Money can Buy Happiness

Hemant Beniwal
-
12
Money can Buy Happiness

Money does make life easier and more comfortable. It allows us to fulfill our needs and wants. We can have a good happy life if we are financially comfortable. But how does it give us happiness? Is having money all we need to be happy? We all want to earn more money and when we get it, we feel happy. But as per new research, making money does not make one happy but how one spends it is the key to happiness.  People are happy spending on experiences, things bought and even spending on others. Many people feel that even after becoming rich or having a lot of wealth, they are not content in life and seem to be less happier than before when they were not well-off. It could be because they are not spending it the right way.

Money can Buy Happiness

5 ways to spend money and maximize happiness –

Spend on experiences

The book ‘Happy Money: The Science of Smarter Spending’ offers interesting insights into happiness and spending money. Based on research, it says that people are happier when they spend on experiences they love be it travelling or on a dinner with friends rather than buying the new big screen TV or smartphone. People look forward more to going for a vacation with friends rather than buying a material thing. The vacation also gives you good memories that you can cherish. You are not going to have too many cherished memories when you buy a diamond necklace. Experiences need not be based on spending alone. For example, Evan Spiegel the CEO of Snapchat got an offer from Facebook to sell Snapchat for $3 billion dollars to Facebook. He declined it even though the money was really good. He denied it because he was already wealthy and did not need more money. Running the technology company and using his money for that was a more important pursuit for him.

Give, Give, Give

People feel good when they give money for a good cause that is close to their heart. It is good to donate to charities, orphanages or other causes that help mankind. People across countries and income levels feel healthier and wealthier when they spend money on others.  You will feel good when you see your money being used to help others who are in need.

Splurge on smaller pleasures than one big bang purchase

If you buy the latest luxury car, you will feel happy but that is only for a short while. Instead if you use the money to make smaller indulgent purchases like a spa visit, stay at a luxury resort and going for dinner with family in a high end restaurant, you will feel more happy and feel good for a longer time. It is also important to hold back. You know you can treat yourself to gourmet chocolates and pastries everyday but having them every day will diminish their value to you. Instead having them once in a way will make them more special and you will feel happy when you are indulging in them. 

Spend to have more time for yourself

Do you spend a lot of time commuting? Are you busy the whole day doing chores like driving your kids to school or cooking and cleaning such that you have no time to spend quality time with your spouse, parents or children and feel guilty? If that is the case, you should hire some help or take an alternate way for commuting that maybe expensive but leaves you less stressed and gives you more time in your hands. You may buy a home closer to your workplace (or rent) even if you can afford a smaller one but it will give more time in your hands. If you spend money to keep yourself in a healthy frame of mind and be connected with family, you will be happier.

Invest in yourself

You will be more content and happy if you use money to develop yourself as a person. You can improve your health by joining a fitness program or having healthy food or organic foods. These cost money but you can afford it and as the saying goes -‘ Health is Wealth’. You can learn new skills like learning new languages or musical instrument or a dance form. If you are working, you can invest money to upgrade your skills or getting a diploma or degree in a subject that will help career progression. As a businessman, you can invest in attending seminars, conferences, travelling to potential markets to assess profitability. All these things cost money and using money to do any of these things will make you happy.

If you really want to buy yourself a more fulfilling life, it’s not how much money you earn that matters, but how you spend it. Of course you should ensure that you are financially secure, have no debts or debts that you can manage and then spend to be happy and have a more fulfilling life.

I am too Young to Plan my Retirement is a Myth

Hemant Beniwal
-
4
I am too Young to Plan my Retirement is a Myth

Have you thought about your retirement? Are you thinking that you are too young to think about  retirement? Let us take an example –

Let us take your monthly expenses are Rs. 25000 per month and assume that you will retire about 30 years from now.  Assuming an annual inflation rate of 6% (you must have said ONLY 6%) and a similar lifestyle, you will need about Rs. 1,43,000 per month (Howz that!! 6 times) post retirement in the year you retire. It will only increase from there due to inflation. If you think, you will not have a similar lifestyle when you are retired, let us assume that you will incur 80% of the expenses today. Even then you will need about Rs. 1,14,000 per month in the year of retirement. You will not be earning so much then and therefore need to plan your investments such that they allow you to afford the expenses.

 

I am too Young to Plan my Retirement is a Myth

Must Read – What To Do After Retirement in India

It is important to have post retirement plan when you are young and have time on your side. Many of us just contribute to PPF and EPF and think that is enough to save for the future because we are not aware of how much money we will need when we retire. Life Expectancy in India is growing and retirement phase of a person is generally long and it should be provided for.  If you start 5 years later, you will need to save even more as you have lost the opportunity of power of compounding. Hope this example removes the illusion that you are too young to think about retirement. Check this Economic Times recent cutting…

Check – Retirement Planning Guide

too young to plan retirement

I am too Young to Plan my Retirement is a Myth Click to Tweet

There are some myths around retirement. Let us see if they hold true.

I am too young to plan for retirement –

It is important to start planning for retirement as early as possible. It means you need to save less to build the same corpus as you would need 5 years later. Let us extend the example mentioned above –

Age when retirement planning started 25 Years 30 Years
Retirement Age 55 55
Monthly expenses Rs. 25000 Rs. 25000
Inflation Rate p.a. 6.00% 6.00%
Annuity Rate p.a. and Rate of Returns on Investment p.a. 6% and 6% 6% and 6%
Total amount required Rs. 5,16,91,421 Rs. 3,86,26,837
Amount to be invested yearly Rs. 2,85,677 Rs. 3,57,055

The corpus required will be lesser 5 years down the line but to reach that amount, you will need to invest much more than if you had started earlier. (you can also start with a smaller amount & keep increasing amount with increase in your income)

Read – Is Rs 1 Crore enough to retire?

I will not spend as much as I am spending now –

It is true that some lifestyle expenses may be reduced but you cannot assume that the monthly outflow will be less. You might take up new activities and hobbies post retirement. You will have more medical expenses as you are growing older. There will be expenses related to children’s education, children’s marriage etc. The expenses will be equal, more or only slightly lesser which means you have to start thinking of income and wealth for retirement years seriously from the beginning.

Read – 11 ways to curtail impulsive spending

I will fund the entire education of my children –

It is a very responsible and loving idea that you fund your children’s education. But good education is very expensive and you cannot blindly put all your savings in that goal. There are different aspects of life that needs to be taken care of with finances. You should have a target amount that you will spend on for each goal and work towards it. If you spend all your money on the children, tomorrow you will be dependent on them for finances which is not a great place to be in.

Read – Retirement Planning Vs Child Future Planning

I will inherit wealth which will take care of my retirement needs-

You assume you will inherit some money and wealth and calculate the amount and sit happily. You spend all your earning and do not plan for retirement. But this is foolhardy. If the inheritance does not come to you as planned or loses value, you will not have anything to fall back on. The inheritance can also be used for generating more wealth instead of using it for retirement expenses.

Read – 10 big lies that skew retirement planning

I will invest only in a particular asset class –

Many people think investing in real estate is enough to fund for retirement. Some people are extremely defensive and will invest only in PPF or Fixed deposits. Some people think since equities generate the best returns, they can put all the money in equities. You cannot put all your eggs in one basket. If the timing of buying the property or buying and selling shares is wrong, you could be in a loss and lose your hard earned money. Your retirement plans will also go awry. Therefore you should invest in different asset classes which leads to higher returns and a diversified portfolio which reduces investment risks.

Read – Asset Allocation – formula for investment success

I have a lot of money in my bank account –

You might be prudent with your cash and not a spendthrift. This is a great habit to have but not enough to fund your retirement. If your money is lying idle in the savings bank account, it loses value every year due to inflation. It is important to invest in a diversified portfolio of assets that includes shares, Mutual Funds, PPF, Real Estate and Gold instead of keeping all the money in the bank.

Many people follow these myths and lose out on time and strategy to have a proper retirement plan in place. It is important to remove these myths from our minds and work towards a proper retirement plan so that the sunset years will be stress-free and enjoyable.

Aviva Critical Illness Cover – Health Secure – Review

Hemant Beniwal
-
8
Aviva Critical Illness Cover – Health Secure – Review

Critical Illness (CI) policies are designed to cover certain critical illnesses, which are normally costly to treat. While different policies cover a wide range of illnesses, the most common are Cancer, Heart Stroke and Paralysis, Coronary Artery Bypass surgery, Major organ transplant (heart, lung, liver, and pancreas) and Kidney failure.

The major difference between a mediclaim and a CI policy is that mediclaim will only settle your hospital bills but in case of a CI policy, you receive a lump sum straight away, which can be used for treatment and compensate you for the loss of income to some extent. So in mediclaim, when an illness is diagnosed, you are expected to get hospitalize and get treatment, but in the case of CI insurance, the sum assured is paid the moment the illness is diagnosed (typically within 30 to 60 days). You are free to get treated anywhere and spend the money as you like. Mediclaim is like reimbursement whereas CI is incentivizing. For example, suppose Mr. Kumar buys a Critical Illness policy of a sum insured of Rs 10 lakh and contracts any of the major illnesses specified in the policy. If he informs his insurer he will be paid the entire sum insured of Rs 10 lakh. He can utilize this lump sum money to cover any expense as per his discretion and requirement.

Aviva Critical Illness Cover – Health Secure - Review

Aviva Health Secure Plan Review

Critical illness plans offer a much higher coverage amount and the illnesses covered under one policy may differ from another. Aviva Health Secure is one such critical insurance policy with higher coverage at reasonable price. Let us look review this plan–

Aviva Critical Illness Cover – Health Secure - Review Click to Tweet

Aviva Critical Illness Cover Features

  1. It is an online health insurance plan.
  2. It is a critical health insurance plan. It covers 12 critical illnesses and pays you a lump sum amount in case you are diagnosed with any of them. This money can be used to pay for the medical treatment, post hospitalization care or even daily expenses as per your wish. This is a useful feature as when you are ill, your earning capacity might also be affected. The critical illnesses include first heart attack, certain caners, kidney failure, bone marrow transplant, open heart replacement, motor neurone disease, multiple scelorosis, stroke, permanent paralysis, benign brain tumour, open chest CABG and coma
  3. The policy term can be from 10 years- 30 years.
  4. The sum assured can be anything between Rs. 5,00,000 and Rs.50,00,000.
  5. On death or maturity of the plan, nothing is payable to you as it purely covers health insurance.

Read: How Critical is Critical Illness Insurance

Eligibility

  • It covers individuals from the age of 18 years 55 years and the maturity age is from 28 years -65 years.

What makes Aviva health secure policy Unique?

  1. It aims to supplement your normal health insurance plan in case that one is not sufficient to cover the medical cost or your need.
  2. The claim can be made at the first diagnosis of any critical illness listed as long as the critical illness has been diagnosed after 90 days of the policy commencement date or the date of renewal of policy, whichever is valid.
  3. You can get the lump sum amount provided you have survived at least 30 days after the diagnosis of the critical illness.

There is additional benefit if

– Sum Assured>=Rs.10 lacs and < Rs.25 Lacs, Rebate is 0.90 per Rs. 1000 of sum assured

and

– Sum Assured >=Rs.25 lacs, the rebate given is Rs.1.50 per 1000 SA

Other Benefits and Features of Aviva Critical Illness Cover

  • Premium payment frequency is either yearly or half yearly.
  • Premium paid is eligible for tax benefits under section 80D of the Income Tax act.

Cost of medical tests and special tests done at the time of purchase of policy will be taken care of by the insurance company.

Read – Super Top Up Plans – most economical way to increase health cover

Exclusions – Aviva Health Secure

The policy does not cover –

  1. Any critical illness apart from the 12 mentioned in the cover.
  2. Disease due to alcohol or drug abuse.
  3. Failure to seek medical advice.
  4. War, Nuclear accidents, Riots, Social disorder and participation in violent acts.
  5. Injury due to participation in risky sporting activities AIDS, congenital diseases, mental disorders, obesity and cosmetic surgery are not covered
  6. Pregnancy is not covered.
  7. Medical expenses incurred due to substance abuse, war and unproven treatment methods are excluded.
  8. Any condition for which insured had diagnosis, medical treatment or medical advice within 48 months prior to commencement or reinstatement of policy.

* Please check with the company for complete details before buying the policy.

The Aviva Health Secure plan is a good supplement to the existing health cover. There are many similar plans available in the market. For example the ICICI Prudential Crisis Cover that covers 35 illness. Bajaj Allianz Critical Illness plan offers a woman specific critical illness policy that covers breast cancer, ovarian cancer and cervical cancer. You should consider the expenses of the various illnesses covered and you should select the one that is most suitable for you. Do let us know your views on critical illness plans. 

It is common…Each person is different from the other

Hemant Beniwal
-
2
It is common…Each person is different from the other

Robert Zend, poet and fiction author said, “People have one thing in common; they are all different.” If you look around, you will find truth in the statement. People are different in the way they think, behave and have different habits and opinions from one another. For example, one person might like to read books the whole day and the other can fall asleep trying to read a book in a matter of few minutes. People think differently and therefore the stock market has its ups and downs. One person might be thinking of selling a particular share at a certain and another might want to buy the same one. ABC view could be that there is more potential for that share price to rise higher – CBA thinks exact opposite. (& both of them think they are smart – that’s common)

It is common...Each person is different from the other

Read – Your CA is not a Financial Planner/Advisor

As each person is different, the financial planning for each person would also be different. There is no one common template that everyone can use. Let us look at how people are different from each other in the financial world.

It is common...Each person is different from the other Click to Tweet

People who set financial goals versus People with no set financial goals

You can be successful in life only if you know what you want to achieve and then take action to achieve set targets and measure performance against set goals. Similarly in your financial life, you have to set short term and long term goals. You will then work towards them. If you do not set money goals, you will have no idea on how much you are saving and spending. You will not take any concrete steps to make your wealth grow. If you do not have a clear idea of what to do, you will be struggling with money issues.

Infographics – Maslow’s hierarchy of needs & your financial goals

Conservative Investors versus Aggressive Investors

There are different types of investors. Some like to take more risks with their money. Some are more inclined towards preserving existing wealth. You cannot copy anyone else’s investment style as each person is different and in a different stage in life. You can measure your risk profile and decide your personal investment strategy along with the financial planner. If you are younger, you can have a more aggressive investment strategy than when you are in your late 40s. You should be comfortable with the investment strategy else it will give you sleepless nights.

Read – Behavioral Finance – classifying investors

People investing based on research and People investing on tips

Do you invest based on your research or educated recommendations of your financial planner? Are you a person who follows market tips from friends, bloggers and neighbours? Each person is different. It is best to invest based on research and analysis rather than blindly following tips though sometimes you might make money on tips but it is leaving too much to chance.

Infographics – Financial Planning

Savers versus Spendthrifts

Some like saving money and some people are spenders. It is good to save money but you cannot live like a miser and not enjoy life. At the same time spending all your salary in the first week of the month is foolhardy. Some people save a decent amount and think they are doing a good job. But inflation eats into the value of your money. People who invest what they save will have a better financial future.

Must Read – “I need it now” syndrome

Different types of Financial Planners/Advisors

There are many people who are supposedly financial planners. But all are not planners. Some do not have comprehensive knowledge on all aspects of planning. Another financial planner might just invest your money in a few products in the market like mutual funds and shares and leave it at that which is not enough. Another set of financial planners will assess your wealth, your current situation, your goals and create a diversified portfolio of many investment products. They will be in constant touch with you, revisit the plan and the portfolio regularly and make required changes. Which financial planner would you choose?

Can you classify yourself into one of the above mentioned categories? It is important for you know your characteristics, strengths and weaknesses. You should plan your finances and your life on the basis of this. You should not blindly copy the planning and strategy that works for one person just because it worked for that person as the same might not work for you.

Things you should know about affordable Online WILL writing services

Hemant Beniwal
-
6
Things you should know about affordable Online WILL writing services

When you die without a WILL there are many hurdles which your  family had to go through for claiming the legacy. Worse if any dispute arises then they can be deprived of those assets till the disputes are resolved. Many a times such disputes drag for years and can be disastrous for the family. To avoid all such situation writing a Will is very effective. Through it you lay down your wishes as to who should get what from your legacy. There are many ways through which you can write an effective will.

Things you should know about affordable Online WILL writing services

Having said that for writing a WILL services of experts are required. Most lawyers, in general,  charge somewhere between Rs 10000- Rs 25000 for writing a Will. For people who don’t have much assets or less of complication find these cost to be too high.  This is one of the primary reason why many do not think of writing a Will or even if they write they miss out on its effectiveness.

If you want to “Do it Yourself” – Read:

Step by Step guide to writing a WILL & why its so important

Affordable Online WILL services is aiming to bridge this gap. It initially started with a cost of Rs 10000 which has come down to as low as Rs 4000. HDFC Securities and the newly launched ezeewill.com by NSDL in alliance with Warmond Trustees are the existing players.This service mainly caters to people  who cannot afford those higher cost of lawyers. But it’s wiser to understand the nitty-gritties of any low cost services and how it fares in the competition:

What is Online WILL?

As the name suggest it’s a service where you provide all information online through the company website. The information contain details of your assets, liabilities, beneficiaries, executors and your wish on the distribution. Once you provide the information the company sends you the Will through one of the various means it has. Thus there is hardly any human intervention and the entire process is online.

Things you should know about affordable Online WILL writing services Click to Tweet

How does Online WILL service works?

To understand the Process of online Will service we will understand ezeewill.com. Whatever information is provided here is being taken from the company website. First you have to register on the company website. Once you get yourself registered you have to login with your credentials. On the company provided form you have to provide details viz your assets, liabilities, beneficiaries and how your wish to distribute your assets among them. As you have filled this information and aiming to submit it you have to make the payment of their services for which various options are given. When payment is being made –  you can submit the information, the company sends backs a draft of the Will as per given information. This draft is for your review and any correction or changes to be made has to be notified to the company. Once you have reviewed the draft and notified any changes the company send the final copy through email or courier. The company has set a timeline for the entire service which is one month from registration. You also have the benefit of submitting the information not in one go but as per your comfort. Whatever information you are submitting you can review and make corrections if required.

Other Benefits of Online WILL

There are host of other benefits which the company provides in online Will service. If you wish to rework your will or make changes after delivering the final copy it can be done but with an additional cost of Rs 250 –Rs 1000. If you need a consultant to advise you, it is provided by the company and you have to pay an additional cost for it. Similarly there will be  cost for any additional services you wish to avail.

Importance of writing a WILL

Who Should Avail Online Will writing service?

No doubt online WILL services will give many an option to create their Will at a fairly lower cost. But it’s not that it will suit everyone. People who have limited assets and a simple Will need to be written will find it very useful. But if you have large number of assets or business interest or complexities in distributing your wealth then you will need a good guidance from experts. In such instances paying the fees to an expert will be wiser.

Online Will is cost effective. If you have been delaying your Will writing due to the cost factor then this provides you an opportunity to plan for it now. But do remember that such services are structured as per their cost and so its wiser to understand your requirement to identify the actual total cost you will incur.

Do you have a WILL??

Apollo Optima Super Top Up Review – Good Plan for Employees

Hemant Beniwal
-
8
Apollo Optima Super Top Up Review – Good Plan for Employees

Most of us will have a regular health insurance plan that covers medical expenses up to a certain amount. But with rising medical costs, the sum assured seems less after a few years especially for critical illnesses/accidents. Purchasing another health insurance plan or increasing the sum assured of the existing policy is not the only ways to increase the health cover. They are not cost effective many times. So what’s the solution?

Apollo Optima Super Top Up Review – Good Plan for Employees

Top Up Vs Super Top Up

You can purchase top up and super top up health plans to increase your existing cover. Top up plans are insurance policies that give cover above a certain threshold limit. For example, if you have a top up plan with sum assured of Rs. 5,00,000 and the limit as  Rs. 2,00,000, you will be able to claim if your expenses go above Rs.2,00,000. So if you spend Rs. 2,00,000, you cannot make a claim. If you spend Rs. 7,00,000 in one issue, you can make a claim for Rs. 5,00,000 as your medical expenses are above the defined limit.

Super top up plans are a variation of top-up plans. All the medical bills for the year are considered. If the sum of all bills is above the threshold limit, you can make a claim for the amount above the threshold limit.

Apollo Optima Super Top Up Review – Good Plan for Employees Click to Tweet

Apollo Munich Optima Super Review

Apollo Munich has launched a new insurance plan called Apollo Optima Super. This plan is super top up plan with a high deductible. The deductible considers all the claims made during the year. It also has the facility of almost zero deductible. Let us look at all the features of the plan –

Features

  1. The Optima Super is a top-up plan with a high deductible. It is available for a sum assured of Rs. 5 lakh, Rs. 7 lakh and Rs. 10 lakh. There are various deductible options available for each of these ranging from Rs. 1 lakh to Rs. 10 lakh.
  2. Individual plans and family floater plans are available. There are discounts on premiums on family floater plans.

Eligibility

  1. It covers individuals from the age of 91 days to 65 years though there is no maximum age limit on renewals.
  2. In case of a family floater plan, a maximum of 2 adults and 2 children can be covered and the age of the eldest person is used for premium calculation.
  3. If the parents have a policy, dependent children from the age of 91 days to 5 years can also be covered.
  4. In an individual policy, a maximum of 6 people can be added to the policy.

Read: Best Medical Insurance for Parents in India

Apollo Optima Super Top Up for corporate employees

What makes the policy Unique & beneficial for employees who already have insurance from employer? The plan can be converted to a normal health plan with almost zero deductible between the ages of 55 and 60 if the customer wishes. This can be done without any medical tests. This is helpful if a company has taken this insurance for employees as when the employees are nearing retirement, it can be converted to a normal health plan.

Other Benefits and Features of Apollo Optima Super Top Up Review

  1. The policy offers a discount on the premium for the second year if a two year policy is taken.
  2. Apollo Munich offers counselling for health related issues for customers who have this plan.
  3. There is the facility of cashless hospitalisation in about 4000 hospitals.
  4. Pre hospitalisation up to 60 days prior to hospitalisation and post hospitalisation up to 90 days post hospitalisation are covered.
  5. 144 day care surgeries, organ transplant and ambulance service up to Rs. 2000 are covered.
  6. It is a portable insurance policy with tax benefits under Section 80D of the Income Tax act.

Read: Apollo Munich Optima Restore Review

Exclusions

The policy does not cover –

  1. Treatments within 30 days of buying the policy unless it is an accident
  2. AIDS, congenital diseases, mental disorders, obesity and cosmetic surgery are not covered
  3. Pregnancy is not covered.
  4. Medical expenses incurred due to substance abuse, war and unproven treatment methods are excluded.

Pre-existing conditions will be covered only after 4 years of buying the policy though some conditions like cataract, joint replacement surgery, hernia are covered after a 2-year waiting period.

Let us look at the premium payable for some options of the policy.

For an individual with a sum assured of Rs. 5,00,000, the premium payable for various deductibles are –

Individual Deductible 2 lakhs (Rs.) Deductible 5 lakhs (Rs.)
18-35 years 2,055 1,620
36-45 3,055 2,235

* Please check with the company for exact premium amounts.

For a family with a sum assured of Rs. 5,00,000, the premium payable for various deductibles are –

Family Type Age of Oldest Member (Years) Deductible of Rs. 2 lakhs (Rs.) Deductible of Rs.  5 lakhs (Rs.)
Family+1 child 35 4,315 3,400
Family + 1 child 45 5,915 4,385
Family + 2 children 35 4,935 3,885
Family + 2 children 45 6,535 4,870

* Please check with the company for exact premium amounts.

The premium for a normal insurance plan of Rs. 5,00,000 for a 35 year old individual is above Rs. 5000. If he/ she feel that this coverage is not adequate and goes to buy another plan or increase coverage, it will be more expensive. For example, if he/ she buys another insurance policy for Rs.3,00,000, additional insurance premium of Rs. 4,000 and above will have to be paid which turns out to be more expensive.

Should you buy Apollo Optima Super Top Up Plan?

The Apollo Optima Super top up Plan is cost effective and provides the unique feature of getting converted to a normal health plan during a certain phase. If you are looking to increase your health coverage, it is a good plan to consider. If you have a health cover from your employer only, this is a good plan to consider as it has the option to convert to a normal health plan.

* Please check with the company for complete details before buying the policy.

Do you have a top-up or super top up health insurance plan? Let us know which one you have and what your view on it is.

Read this before you take Education Loan & comparison

Hemant Beniwal
-
3
Read this before you take Education Loan & comparison

30-35 years back, my uncle got selected in IIM Ahmadabad but unfortunately due to financial constraint he was not able to join. Then he dropped plan of higher studies & joined some PSU at junior level. Few years back his son got selected in good US University but he was not in a position to fund that through his savings.

Read this before you take Education Loan & comparison

But things have changed

Many people want to study further but are unable to do so because of the fees. Higher education and professional degrees are becoming very expensive. Many banks and financial institutions therefore provide education loans for this purpose. The best aspect about education loans is that most institutions allow you to start the repayment instalments after you complete the course for which you have taken the loan or start working.

Read this before you take Education Loan & comparison Click to Tweet

My uncle funded his son’s education through loan – now my cousin is working & comfortably repaying the loan.

Compare Education Loan

You need to compare the loans available in the market on many factors before you decide the best one for you. Let us compare some popular education loans –

Features Credila (HDFC Bank) IDBI Bank Punjab National Bank State Bank of India
Details – The borrower will get an Indian rupee denominated loan deposited in any bank account in India.

 

– It covers tuition money, living expenses, purchase of equipment for studies and fare equivalent to one economy class return ticket if it is a different country of study

 – There are different loans available depending on whether it is a vocational/non-vocational or whether the applicant falls under the financial inclusion program or is physically challenged.

 

– Loans for Executive programs are also available. It covers tuition expenses, purchase of equipment and books for studies, travel expenses if education is to be had abroad and insurance premium if insurance is mandatory.

 – Loans are available for graduation, post graduation courses, vocational courses and part-time job oriented courses for Indian nationals.

 

– It covers fees, purchase of equipment and books, travel expenses, study tour costs and project expenses.

 

– Margin money is required for loan amount greater than Rs. 4,00,000 up to the extent of 5% for studies in India and 15% for studies abroad.

 – Different types of loans are available depending graduation and post graduation courses, diploma courses and vocational training.

 

– It covers fees, purchase of equipment and books, travel expenses, study tour costs, project expenses and the cost of a two-wheeler up to Rs. 50,0000

 

– Margin money is required for loan amount greater than Rs. 4,00,000 up to the extent of 5% for studies in India and 15% for studies abroad.

 

– There is a 1% discount on the loan if interest is paid regularly starting from the moratorium period (the period when you are exempt from repayment.)

 
Rate of Interest A floating rate of 14.25% A rate from 11.25%-13.75% depending on type of loan. A rate from 11%-14.25% depending on loan amount. A rate from 11.75%-13.75% depending on loan amount.
Collateral House, Flat, Agricultural land or fixed deposit can be used as collateral – Collateral is not required for a loan amount < Rs. 4,00,000. 

 

– Third party guarantee is required for loan amount from Rs. 4,00,000 to Rs. 7,50,000.

 

– Above that, collateral in the way of land, Bonds, bank deposit etc. is required.

 – Collateral is not required for a loan amount < Rs. 4,00,000.

 

– Third party guarantee is required for loan amount from Rs. 4,00,000 to Rs. 7,50,000.

 

– Above that, collateral in the way of land, Bonds, bank deposit etc. is required.

 – Collateral is not required for a loan amount < Rs. 4,00,000.

 

– Third party guarantee is required for loan amount from Rs. 4,00,000 to Rs. 7,50,000.

 

– Above that, collateral in the way of land, Bonds, bank deposit etc. is required.
Loan Repayment Repayment instalments will begin as soon as disbursement of loan has begun. Borrower needs to pay during the tenure of the course and post that up to 1 year or 6 months after getting a job whichever is earlier. Borrower needs to pay during the tenure of the course and post that up to 1 year or 6 months after getting a job whichever is earlier. Repayment will have to begin one year after completion of course or 6 months after getting a job, whichever is earlier.
Processing Fees Rs. 5618 (For a Loan of Rs. 5,00,000) No processing fees. There are some charges levied as upfront fees for study abroad which is refundable and documentation charges are levied. There is no processing fees or upfront charges. A refundable deposit of Rs.5000 will be charged for loans for education abroad.
Minimum and Maximum Amount Rs, 1,00,000 to any amount deemed suitable by Credila. – For studies in India, the maximum loan disbursed is Rs. 10,00,000 and for studies in abroad, the maximum loan amount is Rs. 20,00,000.

 

– Students availing loan for education in premier institutions can get higher amounts.

 For studies in India, the maximum loan disbursed is Rs. 10,00,000 and for studies in abroad, the maximum loan amount is Rs. 20,00,000 For studies in India, the maximum loan disbursed is Rs. 10,00,000 and for studies in abroad, the maximum loan amount is Rs. 30,00,000

There are certain aspects that you need to remember while taking an education loan –

  1. A co-applicant is compulsory. It can be parents, siblings or spouse and parents-in-law.
  2. Default in payment will affect the credit score of the student on whose behalf the loan is taken and the co-applicant.
  3. Most colleges/universities abroad ask for insurance. Therefore you should check if the loan covers that.
  4. You can avail of tax benefits under section 80-E of Income Tax Act.
  5. Public sector banks give a discount of 0.25% for female students.
  6. The loan may not cover the entire expense of education abroad and so the student has to look at other avenues like savings, scholarship or part time job
  7. If the student remains abroad even after the course is over, the bank will expect the co-applicant to repay the loan amount.
  8. You should be ready with a backup plan in case the student does not get regular income even 1 year after the course.

There are more banks and financial institutions (apart from the ones mentioned here) that provide education loans that help people pursue their dreams of more education and higher education. Many have similar features to the ones mentioned above. You should compare the loans of the various criteria mentioned above and select the most appropriate one. Have you taken an education loan? Let us know your experience in using loans for education.

What information to disclose & hide at office

Hemant Beniwal
-
12
What information to disclose & hide at office

A very strange thing happened recently. I was attached as a financial planner to Mr. X for around a year. He called me and said that he is out of job and wanted to discuss few things. I fixed up a time with him. What surprised me was the reason he was forced to part ways with his employer that he actually led a group of employees, to disclose their CTC or in other words the salary they get. There was an argument in the office that management was paying less to women and middle-age employees and to prove that he volunteered that everyone should disclose their packages. He was spotted by management as the leader of this group and he was asked to leave.

What information to disclose & hide at office

Image courtesy of Idea go at FreeDigitalPhotos.net

Question– Is X wrong in discussing his salary with his colleagues?

Answer– Although law of country does not restrict this, but if the Terms of Employment that you have signed (and sometime if you have not signed, but culturally if it’s a set norm) with your employer make you withhold this information, one should not reveal it.

What information to disclose & hide at office Click to Tweet

What else one should not reveal? Apart from the general nature or behavioral things like your ugly past (if you have one), your gravest mistake (highlighting that you are prone to committing blunders), your boozing habits (the out of control ones), your stud personality (date n hate style of being in relationship), marriage woes (Hitler in-laws or divorce inclined spouse), crush over the Photostat girl etc etc … there are some things of financial nature also, that you should not tell your colleagues. These are:

  • Salary: like the example above, salary is not to be discussed in office. Apart from salary the year end incentives, bonuses, esops or raise – even in percentage terms should not be discussed. One must confirm the organizational policy and culture followed by the management. I would also suggest that you should not boast your family income or show off your spouse income.
  • Debt Obligations: Everyone has a house loan and a car loan. Till this it’s ok to share, but if you have loans above this limit, it is better not to disclose. In case you are debt ridden by responsibility or by ignorance, it’s better not to wash dirty things in open. I remember a colleague (when I was in job) who took a huge sum of personal loan during his marriage. Half the people in the office gossiped that his parents do not support him (yes it’s a curse in India- parents are bound to support although kids may choose to do otherwise, and if they do so the responsibility again lies with parents as society attributes this as fault in upbringing).
  • Any Sob Story of money loss: Ok you were in credit card debt and collections departments landed at your office or residence or you lost 80% of your portfolio in 2008 market crash, but why you have to tell your own story to teach juniors to be prudent in life. These stories about you taking a bad decision are actually destroying your impression. Yes they may be true and you might have a positive end with these stories, but office is not a place to show heroic side of you over issues that everyone faces.
  • Any Scheme to Trap: Surveys have proved that majority investments decision, the information starts from office. So offices or colleagues are bound to discuss investment opportunities. It is better to refrain from unqualified advices. In case you have a financial planner and you have already on track with a financial plan, you have no reason to waste time. You can assume yourself in safe and trustable hands. Also if you are no expert please avoid advocating property investments, equity tips, multi-level schemes or holiday memberships.

Dear reader, office conduct is a big subject and depends on person to person and organizational culture. But few measures can save lot of energy waste. And as always recommended, financial planning is way to financial freedom. Even your smartest boss can’t guarantee that. Please share you views & experience on this.  …& you can share this article in your office 🙂

Understanding Financial Infidelity – Symptoms & What to do…

Hemant Beniwal
-
4
Understanding Financial Infidelity – Symptoms & What to do…

Wikipedia defines, “Financial Infidelity is the secretive act of spending money, possessing credit and credit cards, holding secret accounts or stashes of money, borrowing money, or otherwise incurring debt unknown to one’s spouse, partner, or significant other.” In Indian context compulsive shopping, wining or dining with undisclosed friend, buying hidden property to settle extra-marital relationships or losing money in stocks or by way of gambling etc are also reasons of financial infidelity.

Financial Infidelity

Image courtesy of jesadaphorn at FreeDigitalPhotos.net

Few Facts

Adding to the monetary strain commonly associated with financial infidelity in a relationship, there is a subsequent loss of intimacy and trust in the relationship. One of the recent survey reports that 33% couple who had combined finances have committed infidelity. Financial infidelity appears to be on the rise, with a 2005 study showing that 30% of respondents had lied about financial information and 25% had withheld information, whereas a 2008 study showed that half the respondents had committed some form of financial infidelity. CNBC (US) “Studies show that financial infidelity occurs evenly across all income levels and both sexes.”

Understanding Financial Infidelity – Symptoms & What to do... Click to Tweet

Huffington post says,

“1 In 3 People Admit To Lying About This in a Relationship”

“The Money Issue that Drags down One in 10 Marriages”

Why I am writing this?

It may seem like a work of fiction, but a one of my friend is planning to invest in a ready to shift condo. I knew his family would lack space due to its size, so of further enquiry he revealed his real motive. He wanted to use this as a bachelor pad, where he can relax with friends, catchup old times over drinks and have isolated weekends and not the family ones.

Reason may be strange but a property investment is a huge outflow. May be you purchase it all cash or over loan. Important thing is that the decision to invest has been made without consulting from the stakeholders. This can be very dangerous situation in our country as it may lead to separations, which is again a financial drain (thanks to one sided laws- will not debate this one). Although divorce come at later stage or as a result of other issues, but trust is lost and if two souls living under the same roof but not trusting each other, it is called landing in HELL.

Symptoms of financial infidelity

  • Spending or debt: Your partner will show variation is his spending habits. It can be both ways that one can go for purchases beyond means or he/she may try to cut some usual expenses. Your partner can go on loan spree also. If you notice that partner has started making loan enquiry from financial institutions or relatives without much discussing at home, it is a sign.
  • Topic avoidance: Normally the spouse avoids talking about finances or becomes defensive or angry around the topic. He/she will make you feel that he is correct in finance and would try to show case a normal picture.
  • Hiding Purchases: The spouse would hide a big purchase. Than he may react normally to cool off his stand that he purchased something without talking to you first.
  • Home auditing: You may find bills or receipts for items you didn’t know about. It could be utility bills not installed in your home or may be invoices from a share broker.
  • Credit enquiries: You may discover new enquiries of credit opening in your spouse’s or in worst condition in your name. You may see an upside down change in your monthly account balances or house budget.
  • Acting fishy: The change can be behavioral also. Your spouse can hide or prevents you from seeing bills and bank statements which earlier your were seeing normally. Watch out for abnormal financial behavior.

What to do?

Tackling financial infidelity is more difficult than discovering it. In western countries the specialists and counselors are available, but in our country everyone is an advisor/opinion holder so serious counselling is ruled out. Hence it comes on the two individuals, among whom one is plaintiff and other the guilty one, to come on a meaningful solution and save the relationship.

4 Step Process

I checked lot of readings on this subject and all had just one solution packed in different words. And this was a 4 step process that the ailing couple need to follow. These four steps are:

  • Confront the issue: denial is not the scenario from where one can look at the solution. Have a serious conversation about your expenses, budget and variations. Be clear why infidelity has happened. Reassure that you and your spouse are in one direction for future plans and aspirations. A multi-focused team is not appreciated in financial planning.
  • Re-agree to a plan: determine the joint goals and compromises that now you have to make in your present finances. One of the major reason of financial infidelity is that one assumes that certain part of finances should be private. If one is adamant in thinking so than a mid-way needs to be chartered out for fulfilling the shared responsibilities.
  • Follow the plan: once you have given a fresh start, it is important that it’s followed in all spirits. Revision is important and in inception stage a monthly review should be followed and after some time the reviewing period can be increased. Symptoms as discussed earlier have to be watched and if you are getting red flags… confront it.
  • Emergency plan: What if the financial infidelity was due to marital woes or habit? What if one of the partners resorts to earlier means? Emergency plan should be made in consultation of your financial planner and he may assist you in understanding the damage involved in separation and other issues.

I admit that I have written on a very serious topic which in our country is termed as breaking-a-house. People avoid it knowingly till it is suffocating, but change in society, openness in financial relationships, joint goal planning and inclusions of females have made it important that negative aspects of a particular concepts are also explored. Hence this is not scare you but to caution you. Must Share your views…

Understanding Clubbing of Income & blunders people make

Hemant Beniwal
-
34
Understanding Clubbing of Income & blunders people make

Many times you transfer assets to a relative like parent or wife or buy assets for a relative especially non-earning family members in their name with your money. This is done either for emotional purposes, providing financial stability to the relative or to save some tax liability. In certain cases, when this asset earns income, you are liable to pay tax on it. This income is clubbed with your other sources of income. (Income Tax Section 60 to 64) Similarly if the asset incurs loss, the loss is also clubbed with your income to calculate your income tax.

clubbing of income India

Let us look at the situations that are considered as clubbing of income as per the Income Tax Act –

  1. You are allowed to transfer an asset to your spouse. If this asset earns income, it will be clubbed to your income while computing income tax and you are liable to pay it.
  2. You can transfer an asset to your child (own legitimate child/ adopted child). You are liable to pay tax on income accrued on this asset. If the parents are divorced, then the income is clubbed with the income of the parent who has custody of the minor child.
Understanding Clubbing of Income & blunders people make Click to Tweet
  1. If you transfer an asset to your son’s wife, and there is income earned, that amount is required to be clubbed with your income and you should pay tax on it.
  2. You can invest in assets in your spouse’s name. For example, you can buy shares or invest in Mutual funds in your spouse’s name. The income earned from these assets needs to be clubbed with your income while filing Tax Returns.
  3. If you transfer income to another person, this income will be included in your income and be computed for tax liability.
  4. If you have property in your name and convert it to HUF (Hindu Undivided Family) property, then income earned from this property is to be clubbed with your income for tax computation.
cpSource: www.ClearTax.in

Still looking for ways to save tax?

There are some other ways in which you can reduce your tax liability –

  • If you transfer an asset to your parents or siblings, the provision of clubbing income does not arise and you do not have tax liability on the income earned on this asset.
  • If you invest in instruments like PPF, life insurance for your spouse and/ or children, your income is eligible for tax deduction under Section 80 C and 80 D of Income Tax Act.
  • If you buy health insurance for your parents, you are eligible for tax deduction.
  • You can also invest in PPF and Senior Citizens’ Savings Scheme in your parents’ name. You will not be eligible for tax deduction but your money will earn tax-free interest.
  • You can gift money to your spouse, siblings or adult children who can invest in PPF. You will again not be eligible for tax deduction but your money will earn tax-free returns.
  • Gifts given before marriage to would-be spouse is not considered in clubbing of income.
  • Cross Gifts which means you give your brother’s children gifts and he gives your children gifts. Such transfer is also not included in the giver’s income. (this may be counted in tax evasion)

 If you would like to read this topic in detail – check this

Blunders people make: I have seen lot of people who invest in the name of spouse or kid but don’t show that in ITR – someday that may land them in tax scrutiny & penalties.

Have you considered clubbing your income provisions? Do ensure that you keep the above mentioned points in mind so that you do not break any laws of the Income Tax Act.

1...212223...44Page 22 of 44