Vijaibabu's Blog - Personal Finance Guide for Financial Freedom

It didn’t need much deliberation for me to choose the title of this article; straight from the gut, if you’d like to call it.  Before I proceed, let’s get one thing clear. We are not talking of getting rich through a lottery or inheriting huge wealth here. We are talking of:  Simple investing practices that delay gratification so that you and your family may enjoy it to the fullest later Having your financial goals fulfilled comfortably Retiring in comfort, and  Taking dream vacations without having to count every penny  When we choose conservative investment options, become apprehensive about investing more in a superior yielding asset class (example equities), dread losing money, and fear far too much about ending up poor, we are simply denying ourselves a chance to become rich.  Here are some of the common fears we have about investing in a seemingly ‘risky’ asset class such as equity, along with reasons on why your fears may not be justified: I...

Discuss finances jointly It's important for both partners to be on the same page when it comes to money matters. One needs to keep the other informed about insurance policies, mutual funds and other investments. Ensure you assign your spouse as nominee in all investments. Avoid splurging With two incomes and enough disposable money, one might be tempted to buy the latest gadget or upgrade to a bigger car, but do not be impulsive. Buy only what you actually need and can afford. Buy a car that fits your budget. Your car loan EMI should not exceed 10% of your monthly net take home pay. Ensure that you have made your savings before you spend your salary Don't ignore retirement It's easy to lose track of retirement planning when you are young. Put away at least 10% of your income for retirement savings. Go for equity funds because you have time on your side. The ultra cautious can go for the PPF, though the returns will not be spectacular Set up an emergency fund Always b...

F irst income always brings in a sense of joy and freedom. This joy is shared most of the times by buying gifts for near and dear ones. Beyond that it becomes a routine spending affair. In the current days of flourishing e-commerce it is very easy to empty the wallets on everything that you need and want! It is the wisdom of the ages that anything in excess is not good. So neither too much spending nor too much saving is going to get you in your happy space eventually. A balance needs to be arrived between the two. For most youngsters this can be a daunting task. A simple mantra is to adopt an ‘Earn-Save-Spend’ habit , as against the easier and tempting ‘Earn-Spend-Save’ habit. Be disciplined to save at least 10% of what is earned. This can increase depending on personal circumstances. For a 22 year old earning Rs.20,000 a month this amounts to a saving of Rs.2,000 a month. This saving invested in an instrument giving about 12% return will grow to Rs.1.84 crore by the time he ...

This Diwali, you must commit to make bright investment decisions to ensure a great financial future for your loved ones. Here’s how you can do this: •    If you are an existing investor, the top most priority should to analyze your asset allocation.  Asset allocation is the key to investment success in the long run . It helps in determining the kind of risk you are likely to take and the kind of returns you can expect from your portfolio. If your asset allocation is too aggressive, you must rebalance it in line with your risk profile and time horizon.  On the other hand, if your long-term asset allocation is too conservative, it’s time to either start investing in an asset class like equity or increase exposure to it to give your money a chance to earn positive real rate of return.   It is equally important to have well diversified holdings within an asset class too, more so, when you invest in an asset class like equity. In reality, not much attention is p...

Hardly anyone is covered by guaranteed pension today. So, plan for it How will you meet your living expenses after retirement? Ask this question of different people and you are likely to get answers ranging from the vague ('My children will support me!') to the openly dismissive ('Oh, I plan to work all my life'). Surveys by financial firms show that Indians don’t give retirement savings priority, busy as they are saving up for their children’s higher education or wedding expenses. But this can be foolhardy for many reasons. No cover To start with, an overwhelming proportion of employees (even in the organised sector) today are not covered by any guaranteed pension scheme. It wasn’t like this a few years ago. Then, the Government and the public sector were the employers of choice and offered guaranteed pension benefits to all their employees. But the Government has stopped this practise since 2004 and moved its employees to the market-linked NaNational ...

We all have dreams and ambitions in life. A desire to achieve many things- from purchasing a home or even dreams with regards to where we want to see our children placed in the future. To transform these “goals” into reality, apart from the individual effort, financial resources play a key role. To effectively manage the financial resources so that they are properly utlised to fulfil your life’s goals, planning comes in handy. Planning makes life simpler and brings a systematic approach in decision making. Overview of Financial Planning Financial planning is all about preparing a series or set of actionable plans to achieve your specific life goals . A road map, it guides you in making financial decisions- on investing, financial protection through insurance and building a corpus. It assesses the inflow and outflow of your resources, income, assets and liabilities. The Importance of having a Financial Plan Having a sound financial plan comes with advantages galore. Here is what...

Mutual fund is increasingly getting popular since last few months. Mutual funds are a fund that invests investors’ money in various companies. Since the investment is in a set of companies, any upside or downside in a few companies is compensated by the reverse in other companies. This is what makes mutual funds attractive. It makes sense for individual investors to invest in mutual funds. Investment rationale in mutual funds As explained earlier mutual funds invest in a set of bonds and stocks depending on type and target investors of the fund . It essentially minimizes the risk because of investment in various assets. Any fluctuation in one or few assets is usually offset by reverse gains and losses in other set of assets which are part of mutual fund. Let me illustrate with an example. Say XYZ equity fund invests in approximately 40 companies. The possibility of shares of all the firms going down at the same time is very remote unless there is huge disaster in the economy. H...