Assess Your Financial Health With These Ratios

Hemant Beniwal
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11
Assess Your Financial Health With These Ratios

In school, one could make out how a student was performing in studies on the basis of grades. In the corporate world, your performance can be assessed by your promotions, salary rise among other things. Basic Health indicators are sugar level, pulse rate, blood pressure. How do you know whether you are doing well in your finances? You might be getting a good salary and leading a comfortable life. But does that mean you are financially fit. The price to earning ratio (PE) and dividend yield of a company are used to evaluate valuation of company. Similarly there are some ratios that can be used to assess your financial health –

Financial Health

Image courtesy of renjith krishnan at FreeDigitalPhotos.net

1. Liquidity Ratio (or emergency fund) – Liquidity ratio measures your ability to pay for expenses with cash in hand. It is calculated as –

                                       (Cash + Bank Balance)/ (Monthly Living Expenses)

Typically you should have cash/ bank balance to pay for living expenses of about 3-6 months depending on marriage status, home loan etc. You should check this ratio when you are planning to quit your job or taking a new job with a start-up where financial and career risks might be higher.

Assess Your Financial Health With These Ratios Click to Tweet

2. Savings to Income Ratio – This ratio compares amount invested and the total income earned per month.

                                    (Amount invested per month) /(Total Income per month)

Savings can be in the form of cash, bank balance, FDs, PPF, Shares, Mutual Funds, Bonds etc. Minimum 20%-30% of gross income should go towards savings on a monthly basis.

3. Debt Service Ratio – This ratio shows the ability of a person to pay the loan instalments on a regular basis. It is calculated as –                                      

                                              (All EMIs & other debt payments) / (Family Gross Monthly Income)

It shows how much percentage of your monthly income is used for servicing loans. You will have to manage your investments and expenses with the remaining amount. The lower this ratio the better your debt management skills. It is advised that debt servicing should not take up more than 40% of your income.

4. Solvency Ratio – This ratio compares a person’s total assets and total liabilities to find if the person has the ability to pay off his debts.

                                              (Financial Assets) / (Total Liabilities)

 The ideal ratio depends on age and income earning capacity of a person. You should have a debt of up to 50% of your financial assets & if its above 100%, you need help. It means you can pay off your debts if required and you have a cushion to fall back on if value of assets go down or you have to take more loan.

Must Read: Net Worth – How to calculate & why its so important 

When you are younger or have a bright career ahead with the potential to earn a lot of money in a short span of time, the debt taken can be larger compared to a time when you are nearing your retirement or the scope for earnings increase is limited. When you have to take a loan, you should have a look at this ratio before finalizing the loan.

The personal finance ratios help you to evaluate your financial position and take next steps. I have given a generalized target for the ratios. You should calculate your financial ratios, consider your personal, professional and financial situation and take measures to improve your financial health.

Have you calculated these ratios for yourself. What steps did you take after that?

You have a chance to become Freedom Fighter on this Independence Day

Hemant Beniwal
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9
You have a chance to become Freedom Fighter on this Independence Day

Happy Independence Day!!

I am not sure about you but when I was kid, I always dreamt that I would have participated in India’s Freedom Fight. But still we can do this through some other ways……. go ahead & read this… today you have a chance to do something for the country….

HID 

Subsidies are not always good for the economy

Subsidies are given in the form of cash payments, free goods and services, reduced taxes or reduced prices. They are usually given to the poor or as a benefit to a particular group of people or to particular industries that might have the potential to become successful in the future or the ones that are struggling to carry on business.

LPG Subsidy

The Oil Ministry has asked state owned oil refineries and oil exploration companies to give the employees a choice to opt not to take subsidy on purchase of LPG Cylinder. People generally get LPG at close to half the sale price which is a big revenue loss to the government exchequer.

You have a chance to become Freedom Fighter on this Independence Day Click to Tweet

IOC and BPCL have already shown their support to the move by initiating within the company.  BPCL chairman has shown the way to his employees by opting to not avail of subsidy on LPG that is entitled to him. 10-12% of employees have already done this 🙂

Be a Financial Freedom Fighter – opt out of LPG Subsidy

The whole process to opt out of the subsidy scheme is now available for every Indian. On LPG companies web portal anyone can access and give his/her preference. This will ensure that it is a simple process requiring minimal effort and time. The portal also has a ‘Scroll of Honour’ which will list names of people choosing to not to take ‘LPG subsidy’.

Govt Numbers Vs Your Numbers – Source Economic Times

surrender your lpg subsidy

I think this is a smart move by the government as high ranked officials and affluent will morally feel obligated to take the option of ‘No subsidy’. It is better than coercing people to opt out of the scheme.

Scroll of Honour – Indane

Scroll of Honour

Process to opt out of subsidy

  • Take a cool headed decision that opting out will not impact you much
  • Visit website of your LPG Company – LINKS – Bharat Gas – HP Gas – Indane (Indian Oil)
  • Register on website using your LPG consumer number & registered mobile number
  • Opt out of subsidy 🙂

Role of Subsidy

Subsidies are important but they have to be given to the right candidates at the right time. The subsidies that were given to the IT and ITES sector  when the industry was in the nascent stage like tax sops, capital subsidies, zero import duty etc. helped the industry to grow, increase exports and create jobs.

For example, subsidies like giving free education to girls in rural areas or construction of toilets for women in rural areas are steps in the right way as it would help in social development.

But giving farmers subsidy on fertilisers and subsidies on electricity in rural areas can be scrapped as it just leads to misuse of resources and it is unnecessary. Subsidies on diesel benefit the rich than the poor as in cities, people started buying more than 1 diesel car (generally an SUV) for themselves and consumed more fuel. People will use resources more efficiently if they pay the right price. Moreover the money spent on subsidies could have been used in making public transportation more efficient which would do good for more people across all income levels. This can be argued but lets leave it for some other day.

A lot of money is spent on giving subsidies and this takes a toll on government revenue. To compensate for the revenue, the government will

  • Raise taxes – Leading to higher production costs and rising prices
  • Borrow More Money – Leading to low returns on long term investments and debt investments
  • Print Money – If more money is printed without a similar increase in goods’ production, value of currency will fall leading to less purchasing power in the hands of people and this hurts the poor.

Subsidies are required in some aspects but wasteful subsidies have to be curbed. This is an excellent initiative by the government where the power is in the hands of the people to take the right steps. I do hope people who can afford this should surrender LPG subsidy & set examples for others. Today I am going for opt out & you??

How to file your Income Tax Returns Online

Hemant Beniwal
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11
How to file your Income Tax Returns Online

July 31, 2014 is the last day to file your tax returns for the financial year 2013-2014. Have you filed your ITR? Yes, there are ways to file returns post this deadline but it becomes complicated. Don’t fret, you do not have to make rounds of your tax planner or CA or any government offices. You can fill it online either through the income tax portal or other authorised websites. If your taxable income is greater than Rs. 5,00,000, it is anyways mandatory to file returns online.

Before you go online, you need to keep the following documents ready –

  • – Form 16
  • – Bank Statements
  • – TDS Certificates
  • – Last Year’s Tax Returns document
  • – PAN details

There are two ways to file them –

1.Filing through the Income tax portal –

Here are the steps to follow if you file your returns on the income tax department’s website –

  1. Register yourself on the website – https://incometaxindiaefiling.gov.in by proving information such as name, address, PAN number, birth date, contact details etc.
  2. You should then click on ‘Login’ and log in the portal using your PAN number as the username.
  3. View the Form 26 AS form. It will reflect the total tax paid by you. Verify if the amount is correct. If you need to pay any balance amount, you should pay it. This can be done online as well.You will get a challan for the same.
  4. There are different ITR forms  for individuals and HUFs as per the sources of income- ITR-1, ITR-2, ITR-3 and ITR4 and ITR4S. Choose the one relevant for you and download it and complete the details in it. You will need details from your Form 16 to fill it. This can be saved as an XML file.
How to file your Income Tax Returns Online Click to Tweet

 Income tax online

  1. Enter the challan details for the balance tax paid by you
  2. Click on the Validate tab to confirm all information entered
  3. There are two alternate steps now –

A. If you included your digital signature, you can upload the XML file by clicking on the submit button. You will get an acknowledgement which should be printed/saved. This indicates successful ITR filing. It is to be noted that a registered Digital Signature only can be used to file returns.

B. If you do not have a digital signature, print the ITR-V form, sign it and send it to the  following address by Speed Post or Ordinary Post within 120 days of submitting returns.

          ‘Income Tax Department – CPC, Post Bag No – 1,

          Electronic City Post Office, Bengaluru – 560100, Karnataka’

 The tax department will send an acknowledgement on successful receipt of your ITR-V  form which indicates successful ITR filing.

You should try to file your returns on the income tax website first.

2) Filing income tax return through private portals –

If you find the process of filing returns on the income tax website cumbersome or difficult, there are many websites that offer you service to file your ITR online for a fee. Some of these portals are Taxsmile and ClearTax. There are mobile applications too for filing ITR online.

These portals offer different services

  • – File Returns on your own
  • – The website assists you to file the returns
  • – ITR-V submission
  • – Tracking tax credits and refunds

It is important to check the track record and reputation of the private portal if you are filing your returns through them as you are sharing a lot of private data.

Let us know how you filed your returns and your experience and feedback on the income tax portal or private portals that you used.

Union Budget 2014 – Beginning of Acche Din [infographics]

Hemant Beniwal
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27
Union Budget 2014 – Beginning of Acche Din [infographics]

It was the first Union budget of the new BJP led government and an important one as there are high expectations from people of all quarters that the government is going to kickstart the Indian economy, create jobs and bring all round development. The budget also indicates the broad path that the government is going to take in managing the country. Let us look at what the Budget offers to the ‘Aam Aadmi’ –

Budget 2014

Source

Union Budget 2014 from a Personal Finance Perspective

Income

  1. From an earnings perspective, income tax exemption limit raised from Rs 2 lakhs at present to Rs 2.5 lakhs which means one will pay less tax. Approx Tax Saving: Tax Slab 2-5 Lakh = Rs 15000, 5-10 Lakh = Rs 25000, Abpve 10 Lakh = 36000.
  2. For Senior Citizens, income tax exemption limit raised from Rs 2.5 lakhs to Rs 3.0 lakhs.
  3. The monthly pension from EPFO under the EPS-95 scheme is increased to Rs. 1,000. Till now people with monthly wage of Rs. 6,500 can subscribe to EPFO schemes. The monthly wage limit has been increased to Rs.15,000 which means more people can benefit from EPFO’s social security schemes.

Savings & Investments

  1. In terms of investment, Section 80C investment limit has been raised from Rs 1,00,000 to Rs 1,50,000 for tax benefits.
  2. Tax exemption on interest component of housing loan has been raised from Rs 1,50,000 to Rs 2,00,000.
  3. Annual Public Provident Fund PPF ceiling to be enhanced from Rs 1 lakh to to Rs 1.5 lakhs.
  4. On the flip side, from an individual perspective, Long Term Capital Gain tax on Debt Mutual Funds (& even gold funds) is increased from 10 % to 20% and tenure increased from 1 year to 3years. This will have some serious impact on people who are in higher tax brackets, you have to stick with your plans so that you save on taxes.
  5. Your insurer will deduct tax at source of 2 per cent from maturity proceeds of a life insurance policy if the premium paid is more than 10 per cent of the sum assured (or where 10 (10 d) doesn’t apply).
  6. Other investment schemes introduced include
  •           A special small saving scheme will be introduced encourage savings towards education &  marriage of girl child
  •           Kisan Vikas Patra (KVP) to be reintroduced for planned and unplanned savings under small savings schemes
  •           Varishth Pension Bima Yojna to be revived for citizens aged 60 & above.

Management of Personal Finance

  1. There is a proposal to introduce one demat account for all types financial transactions
  2. KYC norms would be standardised across the financial sector
  3. Level of FDI in Insurance is increased to 49%. This means more people will have access to insurance.
  4. Currency notes will have details in Braille (language for the blind) which indicates social inclusion
  5. A unified account will be launched by EPFO so that Provident Fund is easily portable & tracked.
  6. A fund will be kept aside for provision of low cost housing and giving cheaper credit to the poor to buy housing.

Purchasing Power

  1. In terms of purchasing power, items like computers, TVs with <=19” screens, diamond jewellery, packaged food and footwear are cheaper. People wanting to buy these should have a smile on their face.
  2. On the other hand, aerated drinks, tobacco products, cigarettes have become expensive. It is probably good as they are anyways unhealthy. Cigarette smoking is injurious to Health & WEALTH. 
  3. More goods and services will come under the service tax net, so we should be prepared to shell out more money for some services like online and mobile advertising.

Some Developmental Steps that would directly affect the common man 

  1. 5 IIMs and 5 IITs will be set up improving education facilities and allowing more number of people access to premier institutions
  2. AIIMS or similar institution will be set up in many more states which will help people get access to better healthcare facilities.
  3. There are lot of proposals and fund allocation for different sectors like agriculture, SMEs and large companies which will lead to economic development which will ultimately aide the common man in terms of job creation, competitive prices, new products and services and increased quality in goods and services.
  4. There are funds allocated for skill development, smart cities and entrepreneurship. These are steps in the right direction but remains to be seen how they are implemented and it will definitely take some time to have an impact. So we will have to wait and watch.

Did you follow the budget yesterday? How would you rate it? I would love to know which points do you think affect you the most?

Key Takeaways from the Rail Budget

Hemant Beniwal
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5
Key Takeaways from the Rail Budget

There was keen interest from all quarters in the Rail Budget – the first one of the Narendra Modi government. Let us analyse it and see if this is the beginning of the ‘Acche Din’ –

  • E-Ticketing Services will be improved so that about 7200 tickets can be booked per minute and 120,000 users can be accommodated simultaneously on the website. This is a great step as there are lots of complaints on the online booking services.
  • Effort to provide online booking of railway retiring rooms and platform tickets will be made. A plan to popularize booking of tickets via mobile phones and post offices will be in place which will make ticket booking convenient in urban and rural areas.

  • When my uncle was in Europe, he was amazed to see business travellers easily finishing a lot of work on their travel between two cities because of the high quality trains and availability of network and power facilities in some of them. Similarly Internet (wifi facilities) and Workstation Facilities will be provided in some of our trains which certainly is a good sign.
Key Takeaways from the Rail Budget Click to Tweet
  • 58 new trains are being launched which is a good sign as capacity had to be increased. Railways is an efficient public transportation system that is cost effective and more environmentally more friendly.
  • Ready to eat food and pre-cooked food of reputed brands will be available on trains. This will hopefully mean more choices and more hygiene. Vendors supplying unhygienic food will face the risk of losing their contract. Filtered Drinking water will be provided in stations. Food courts are planned to be built in major stations so that people have many interesting and hot food options. These are steps in the right direction to provide convenience to travellers. Of course this might mean that the age old ritual of packing dabbas for a train journey will stop which was part of the enjoyment of a long train journey.
  • Cleanliness and sanitation is given importance in this budget as 40% of higher allocation is given to this aspect. Outsourcing of cleanliness management in 50 stations is also approved. This is really necessary as quite a few train stations in the country do not satisfy even basic hygiene standards.
  • Onboard Housekeeping services will be available in all trains which means laundry services for the linen provided will be available within the trains.
  • The budget has mentioned to introduce high speed trains in certain corridors. The trains will run 160km-200km per hour which is great as it will save travel time for passengers if implemented properly.
  • There is emphasis on safety as there will be increase in the recruitment of RPF personnel. It is also planned that 4000 women constables will be recruited. There is budget allocated for over bridges and under bridges so that people need not cross railway tracks and unmanned level crossings can be eliminated.
  • A bullet train has been proposed between Mumbai and Ahmedabad. Though it needs a lot of work and is just planned for 1 route, it hopefully promises modernisation and more such facilities throughout the country.

There are many positive things promised in the budget. If they are implemented in a cost effective manner with appropriate quality standards maintained, it will definitely be good for us.

What do you think of the Rail Budget. Which of these facilities would help you the most?

This article is written by our Para Planner Ravi Varyani.

LIC Online Term Plan – eTerm Review

Hemant Beniwal
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71
LIC Online Term Plan – eTerm Review

Term Insurance Plans are insurance plans where the sum assured is paid on the demise of the person insured. There are no benefits when the policy matures & this is the best part of term plans. So it is purely a protection plan. Online term plans can be purchased online directly from the company. There are no intermediaries and therefore no commissions involved and so they are cheaper than offline term plans.

The largest insurer in the country had stayed away from online term plans for so long. But now LIC has launched an online term plan –LIC eTerm Plan.

LIC eTerm Plan Review

Let us look at the main features of the LIC online Term plan.

Features of LIC eTerm Plan
Entry Age Minimum – 18 Years

Maximum – 60 Years
Maximum Age at beyond which cover will cease 75 Years
Minimum Sum Assured Rs. 25,00,000 for Aggregate Category (includes smokers and non-smokers)

Rs. 50,00,000 for Non-Smoker Category and wants to have

Sum Assured >= Rs. 50,00,000
Policy Term Minimum – 10 Years

Maximum – 35 Years
Premium Payment Frequency Annual (Once a Year)

LIC Online Term Plan – Important Points

–      It can be bought online

–      Premium Rates are different for smokers and non-smokers

–      In case of demise of the policy holder, Sum assured will be paid.

–      The insured can return the policy within 30 days of buying the policy with reasons if he/she is not satisfied with the terms and conditions of the policy.

–      It is cheaper than the offline Term Plan of LIC

–      NRIs can also buy the LIC Online eterm plan and will be covered even if they are abroad provided they are present in India for medical tests.

Read – LIC Jeevan Akshay – Pension Plan

What LIC eTerm Plan does not Cover?

It is only a risk cover. So there will be no benefits paid on maturity of the policy. The policy can be bought only for self – there is no insurance for employee option here.

LIC Online Term Plan - eTerm Review Click to Tweet

LIC Online Term Plan Premium

Premium to be paid for a Sum Assured of Rs. 50,00,000 for a 10 year term

Age (Years) Yearly Premium for a Non-Smoker (Rs.) Yearly Premium for Aggregate Category (Rs.)
30 4326 6180
35 5618 7865
40 8315 11348

            *Premium includes taxes

LIC eTerm Plan Vs other online term plans

Let us compare premium for LIC eTerm Plan with similar plans available in the market.

The table below shows the premium that has to be paid by a non-smoker for a Sum Assured of Rs. 50 lakhs for a 20 year term

 

Age (Years)

Premium to be paid
LIC e-Term Plan HDFC Life Click2Protect Aviva – iLife
30 Rs.5618 Rs. 5730 Rs. 4519
35 Rs. 8258 Rs. 7191 Rs. 5845
40 Rs. 12641 Rs. 10281 Rs. 8254

* Please contact the Organization for exact premium and terms and conditions applicable

Should I buy LIC eTerm Plan?

Most term plans are similar. You should compare the premium, ease of settlement and claim ratio. LIC is a government organization and people trust it more for this reason. But premium charged by LIC for this term plan is higher compared to other term plans – in case if you are above 35. If you are a person, who trusts LIC more than private players and do not have a term plan, you can consider buying it else you can look at other term plans as well.

We would like to know which term plan you have purchased and the reasons for you to select the one you have. In case if you have recently bought LIC Online term plan – please share your experience.

LIC Online eTerm plan review is done by our Para Planner Ravi Variyani.

Let us not believe in PREDICTIONS in personal life nor in financial life

Hemant Beniwal
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3
Let us not believe in PREDICTIONS in personal life nor in financial life

A turtle who goes by the name, Big Head is predicting results of the 2014 FIFA World Cup matches & in 2010 it was Paul the Octopus. Most newspapers have daily and weekly predictions for star signs which many read religiously. We have experts and analysts who predict how the stock markets will do. This also has many takers. The future is always a mystery which we want to unravel before it comes. We humans like certainty and since the future is filled with uncertainty, we try to predict what will happen or want to believe predictions that “experts” make.

But believing in predictions is not such a good idea as –

  • One can never be sure if it will happen for sure.
  • If you start taking predictions seriously, you will stop believing in yourself.
  • Personal Predictions are based on opinion and hope and little on real facts. Moreover it is coloured by how one perceives the prediction. Therefore predictions can go wrong.
  • Expert and Analyst predictions are never towards one direction. There are always underlying meanings and we end up believing what we want to believe.
Let us not believe in PREDICTIONS in personal life nor in financial life Click to Tweet

Prediction is not a good habit in your financial life as well

  1. Personal Finance is a matter of proper research, planning, executing the plan and comparing results with the goals to be achieved. It also has a significant impact in your life which means there is not much room for prediction.
  2. If you have just started working, you cannot predict your career path or your retirement age nor the corpus that you will need then magically. If you have a child, you cannot predict what he/she will be interested in 15 years from today or what she would want to study and how much it would cost.
  3. Your financial standing also depends on external variables like the economic growth of the country, shape of the sector that you are working in, global economic parameters etc. There is not much scope for you to know how these variables will stand 5 or 10 years from now.
  4. You will not be able to know the exact value of all your investments in the future. Stock prices may go up or down. The value of real estate and gold also change. These can lead to your net worth value go up skyrocketing or fall down.
  5. Just like tossing a coin, knowing next multibagger stock is not possible.

Carl Richards – Why predictions are so tempting?

1) It’s fun. As social animals, we love being in the know and place value on being the one to break the news.

2) It’s genetic. Our natural instinct to survive makes us sensitive to the world around us, and we’re constantly trying to predict dangers lurking in the bushes. We rely on predicting and forecasting for almost every decision we make, including the weather, our commute time and even what to wear based on what we predict others will think or say.

3) We want control. We all want to control our environment and our futures if we can. It’s very difficult to accept that much of what goes on is random and that the only constant seems to be change.

4) We forget quickly. Many of the currently famous market forecasters have been wrong for years, but we quickly forget their incorrect forecasts from days gone by and cling to the one big call they recently got right.

This does not mean you should not plan for the future. You should think of the scenarios in the future and plan your finances. You should do the basic things like

  • Spend less and save more.
  • Invest your money and let it work for you instead of it lying idle in lockers and bank accounts.
  • Diversify your asset allocation. Invest in a variety of assets so that risks are minimized and returns are optimised.
  • We consider those who make money using investment skills as lucky. Financial Planning and Investing are is not only about luck. You have to make informed decisions and work on your plan regularly till you are skillful in it. Once you get the requisite skills, you will be lucky as you will be making intelligent investment decisions.
  • You have to make your financial plan and execute the plan. Along the way, there will be events due to which you would need to alter the plan and you should be ready for it. Meanwhile you should remember that money is not everything and enjoy all aspects of life.

I believe that you should work on your financial plan and not believe much on predictions. This will definitely be more beneficial from a personal and financial perspective. Must share your experience with predictions & people who claim that they can gaze into future.

5 Insurance Policies that you may not need

Hemant Beniwal
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28
5 Insurance Policies that you may not need

Every asset has an economic value and it provides some benefit for a certain period of time. After its life-time, the asset needs to be replaced with a substitute. However, there can be an unfortunate event like an accident which may destroy the asset (including human) early or make it incapable of generating any income. To reduce the financial effect of such adverse situations, Insurance comes into the picture. So, the simple rule is: all those things which will cause you economic loss to replace or reinstate, should be insured.

Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net

But practically it’s not possible because if you try to insure everything under this sun, you will be left with no money for your living expenses & goals. So one should consider two things before taking any insurance – probability of the event & financial impact. It can be simply understood by this grid.

5 Insurance Policies that you may not need Click to Tweet
Financial Impact
High Low
Probability/Recurrence High A C
Low B D
  • A (High Probability, High Financial Impact) type should be covered without any second thought – Ex health insurance & motor insurance.
  • B (Low Probability, High Financial Impact) type can have significant financial impact so should be considering after looking at personal situations & assets Ex Term Insurance, Accidental Insurance & Critical Care Insurance.
  • C (High Probability, Low Financial Impact) in this case decision should be made that risk should be retained Ex extended warranties.
  • D (Low Probability, Low Financial Impact) such insurance can be outright ignored like loss of credit card.

Read – Best Medical Insurance for Parents

Sometimes probability of event occurrence can depend on your job profile or individual situation. Take the case of IT professionals, day and night they work in front of their computers or laptops. The prolonged sitting leads to problems such as back pains. This means they have a greater risk of physical health problems and so they will be more concerned about them. Now consider a manufacturing company.  The probability of an accident taking place is high. For them, the probability of being involved in an accident is their biggest concern and so it will be their top priority. And what about professionals such as doctors? Have you ever thought of what could happen when a patient dies in a hospital and the family files a lawsuit against the doctor. It may not have been the doctor’s fault but sometime it takes years to get a decision in the court and the time spent can be disastrous, leave alone the loss of money. Then imagine what the consequences of the doctor losing the battle would be. The amount payable as compensation could be a big setback financially. So won’t it be on the priority list of professionals like doctors to get insurance for such risks.

Read – New LIC Jeevan Akshay 

Insurance Policies that you may not need

There are some insurance policies which people generally don’t need:

1. Insurance for investment purpose – Insurance is an investment is a myth which companies or agents have played around with to maximize their earnings. Since we are use to looking at receiving a return on every penny we spend in our lifetime only, agents or companies push expensive products with return maximization strategies. This leads us to buy the wrong products every time. Don’t mix insurance and investments. This is also applicable on investment products which offer insurance benefits – some mutual funds offer benefit of health & life insurance if you invest in their schemes. These offers should be ignored as they will always come with some hidden T & C of exit loads & expenses. Also ignore health insurance policies which have investment component, go for plain vanilla health insurance products.

Read – Mixing Insurance & Investment

2. Life insurance for children – All parents want to ensure their child’s future. And to do this, some wants to by a child policy which can meet their child’s financial requirements. But buying a policy on child’s name is not the right solution as the objective of insurance is to support your dependents financially when you are no more. Hence, the insurance has to be in your name rather than the child.

Read – Child Future Plan

3. Excess Accidental Insurance (death) – Accidental insurance is a must have insurance but in India there are some limitations in the product. Biggest flaw is that in most of the cases accidental death is the base policy, which is already covered in the term insurance. So if someone already has sufficient life cover through term plan this insurance is not required. Lot of people also opt for accidental death benefit rider in case of traditional insurance policies. They should check their total life coverage before taking any decision. In international markets dismemberment policy can be bought with accidental death benefit, which is not the case in India. So check your cashflow before taking decision on this.

Check- What is Family Floater Health Insurance Policy

4. Wedding insurance & Flight Insurance – These will fall under low probability but high impact category. Flight Insurance can be clearly ignored as that will be covered under life insurance. Wedding insurance is a new category in general insurance which covers loss due to wedding cancellation, damage of property, personal accident & public liability. Accidental & property damage overlaps with comprehensive accidental insurance policy & householder insurance policy so is of less consideration. So it’s about wedding cancellation & public liability which can have significant financial impact. But in India people are more accommodating in case of cancellation of event in comparison to western world and add to it the list of exclusion in such policies, wedding insurance is still not in a priority list.

Read – 9 common Insurance Questions & their Answers

5. Credit card insurance – How many times you lost your credit card? Even if once, what’s the first thing that you did? I think you asked to block your card & the card company issued a new card. So my suggestion will be rather than taking insurance for loss of credit card, make sure it’s not lost or keep lesser limits card in your wallet. 

But there is another issue. When you get credit card from bank or financial institution, they start pitching lot of insurance policies which are marketed as “especially available for our card holders” – health insurance, accidental insurance are the most common. In most of the cases, either these policies are expensive or come with lot of limitations. Moreover, insurance in these policies may not be transferred if you don’t want to continue with your card company. So why to stuck with such policies…. Just Keep Things Simple.

I know this is not the complete list & there can be few other policies that can be ignored – I will love to hear your views on the same.

It’s a bull run when… [infographics]

Hemant Beniwal
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21
It’s a bull run when… [infographics]

Yesterday I got a call from my close friend; he is a banker – heading loan department. Before even saying Hi-hello, he said “I have 2-3 lakhs to invest for 6 months, please tell me few good stocks.” I was NOT surprised/shocked & told him, you called the wrong guy. I know he was frustrated at the end of the call but I can’t help. (before election results he told me that he is planning to sell ESOPs)

This conversation reminded me of this awesome article “It’s a bull run when…” by Mudar Patherya that was published in Business Standard. I have just picked few points & created this infographics… Here you go….

Bull Market

Please share, if you come across something similar happening around you in last few weeks or if you remember something from last bull run 2004-2008.  

SmartPhones are making us Dumb – Financially & Mentally

Hemant Beniwal
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59
SmartPhones are making us Dumb – Financially & Mentally

I went to a restaurant for dinner yesterday. When I had a look around, most tables were occupied by families, friends and couples. There was one thing common across all tables – Smartphones. Most customers kept fiddling with their smartphones be it surfing, messaging, social media talking on the phone or clicking photographs. What was meant to connect us all has, in fact separated us today – at least in that restaurant but I know its no different at any other public place. (check video at the end of this post – may make you cry)

I felt it is true when they say that for some of us, our smartphone is our best friend and for others it is an extension of themselves. We take it everywhere with us from the shower to the lunch table and when we are going to bed. Most of us also see the updates on our smartphone, the moment we get up in the morning. Basically, smartphones are taking over our lives and maybe some of us are getting addicted to our phones. Excessive use of smartphones is creating problems like ruining social interactions, physiological problems and health issues.

SmartPhones are making us Dumb – Financially & Mentally Click to Tweet

Few Facts – ET Brand Equity survey (young people)

  • 97% of young people in metros own mobile phone
  • 98% young people use mobile for internet surfing/watching online videos
  • Shocking (at least for me) – Mobile phones used more for – 58% said Internet & 42% Call/text
  • Average mobile phone bill Rs 550 – Delhi & Chennai Rs 700
  • Mobile phone expenses/bills are in the top three expenses (17% share of wallet)
  • Most of smatphone addicts are suffering from OCD (obsession compulsive disorder)

And what about this 🙁

A third of all divorce filings in 2011 contained the word “Facebook,” according to Divorce Online. And more than 80 percent of U.S. divorce attorneys say social networking in divorce proceedings is on the rise, according to the American Academy of Matrimonial Lawyers.

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Let us see the ways in which our financial life is affected by smartphones –

1. Phone Bills – We do everything on our smartphones – keep in touch with friends, check mails, book tickets, play games, listen to songs. We take expensive mobile plans leading to increased usage of the phone. Our bills also increase over a period of time as we use the phone without any restrictions and many of us realise that we are paying a lot very late.

2. Buy latest gadgets – In earlier times, mobile phones were a luxury and simple. You used it to call or message and play the odd game which came preloaded. Today we all want the latest phones with the latest technology. Earlier there used to be one telephone instrument in the house for the entire family (and sometimes for the neighbours as well). This instrument used to last forever. But today we keep buying new phones and discarding the old ones. This leads to our budget going overboard.

3. Losing your smartphone – Losing a phone is a nightmare for us. When we lose a phone, we not only lose an expensive gadget but there are photos, videos, messages and notes in it. Some of us have passwords, financial information stored. A person with bad intentions could misuse this information leading to financial loss and mental trauma as well.

4. Online Shopping – We have numerous sites selling all kinds of products. They have eye catching deals etc. Many people browse through these sites and end up buying a lot of products which might be unnecessary. Unnecessary shopping on your fingertips can be harmful to your financial health.

5. Cellphone addiction affects studies, work and business – Students getting distracted by smartphones will not be able to concentrate on their studies. This affects their academic performance negatively. It also affects all round development which is not very good in the long run. Employees are busy texting and checking notifications on their phones and this leads to loss of productivity. If you are on social media platforms instead of concentrating on your business, you will end up losing revenue.

6. Lesser investment Returns – One study suggests, more changes you will make in your portfolio, lesser will be the returns – another study suggests more often you look at your portfolio, lower the returns.

Must Watch this Video

Basically smartphones are causing disruptions in our life – small ones or big. Here are some ways to get our lives back –

  • Do not buy the latest gizmo in the mobile phone market – You will be tempted to buy that expensive, fancy phone in the market. It will have loads of features and it will be a pleasure to use. But that exactly will make it easy for you to get addicted to it. Buy a simple phone that will satisfy your needs and not wants.
  • Do not download too many apps and games – Set rules for yourself for downloading. This will ensure that there are not too many things to do in your phone.Do not check your phone the first thing when you wake up. Enjoy your tea or read the newspapers or meditate or spend some time with loved ones. Your day will have a much better start and quality of life will definitely improve.
  • Self discipline in college and office – In office or college, keep strict time intervals (e.g. every 2 hours) to check your phone and ensure that you adhere to the schedule. Decide on a fixed time that you will use your phone as well. For example, you should allow yourself 10 minutes for a smartphone session and then stop it unless of course it is very urgent or an exception like connecting with someone after a really long time. This will ensure your productivity is optimum.
  • Control the usage of your phone -Do not check your phone every 5 minutes when you are at a dinner, party or place of worship. You are there for a purpose even it is to have fun at a party. Ensure you do that. Once you are back from office, keep the phone far away from you so that you spend quality time with loved ones. Avoid using the smartphone when you are talking, playing or eating dinner with family. This will limit your bills and you will have a more enriched life.
  • Notifications – notifications should be muted, specially whatsapp 😉

Do you feel you use your smartphone too often? Have you set any rules for yourself for smartphone usage. Do let me know your tips so that our readers do not get addicted to smartphones and ruin their financial & mental health. {If you like this article, must share with your friends}

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