Vijaibabu's Blog - Personal Finance Guide for Financial Freedom

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. The

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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

Liquid / Ultra Short Term Plans Liquid / Ultra Short Term plans are best suited for those investors which have a very short term investment horizon ranging from 1 to a few days. Infact, this is not an investment but just parking of the “surplus liquidity” – it’s a superior alternative to a “bank saving account” wherein you will earn higher yield. Although these funds don’t carry interest rate risk but they certainly carry credit risks. The aim of the investor should be to earn accrual interest. Short Term Plans Short Term Plans invest in similar kind of instruments as does a liquid fund but with a slightly high maturity profile. Hence, this fund is best suited for someone having an investment horizon between 3 to 12 months. This fund finds its place between a bank savings account and a fixed deposit. These funds carry credit risks as well as some amount of interest rate risk. The aim of the investor should be to earn accrual interest along with some capital gains. Income / Gi

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