Vijaibabu's Blog - Personal Finance Guide for Financial Freedom

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

Seven out of ten Indian parents say that planning for their child’s education is the best investment they can make , according to a HSBC study called ‘value of education - springboard for success’. The research explores parent’s attitude and behaviors towards children’s education. Suresh Sadagopan of ladder7 financial advisories agrees with the findings and says that many clients have two major goals – child education and retirement. He suggests financial advisers to keep education inflation in mind before recommending any products. “ Typically, education inflation is much higher than CPI and WPI. Also, if parents aspire to send their children abroad, advisers should factor in currency risk. It’s better off to recommend a combination of equity funds, debt funds and term insurance plan which covers equal liability. Child plan offered by insurance companies are expensive for your clients .” “In India, parents feel funding for their child’s education is one of the major respons

Have you ever wondered how a simple housewife, from any society, can manage her household in whatever budget she has? Why do banks and micro finance institutions lend money to the woman in the household? Simple, women have inherently been better money managers on a small scale. Yet, many women, including working women, seem comfortable leaving their long-term finances and retirement planning to their fathers or husbands. On the occasion of Women’s Day, it will be worthwhile to take a look at simple measures that women could take to plan their finances for a secure future. The first and most important step is to understand her financial needs and develop a suitable plan . For this, a good start would be to calculate the inflows and expenditure and the level of savings possible. As many personal finance managers recommend, she must keep emergency funds in the form of ready cash to the tune of 3-4 times her monthly salary/ allowance . When this level is achieved, she can then take the ne

 It becomes doubly important when we realise that one of the major factors that is drawing global attention to our country as a key emerging market is India’s young population: nearly 50% of our population is below the age of 25 (2011 census). Today’s youth are typically interested in leading a fast life, large spending and quick gains.  Few are averse to spending most of their income to follow a trendy lifestyle. To generate quick returns, they often do not realise the risk involved in investments such as equity derivatives, commodities trading, etc. So, it is important they learn early on in life about the importance of saving and spending wisely. Start early The first and foremost rule is to start early. For example, Rs 1,555 saved every month from the age of 25 would return Rs 1 cr at 60 assuming portfolio returns of 12% (See Table 1). However, a delayed start is likely to lead to higher outflows to achieve the same target. A 5-year delay almost doubles the monthly saving req

Work out a financial plan according to your needs and goals If you want your dreams to come true, there is no running away from taking small, but steady, steps in the right direction. Different people have different needs, therefore, a financial plan that works for someone may or may not necessarily work for you. The right way to go about building your wealth is to create your own financial plan aligned with your future goals. This discipline needs to be adopted in any investment. When you invest in mutual funds, work out the right amount to be invested in a Systematic Investment Plan (SIP) that fits well with your financial plan than blindly follow someone. SIP is one tool that can help you build investment corpus for the long term by investing in mutual funds. Thanks to the volatility, more often than not, investors find it hard to time the market.In a turbulent market, if you wait for the opportune moment to invest, you might end up not investing at all. This