Vijaibabu's Blog - Personal Finance Guide for Financial Freedom

It is amusing to note the kind of views kids have on money. I know of a little one who thinks she can solve world poverty by simply getting an ATM at home. Smart girl! Life is magical when you are still discovering the world and forming your ideas. While I hate to break the spell, it is important to gradually unravel the science behind this magic.  Unlike natural sciences like the law of gravity which kids test on their own (by throwing your shoes and watches out of the window), money facts are not something that will get ingrained into their minds naturally. It has to be understood systematically with deliberate efforts.  As your child observes the economic activities happening around and develops their views, it is important to get a few facts established well in their mind as a means to build the right foundation:  1. Money is a means of exchange  This is a simple fact that kids understand quickly with little effort from your end. At some point they refrain fr...

NAV or Net Asset value is the price per unit of a scheme on a given date. It is the NAV of the fund that determines the number of units you will get when you invest in a particular scheme. Many investors have misconceptions about the NAV of mutual funds and about how NAV is linked to a fund’s performance and its returns. Hence as an investor, it becomes very important for you to understand:  1. What is NAV? 2. How is it Calculated? 3. The Application of NAV  1. What is NAV in mutual funds? Net Asset Value (NAV) in simple terms is the current worth of each unit of the mutual fund . NAV is the single most important number for a mutual fund scheme because all transactions of a fund are with reference to NAV. NAV, which reflects the worth of each unit of a scheme, is computed and declared by mutual fund AMCs on all business days. Depending on the type of scheme NAV is calculated up to 2 or 4 decimal places. 2. How to calculate NAV? On subtracting liabilities of a scheme fr...

Regardless of how financially secure you currently are, the first step towards eventually closing your home loan early is always the creation of a safety net. Paying off a home loan invariably requires a considerable corpus of accounted-for cash. The most important benefit of closing your home loan early is obvious - you become free of EMIs, which are probably the biggest recurring debt currently straining your monthly income . This is definitely a desirable scenario under the right circumstances. In previous years, the penalty involved in prepaying or closing a home loan was a major deterrent, but banks can no longer levy such a penalty.  Assuming that getting rid of this monthly burden is more important to you than the tax benefits of servicing a home loan, you need to start planning your finances and get ready for the big push. This is not an overly complicated process, but it does require you to keep your ultimate goal - closing your home loan - firmly in mind at all times. ...

It is POWER OF COMPOUNDING .Please see the below picture to see the MAGIC of  it :)

A new financial year has started on April 1. This is a good time to get your personal finance decisions straight. To plan and act this time of the year makes sense for two reasons: after the last minute tax-related investments in the just-ended financial year, your money matters will remain fresh in your mind. starting early in the year allows you to plan more methodically for not just your taxes, but also for your short- and long-term goals.Here are five aspects you should consider planning and executing right away 1.Planning tax-saving investments Last minute exercises in tax planning hurts you in several ways. You may not have enough time to calmly consider the various options and what suits you best. You end up earning sub-optimal interest on a few of the fixed-income options. If you are investing in equity-linked options for tax saving,you may end up investing at the wrong time. You may be forced to make a one-time lump-sum investment. As you can use Systematic Inv...

ULIPs don't serve the purpose of either insurance or investment. It's best to go for a term cover. A thoughtful investor should be very clear about what he is going for. Though insurance linked policies have improved substantially but they still have problems. You've to commit to an investment for a very long period of time - it could be penalizing just in case you decide to withdraw early. They're also a compromise on flexibility or liquidity.  Also, your need for insurance changes dramatically. When you're independent and a bachelor, you don't need insurance. The moment you have dependants, the need for insurance come up. These policies do not fulfill that requirement and are unsuited. Do a liberal estimation and go for a term plan.  A sketchy thumb rule is that 10 years annual income should be your term cover. Investors need to look at term plan as a cost, it is not an investment. Look at investment independently. Have a low cost, diversified investm...