75% of the invested amount. Interest on loan will be adjusted against the pension amount. There is no facility for taking a loan against the investment amount. There is no loan facility available.
Surrender Conditions It has a lock-in period of 15 years. Amount can be withdrawn only in case of medical exigencies for self/ spouse with a penalty of 2%. There are different charges for withdrawing depending on when the withdrawal happens. There are different charges for withdrawing depending on when the withdrawal happens.
Key Benefits The pension payout frequency can be as per your convenience.It is a regular income stream.

The returns are high.

It is a low risk investment product.

It is good for economically weaker sections of the society.

The pension is deposited in the bank account which is easier to operate.

 

 It gives a good return of around 9% per annumIt is a liquid asset.

The investment amount qualifies for deductions under Section 80C.

 Returns are guaranteed.You can avail of loans.

The investment amount qualifies for deductions under Section 80C
Disadvantages There is a ceiling on the investment amount.It is illiquid

The maximum pension that you an get is Rs. 5,000 which is not enough to sustain decent living today and therefore, this cannot be the sole income earning method.

There are no tax benefits.

 

 Interest income is taxable.The interest is deposited in the post office account and this is not so easy to manage.

If banks offer higher interest rate,

 Interest income is taxableThe interest is deposited in the post office account and this is not so easy to manage.

Read – How Gratuity is Calculated

The LIC Varishta Pension Bima Yojana is less recommended even though it gives higher returns as there is a lock-in of 15 years. The pension is not enough to sustain a living. You will need much more money for living expenses. On the other hand, the Senior Citizens schemes have lower returns but the money is not locked and the maximum investment amount is quite high. You can have it as a small part of your portfolio for investment diversification if required. Which products developed for senior citizens do you have as part of your portfolio or for your parents’ portfolio?

LIC Varishta Pension Bima Yojana Review is done by Ravi Variyani

Religare Care versus Apollo Optima Restore Health Insurance

Hemant Beniwal
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6
Religare Care versus Apollo Optima Restore Health Insurance

It is a general study that each molecule that a researcher discovers takes about 7-8 years to get commercialized and on an average, 3 million dollars is spent on one drug discovery. And still you say that medicines are getting costly. This is a cycle. The costs of factors of production in the field of medicine are increasing day by day and the demand for these services is also increasing due to improving life expectancy. So, the cost of availing medical facilities is increasing and you cannot afford to display an ostrich syndrome. To avoid these costs or to transfer them, you can purchase Health Insurance policies or Mediclaim policies, as they are popularly called.

Health insurance is an insurance policy that covers the medical expenses of the insured person/ persons. It is important to have health insurance as when there is a medical emergency either to oneself or near and dear ones, one goes through lot of physical, mental and financial stress and it is good if at least the financial stress is taken care of up to certain extent. There are various kinds of policies available for different purposes.

Read – why you require complete health check up annually?

Religare Care and Apollo Optima Restore insurance plans

Religare Care and Apollo Optima Restore insurance plans offer the unique benefits. Religare Care offers the recharge option and Apollo Optima Restore has the ‘Restore’ benefit. Let us review & compare the two plans –

Religare Care versus Apollo Optima Restore Health Insurance Click to Tweet
Parameters Apollo Munich Optima Restore Religare Care
Entry Age – An individual plan can be taken from the age of 5 years till 65 years. There is no maximum age limit on renewal.– The Family Plan can be taken for family members from age of 91 days if parents are covered. The minimum age is 91 days and there is no maximum age limit. There are individual plans as well as family plans
Sum Assured It can extend from Rs. 3,00,000 to Rs. 15,00,000. The sum assured can extend from Rs. 3,00,000 to Rs. 60,00,000.
Premium (Sum Assured = Rs. 5,00,000 for 2 Adults and 2 Children)^ Rs. 14,070 Rs. 12,180
Health Checkup Free Health Check up is not available annually. This plans offers a free medical check up at the time of buying the policy and a yearly check up for adults covered in the plan.
Pre Hospitalization and Post Hospitalization. Pre and Post hospitalization benefits are offered for 60 days and 180 days respectively which is very good. Pre and Post hospitalization benefits are offered for 30 days and 60 days respectively.
Co-Pay There is no co-pay clause on valid claims. – There is no co-payment if a person’s age is less than 61 years and buys the policy for the first time.- There is a variant which offers no ‘co-pay’.- People above 61 can buy a policy of sum assured Rs. 3 lakhs or Rs. 4 lakhs and get the No Co-payment’ option
Day Care Treatments Up to 140 day care procedures are covered under the policy. Expenses of 170 Day care procedures are covered.
Hospital Network They claim to cover 4000 hospitals in over 800 cities They have a tie-up with more than 3500 hospitals  around the country.
Multiplier Benefit The policy holder gets a bonus of 50% of the Basic Sum Insured for every claim free year, maximum up to 100%. In case of claim, bonus will be reduced by 50% of the basic sum insured but this reduction will not reduce original sum assured amount. The policy holder gets a 10% bonus on no claims every year and the maximum is up to 20%. In a variant, called the Super No claim bonus plan, an increase of 50% is got every subject to a maximum of 100% of the sum insured.
Restore versus Recharge Benefits – It has a  Restore  benefit feature. The sum assured is restored or refilled during the policy tenure if it gets exhausted.– For example, if you have a policy of Rs. 3,00,000 and it gets used up entirely during a particular year in the policy term, the amount will get restored and can be used again in the same year for a different illness/problem.– If it is a family floater plan, if one person uses the sum assured, and another family member needs it; he/she can use  the restore benefit feature.

 

 

 – This policy has the ‘Recharge’ option. When the sum assured is utilized, it immediately gets recharged to the original sum assured and can be used for different future illness claims. This can be done once a year.- The advantage over the ‘Restore’ option is that the sum assured gets reinstated immediately and the policy holder does not have to wait till the entire sum assured is claimed.

 

 
Discounts The policyholder gets a discount of 7.5% on the premium if the policy is bought for two years. The policyholder gets a discount of 7.5% on the premium if the policy is bought for two years and a discount of 10% if the policy is taken for 3 years.
What is not covered/ Limitations – The restore benefit cannot be used for the same condition/illness for which the sum assured had been used earlier.– There is a waiting period of 3 years for pre-existing diseases to get covered and 2 years for specific conditions like hernia and joint replacement surgeries.– Pregnancy, Dental Treatment, Congenital diseases, Cosmetic surgery, Mental disorders and AIDS and related diseases are not covered.

– Hospitalization due to nuclear attacks, wars, radiation, dug and alcohol abuse is not covered.

 

 – There is a cap on the room rent.- Pre-existing illnesses are not covered.- Treatment due to pregnancy, dog and alcohol abuse, infertility, wars, strikes, nuclear accidents, attempted suicide and AIDS is not covered.
Comments/Conclusion – The pre and post hospitalization coverage is exhaustive.– The multiplier bonus is also attractive compared to Religare Care.– But the premium is higher.

– From a first glance, the ‘recharge’ option looks better than Optima Restore’s ‘restore’ option.

– This is a good option for health insurance seekers if multiplier bonus, pre-existing illness coverage and pre and post hospitalization coverage are important features to consider.

 – Religare is relatively new in the insurance sector. There is not much data on service and claim settlement ratio.- The recharge option is better than the restore option as the sum assured is reinstated the moment a claim is settled.- Premium is lesser and sum assured can go up to Rs. 60,00,000.

– It is a good policy to buy if the features suit your needs

Read: Review of Apollo Munich Optima Restore

We would like to know which health insurance plan do you have and your reasons for selecting the one you have.

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