personal finance for mr. busy v1

Rohit Shah

Smitha Hari

Vidya Kumar

Top 10 Personal Finance Articles by

GettingYouRich.com

Personal

Finance for

Mr. Busy

Version 1 Published: January 2014 About GettingYouRich.com We specializes in financial planning for Executives, Directors, VPs, Owners, Business Heads and Senior

Professionals. We are Liked, Followed or Read by 2,500 Friends all across the world.

Publisher: GettingYouRich.com Shah Rohit Financial Services Pvt. Ltd., Mumbai Website : www.gettingyourich.com Email : [email protected] Authors: Rohit Shah is a Personal Finance coach and a social entrepreneur. Rohit has co-authored four

Personal Finance eBooks. Rohit is Founder & CEO at GettingYouRich.com. Prior to starting

GettingYouRich.com, Rohit was a Corporate Executive. He worked for 14 years with IBM, Citigroup &

Sterlite and handled Finance, Project Management and Technology assignments. Rohit is a CFPCM and

Post Graduate in Finance.

Smitha Hari is an MBA and has 7+ years experience in investment banking, equity research and

consulting. She has Co-Founder a Financial Consulting Firm. Smitha works as Personal Finance Blog

Editor at GettingYouRich.com.. She has co-authored four Personal Finance eBooks. She is listed as a

personal finance expert on moneycontrol.com

Vidya Kumar writes regularly on our Personal Finance Blog. She is a management graduate with an experience of 6 years in personal finance writing on various websites & blogs. She has co-authored three eBooks on Personal Finance. Credits: The contents of this eBook have been originally written by the Authors as mentioned above. Our knowledge in the personal finance area has been shaped over the years through research and reading through various magazines, books, newspapers, conferences and thought leadership of veterans in the financial services industry. Rights: All rights are reserved by GettingYouRich.com. This eBook is made as a part of our Corporate Social Responsibility Program to spread financial literacy. A FREE copy of this eBook can be downloaded from our website under the FREE section. This eBook can be freely used by any one for personal and educational purposes. However, any commercial usage is prohibited. Disclaimer: The articles in this eBook are compiled & edited from the various articles written on GettingYouRich.coms personal finance blog. While care has been taken to include latest and a concurrent analysis, readers should engage a Financial Planner for a formal advice. This eBook is not an investment advice. Errors & Omissions expected (E&OE). There is no warranty on accuracy & we do not accept any liability for any error, omission or any loss in this regard.

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Dedication

This eBook is dedicated to all Personal Finance websites and

resources, Financial Planners and Advisers, Personal Finance NGOs

and various associations and Regulators on this planet, working for the

cause of Personal Finance Literacy.

At GettingYouRich.com, we believe that like we need to address

Poverty, Unemployment, Malnutrition, Corruption, Inflation and so on,

we also need to address Financial Illiteracy.

May You Get Rich.

Contents

1. Can't afford financial planning? Do it yourself with these resources ............................................ 5

2. All about Retirement Planning ..................................................................................................... 7

3. 11 Smart Tips to buy your Life Insurance ..................................................................................... 8

4. 6 Smart Tips to take your health cover ...................................................................................... 10

5. So what's the right way to invest in Equities? ............................................................................ 12

6. Top 5 Investment Mistakes to Avoid .......................................................................................... 14

7. 6 Smart Ways to Deploy your Surplus Money ............................................................................ 15

8. How to leverage your Salary Structure to minimize Tax Liability ................................................ 17

9. Everything you wanted to know about Estate Planning ............................................................. 19

10. 20 Tips To Come Out Of Liquidity Crisis ..................................................................................... 21

11. FREE Personal Finance Resources .............................................................................................. 23

Personal Finance for Mr. Busy

P a g e | 5 of 23 GettingYouRich.com Merawala Plan

Can't afford financial planning? Do it yourself with these resources

Financial Planning service may not be afforded by everyone. You can try planning your finances yourself by referring to good personal finance books, attending personal finance training sessions, personal finance websites and blogs and using personal finance software. These methods will not giv e you the benefits of hiring a professional planner, who brings in rich knowledge and experience. Nevertheless, these are good resources to start , rather than not doing anything.

Expert financial planners are increasingly being engaged by more and more people, as professional advisors bring in the much required experience, knowledge and objectivity to their advice. But can everyone afford financial planning by a professional? We understand that this may not be feasible for many and therefore thought we can let you know of some resources which will help you start planning your finances. Hiring a professional planner and doing financial planning yourself cannot be compared. Services of a planner also cannot be replaced. The different components of a financial plan like insurance, retirement, goal planning, investment planning and budgeting are interlinked and therefore require you understand the complete picture before making financial decisions. You must also be prepared to go through a lot of paperwork and review your plan regularly. However, we believe that some action is better than no action. Although these resources cannot help you build a comprehensive plan by yourself, it is a good starting point. Personal Finance Books: Personal finance books can give you knowledge and understanding about various aspects of financial planning. You can visit a library or simply order these books online. Select books which are written in easy language and which explain concepts in a simple manner. You can select personal finance books written by Hemant Beniwal, the Jago Investor Team or Parag Parikh. Ranjan Vermas Lights Camera Action Steps on Money Management is also another book on financial management concepts. All these can help you understand various personal finance topics. We, at GettingYouRich have already released our free eBooks on Insurance and Mutual Funds and will shortly release our very own Personal Finance eBook as well. Do visit our Free section to read our eBooks. Although books can be a great source to enrich your knowledge, sometimes, information given is pretty generalized and may not cater to your unique needs. Personal Finance Training: Leading Personal Finance experts in the country schedule their training sessions regularly. Such sessions will allow you to learn lot more about personal finance and take result oriented actions. Even if you like to understand more about Financial Planning before you decide on an engagement with a Financial Planner, then attending such sessions may be a good idea. MoneyLife in Mumbai conducts such sessions regularly. These are also made available on YouTube. Jago Investor and The International Money Matters also conducts such sessions. GettingYouRich.com

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too has an initiative for Financial Wellness sessions. You can check more details about our sessions and schedule by clicking here. Personal Finance Websites: There are innumerable personal finance websites and blogs available which can give you a wealth of knowledge and information. Blogs by SubraMoney, Manish Chauhan, Hemant Beniwal, OneMint and TheWealthWisher are some such resources*. Goodmoneying, FPG India, Network FP and the blog by Ranjan Verma also carry a wealth of information. Our own blog has a wide range of articles on various areas. You can read all our articles by clicking visiting our Blog section. Websites and blogs can give you knowledge, but again, like books, not the personal touch required to put your finances in order. You must also be wary of the credibility of the website, as any wrong advice followed can upset your finances. Personal Finance Software: There are some personal finance software and Do-It-Yourself websites available which can help you either partially or completely do financial planning. IMyGoals website allows you to understand your financial profile and build a plan. Rupee Managers financial planning toolkit helps in recording your current situation, goals, risk

cover and financial plan. The software by InvestPlus looks at different facets of personal finance. MProfit, a desktop portfolio management software helps you to manage assets online.

Other Sources: There are various small tips which we display on our social media page from time to time to help

you in planning. Our Dilberts post for example, is uncomplicated and highlights all important parts of a financial plan you must follow.

Independent agencies like Money Life, which promotes financial literacy and consumer and investor initiatives, can help you in specific issues.

Independent financial advisors do product based financial planning, where you don't have to pay the advisory fee, but the commissions from the product suffice for the adviser. However, we don't subscribe to this view.

Another source of help can be your friends and relatives. However, the help provided from this source is not professional and therefore must not be followed blindly. Further, friends and relatives would advise based on their own experiences and this may not be applicable to your financial situation.

The above Do-It-Yourself resources may not give you the advantages which a professional planner brings to the table. Nevertheless, these can be good starting points and can enhance your knowledge considerably. Start today and use these resources to understand your finances. * Source: Ranjan Vermas blog on Top 10 Personal Finance Resources in India Disclaimer: We do not have commercial interest in any of the products mentioned above.

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All about Retirement Planning

The retirement corpus you need, adjusted for inflation, is likely to be substantial. The

normal PF and PPF savings are not adequate in majority cases. While you plan for

your retirement, ensure you have a decent health cover, start early to get

compounding advantage, gradually de -risk your portfolio as you move towards

retirement, review other financial goals , create regular returns, pay off debts and

focus on retirement savings.

The retirement corpus should sustain your current lifestyle after retirement as well. When you factor in inflation, you will realize that the amount you need on retirement is much higher. Heres what can be done to build your corpus, to help you live a comfortable retired life: Ensure you have adequate risk cover for your life and your health. Post retirement, purchasing

insurance policies may be impossible or expensive due to the age factor. Hence you must ensure you are adequately insured.

When you have about 10-12 years left for retirement, take a stock of your retirement corpus with the present level of investment. If you realize you are falling short of the target, then increase your retirement contribution. When a majority of your investments are exposed to equity instruments, you can achieve your retirement corpus in a easier manner than when compared to debt exposure. However, make sure this suits your risk profile.

When you get closer to retirement, at say, five years or so, you should look at gradually de-risking your portfolio. This is to insulate your retirement portfolio from volatile market movements, which can reduce the value of the corpus. However, you must not completely move your investments to debt, as returns may not match up to inflation. Therefore you should always leave a small portion of your portfolio in equity-based investments.

When you are nearing your retirement, you may have to meet important goals of your life like your childs post-graduation or your childs wedding. When you receive any windfalls or inflow of a large lump sum amount when you are nearing retirement, use this to meet your goals and do not dig into your retirement savings.

Invest in instruments which will help you give regular returns after your retirement. Examples of such investments are fixed deposits and dividend mutual funds.

Repay your debt before you retire. Home loan is the most important liability of any individuals life. If you do not repay your debt before you retire, this will cause a strain on your cash flows post retirement. This necessitates a larger retirement corpus. Hence make sure you have no outstanding liabilities when you retire.

Saving is always worthwhile, and it is never too early or too late to start saving for your retirement. Retirement savings is usually an ignored concept. Make this a priority. A well-structured financial plan can help you lead an easy, stress-free retired life.

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11 Smart Tips to buy your Life Insurance

Before you buy such a long term product, let's get som e smart checks done. Follow a rational approach to decide the cover, look at the features and your requirements and select the Company, try and split the cover across two companies, avoid tenor beyond your retirement age, buy through an adviser if he a dds value, fill in all information yourself, avoid combining insurance and investment, prefer online for cost inefficiencies, opt for MWPA and avoid single premium policies.

Buying a life insurance? We recommend you to consider the following guidance.

1. Decide the amount of the cover and your budget: You can use popular calculators available on internet on various personal finance websites and arrive at a value of the additional life insurance you need for yourself. Remember that Insurance works on a principle of indemnity. This means that you should look at Insurance to indemnify against the loss, and not to make a profit. Read our earlier article on 22-Nov-2013 in this column to get more idea about how you should calculate your life insurance requirement.

2. LIC or Private Sector Players: LIC has an excellent goodwill and a track record. This also generally means a significantly higher premium you pay, for term plans, as an example. The Private sector players on the other hand are far more price competitive due to online model and other factors. Based on your budget, preference and amount of cover, you can decide if you like to go for LIC or one of the Top Private Sector player.

3. Split the cover: If the amount of cover is high, say Rs. 50 Lakhs or above, then you should split the cover across two companies. This has two important advantage. If your family makes a claim upon your death and if one of the Company rejects the claim and if the other one settles the claim then your family has a stronger case to approach the regulator and ask for intervention. Another advantage is that you can have flexibility to continue one policy after few years and surrender the other one, if your insurance requirement has reduced.

4. Duration of the Policy: Your life insurance need is a function of your financial liabilities. If you have surplus financial assets to take care of your financial liabilities, then you dont need to spend on life insurance cover. In most cases, with increasing age, your financial assets increase and your financial liabilities decrease, progressively. Once you retire, the economic dependence on you reduces drastically. We normally advise to take cover with a duration that ends near your retirement age.

5. Declarations: Remember that honesty is the best policy in life. We suggest you fill in the application forms yourself and take adequate care to disclose all material facts. Hiding information about your present medical status (e.g. Diabetes, High BP) is not in the best of your interest. With medical advancement, insurance companies have access to superior techniques that bring out the true picture of your health, anyway.

6. Buy through an Adviser or Direct? Check with your adviser on the level of service that he can provide to you. You should ask him to present you a comparison of product with his recommendations. Your adviser may add value in case of premium loading, medical tests, MWPA, Insurance dmat account opening and most importantly, help your family to raise a proper claim when you are not around. You should understand if going through an adviser will increase your

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total cost. Based on this, the level of services being provided and value being added, you could decide if you need an adviser to assist you.

7. Which Policy to buy? Study the comparison of leading insurance policy on various websites on internet. Compare your requirements against the product features and narrow down your search to 2-3 good policies. Consider visiting 2-3 websites and review their recommendations. Avoid depending upon a single source of recommendation. Review benefit illustration table before you finalize a policy. For a term plan, there is obviously no benefit if you survive the policy maturity. However, we still recommend you to review the benefit illustration table as you will be able to identify any hidden costs.

8. Insurance and Investment. Normally, treating your insurance and investment separately works out far better for you. When Insurance and Investments are combined, you are likely to be going in for a complex product structure like ULIP. These are also likely to be expensive. In the best of your financial interest, taking an online term plan and using rest of the surplus for goal based investments as per your risk profile, is likely to be a far better option.

9. Buy Online or Offline? We strongly recommend you to buy an online term plan from any of the top players. Buying online is convenient, efficient and likely to save a lot of money for you.

10. MWPA. Getting a policy issued under Married Womens Protection Act (MWPA) will ensure that upon your death the insurance proceeds go to your family and cannot be used to pay your liabilities, if any. This is helpful when you are a businessman or a professional with a liability exposure.

11. Regular Premium or Single Premium. Regular premium is likely to give you a better opportunity to absorb the tax benefits. In a single premium policy, your effective cost of insurance may work out higher if you die in the early years as you would have paid in advance for all the years. You may have a better use of money for other financial goals. With more and more innovative features coming in, it makes sense to retain the flexibility with you. So normally it makes sense to go for regular premium policy. In case you do not have a regular income source and would conservatively likely to ensure that insurance is in place, once and for all, then single premium policy may be your preference.



6 Smart Tips to take your health cover

A health cover is one of the most important insurance covers you should necessarily

have. However many people do not consider purchasing a health insurance as they

think the cover provided by their employer is sufficient. Here are some smart tips for

you to purchase a secondary health cover.

A health cover is a must have. However many people do not consider purchasing a health insurance as they think the cover provided by their employer is sufficient. Here are some smart tips for you to purchase a secondary health cover.

We often hear our clients saying that I dont need to take Health Insurance separately as I am getting covered by my Company. Well, we strongly recommend you to consider a secondary health insurance for below reasons:

1. The amount of the Company Cover may not be sufficient 2. Your Company can change the Medical scheme in future 3. As you grow, you may develop medical problems and may not get a new health policy 4. If you change the Job, the new Company may not have an equally good scheme or may not

have a scheme at all, if you join say a start-up 5. Not all Companies cover your parents

Now, if you decide to go in for a secondary health cover, then here are few smart tips for you to determine what kind of cover and amount you should opt for:

1. Current insurance cost: First, please review your current cost of insurance as a % of your total income. As a broad guidance, we suggest that your total yearly cost of insurance should be around 10% of your yearly take home income.

2. Keep in mind your Age & Medical History: If you are in your 40s, its a good idea to start investing in a solid secondary health cover. Based on your present health condition and family history, you can decide the type of cover and amount of the coverage. In addition to the normal health cover, now there are specific policies for Sugar & Heart patients.

3. Go for smart features: As you are likely to continue using your Companys policy as a primary health cover, we suggest you opt for a high no claim bonus policy. Private sector leads with lot of innovative features like high amount of no claim bonus, combination of Individual + Family Floater cover and no sub limits for the claim purpose.

4. Take the right amount: You can decide the amount of the coverage based on your current lifestyle, medical situation, your location (i.e. Tier 1, Tier 2 or Tier 3 town) and available budget. As a broad guidance, we generally recommend our clients to take Rs. 10 Lakhs family floater health cover. Based on the specific situation this can be far higher or even lower.

5. Select the right Company: Here you broadly have 3 choices. You could go with National Insurers, Private Sector Players or opt for the Group Health cover by Nationalized Banks. With competitive pricing and innovative features, we believe that private sector policies generally score higher over National Insurers. Group Health cover by Nationalized Banks are very cheap and often the only option for people above 65 years of age. However, the service levels and sub limits in the policy

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can be a constraint. We suggest you to study the comparative analysis available on many personal finance blogs.

6. Prioritize: You are likely to be Mr. Busy At Work. We normally recommend you to prioritize Health Insurance before Term Plan (Life Insurance) as the probability of hospitalization is higher than death and with increasing age the entry becomes difficult. Again this depends on client specific situation but we normally recommend the personal finance actions in this order: 1. Obtain health cover 2. Setup emergency corpus 3. Take term plan 4. Setup SIPs for Goal based savings 5. Take satellite covers (e.g. Critical Illness, Personal Accident, Hospital Day Cash)



So what's the right way to invest in Equities?

Right methodology, goal based investment and your commitment is a key to a successful investing in Equity MFs. Here are the key considerations:

1. Align investment to your goals 2. Ascertain Capacity to take Risks 3. Design your MF portfolio 4. Identify top performing MFs 5. Invest through SIPs & withdraw through SWPs 6. Keep a regular check on your MF portfolio 7. Hire an expert 8. Manage logistics

You can invest in Equity Market through Directly buying Equity Stocks, Buying Mutual Funds, signing up for a Portfolio Management Schemes or taking an exposure through Futures & Options or structured products. As a best practice, we normally recommend all our clients to invest in equities for long term through mutual funds as a core strategy. Here is the methodology that we suggest. 1. Align investment to your goals: Decide the objective and duration of your investment. The Equity

MFs are suitable only for a long term period i.e. 5 years or more. Goal based investment is one of the best way of building a portfolio.

2. Ascertain Capacity to take Risks: Equity investments come with market risks. You should not invest in Equity if you are not comfortable with fluctuations and possibility of losing capital especially in the short term. You can use Risk Assessment tools on internet. You can decide exposure to Equity based on your age, risk profile & goal requirements.

3. Design your MF portfolio: We normally recommend actively managed Large Cap Equity MFs & based on your risk appetite, you can also invest in Mid & Small Cap MFs. Additionally, consider taking an exposure on specific sectors up to 10% of your MF portfolio. Ideally, you should not invest in more than 4-5 MFs. Some experts prefer passively managed funds given their lower cost structure & market linked returns.

4. Identify top performing MFs: Check www.valuereserachonline.com or www.morningstar.in to research the right schemes for you. Compare rankings on two sites for a second opinion. Your Financial Planner may have paid research tools and better insights. Remember that past performance is not a guarantee of future performance. Try & diversify across AMCs & stick to those AMCs which have a long standing track record.

5. Invest through SIPs & withdraw through SWPs: Leveraging SIPs (Systematic Investment Plans) is a core to a successful investing in Equities. Invest at least for 3 years through SIPs and hold the investments at least for 5 years. When you have to withdraw, again use SWPs (Systematic Withdrawal Plans). Start SWPs say a year or two before your goal is due. Keep taxes in mind.

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6. Keep a regular check on your MF portfolio: Assign Buy, Hold or Sell ratings to your MFs at least once in six months. However, avoid shuffling your portfolio very often. If your Fund is not performing well, you can stop the SIP and see if the fund recovers in next few quarters. You should also check the risk (fluctuations). Continue investing if your fund is giving returns higher than the category average & if you are comfortable with the volatility. We believe that 12% CAGR is a reasonable return expected from Equity MFs in the current scenario.

7. Hire an expert: Equity investments are not a rocket science. Following above steps, you are likely to get on a good start. That said, consider outsourcing this job to your Financial Planner if you are unable to dedicate time or if you have a large size portfolio.

8. Manage logistics: Invest time in getting access to transact online & getting monthly email updates from your fund houses. You may have to fill in additional forms. This can save lot of running around.

Happy Investing!



Top 5 Investment Mistakes to Avoid

It is important to have a sound investment plan in place and ensure that we do not make the following mistakes while investing our hard earned money:

1. Lack of financial Plan and Budget 2. Making Investments without really understanding them 3. No Diversification of Investments 4. Family is unaware of the financial state of affairs 5. Holding on to non performing investments

We all know that making sound investments as per our goals is important. Here we list out 5 deadly investment mistakes that one should stay far away from.

1. Lack of Financial Plan and Budget: Some of us make random investments with no sound plan in mind. We buy some stocks on the basis of some friendly tips, make some last minute tax investments on 31st March without really understanding what those investments are and whether they are suited to our financial profile. We should make a financial plan listing out goals, income, expenses, dependents etc. on the basis of our risk profile and then execute the financial plan. It is also important to have a budget in place and stick to it. Otherwise, we could spend beyond our means and will not have money for important things.

2. Making Investments without really understanding them: Of course, you do not have to be an investment whiz, but you should be aware of the instruments, assets or businesses that you are investing in. Understand the returns expectation or how the business is organized. If you are not aware, you should make an effort to learn more or avoid investing in it.

3. No Diversification of Investments: You need to make investments in different kinds of assets depending on your returns expectation and financial goals. If you invest only in 1 or 2 types of assets, and there is a downtrend in that asset market, your financial plan will backfire.

4. Family is unaware of the financial state of affairs: More than one person in the family should know all financial details like insurance claim and medical claim details. Physical assets like investment documents, gold, bond certificates should be kept safe and secure. Banking and Demat account passwords should be kept secure but there should be a way for someone trustworthy to be able to access them if required.

5. Holding on to non-performing investments: Our investment may not perform as per expectation. It could also happen that the asset class was on a bull run for a temporary period and then is priced by the market to its real value. Many times we hold on to such loss investments, thinking it will bounce back in the long run. It is better to sell the non-performing investments and use that money to invest in some better quality asset.

Investment of our hard earned money is critical for our as well as our familys future and we should ensure that our investments work just as hard as us. Therefore we should avoid costly investment mistakes.

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6 Smart Ways to Deploy your Surplus Money

If you have got extra cash in your hands, it is important not to squander it all away. It is better to look at your current financial situation and take the best course of action by saving, investing appropriately and paying down loans. You can use it to reward yourself occasionally as you have earned it. You can also use it to contribute to the community in different ways.

This is one place where everyone would like to be in- have much more cash than required or having income that is much greater than expenditure. This could be due to a sudden windfall, inheritance, bonus, second income etc. What should you do if you are in this happy place? For starters, you should feel good about it and then be very careful with it. Many of us are less careful if the money is not from our regular income and are tempted to splurge by buying expensive things or experiences or use it to buy lottery tickets or for gambling. It is obviously sensible to make better use of it so that it helps our future financial security. The important steps would be to save first, invest and then pay off debts. We have listed below various options that you can choose from: Keep a Sufficient Emergency Corpus: If you have extra income or cash or gets some windfall, you should save it to ensure there is adequate cash for exigencies. Depending on whether you are young or have dependents or are close to retirement, the amount of cash for emergency purposes is different. When you are young, it is recommended that you should have cash up to 2-3 months of living expenses (Expenses for food, utilities, housing etc.) as an emergency stash. When you have a family and/or loans, it is generally said that you need up to 5-6 months of living expenses as ready cash. When you are nearing retirement or are retired, a sum close to 2 years of living expenses is recommended as readily available cash. Realign Financial Plan: If you still have excess cash after satisfying the conditions above, you should consider investing in some assets as per your financial plan. If you do not have a solid financial plan in place, you should consider making one. It will help you decide where to invest the excess money. You might be tempted to put your money on that hot stock tip that you got from your friend or expert trader in the neighborhood. But that is not such a smart move. You should make an informed decision based on current market conditions and personal financial standing. You should invest based on asset allocation suitable for you. You can also take the help of your financial planner/advisor to put the money in the best investments to get good secure returns. You could also draft a will and then update your investments based on the same.

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Pay off Debts: It is a good idea to pay off some part of your loans- educational loans, housing loans. Lower debt in your portfolio is always better. It also is a feel good factor to know that you have paid off your loan installments in advance. You should target the high interest loans first. Of course you should check the clauses/penalties/processing fees etc. for prepayment and then decide if the pre payment is profitable or not. You should also remember to consider the tax benefits you receive from certain loans like home loan and education loan and balance prepayments accordingly. Invest in yourself and family: You should reward yourself for managing to earn more money as well. You can indulge in something that you always wanted or an experience that you always wanted to have. You can spend it on your family as well. You can acquire a new skill that you always wanted to have. You can pursue a hobby or two more seriously. You could also take up a course for inner healing like Vipassana. You could also take up courses or certifications that will update your professional skillsets and enhance your career. If you are an IT professional, you can consider PMP certification. You could take up executive MBA programs. This kind of investment will definitely enrich your life and career. Give back to Society: Another way to utilize excess cash well is to give back to the society. You could support a cause that is dear to your heart. You could donate money to charitable institutions and/ or orphanages that work towards noble causes. If possible, you could take a break from your daily job and participate in some voluntary work for the benefit of the society. For example, you can sign up for short-term assignments with (UN) United Nations or volunteer for some time at Teach For India to teach Indias underprivileged children. These steps will lead to a more fulfilling life. Take a break: Consider going on a nice vacation with your family & friends. Give them a surprise. Go read the book that you always wanted. Go close to the nature. Spend some time and rejuvenate yourself. Listen to your favorite music. Relax & unwind. You will be back with far more energy and positivism. The bottom line is that extra income should be saved, invested, used to pay off some loans and also should be used to reward yourself once in a while as you have earned it and therefore deserve it. You can also utilize it to give back to the community.



How to leverage your Salary Structure to minimize Tax Liability

Cost to Company (CTC) is the total salary that is agreed upon as an employees compensation. Net salary is the amount of money that comes in his or her bank account post taxation. One should ensure that the various perks, allowances available are used judiciously to maximize the net salary.

The magical three words for most persons employed in the corporate world are Salary is credited. But there is a big difference in the compensation mentioned in your appointment letter and the amount that finally gets credited in your bank account and some of us get a shock looking at the difference. Therefore it is very important to understand the salary structure and also ensure that at the time of joining a company, one structures his or her salary along with the HR department to maximize the take home pay (net amount that gets credited to the bank account). We list down some ways to maximize salary and minimize tax liability: Medical Allowance: Medical Allowance up to Rs. 15000 is allowed as deduction from the salary amount that is used for tax computation provided bills for the amount are submitted to the employer. Telephone Reimbursement: Amount paid towards telephone bills are exempt from tax up to a maximum of Rs. 12000. You will of course have to submit the relevant bills to your employer. LTA: LTA stands for Leave Travel Allowance. The Income-Tax department allows you to claim tax exemption on the amount spent on travel for you and your family twice in a block of four calendar years. It is a good tax saving device for salaried employees. Read our article on LTA to understand it better. Food Allowance Coupons: Food Allowance coupons are a good way to escape the tax net, as the amount paid in this manner is not taxable. Nowadays of course some of the stores have a surcharge on the bill if coupons are used to pay but the coupons are redeemable freely at most restaurants. HRA: House Rent Allowance (HRA) is another component of your salary, which will help you lower your tax liability if you stay in a rented house. The amount exempt from tax is the lower of the following: (a) Actual HRA received (b)50% of your Basic Salary if you live in the metros or 40% of Basic Salary if you live elsewhere (c) Rent paid in excess of 10% of Basic Salary. Perks like transport, driver, club memberships: Companies offer perks like driver facility, transport to and from office, club memberships, magazine subscriptions. Depending on your requirements and interest levels, you can have such perks as part of your gross salary and this would be exempt from tax in your hands.

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Superannuation Scheme: Senior level employees get the benefit of a superannuation scheme in which he or she makes a contribution and the amount exempt is up to Rs. 1 lakh. It is important to ensure that one submits proper bills and does not misuse the facilities provided by the company. Your employer may or may not be offering the above allowances and perks to you. Hence it is important to discuss with your HR department, take a look at your tax structure and the various salary components available from your company as part of the salary package and analyze if you have an optimum salary structure.



Everything you wanted to know about Estate Planning

Estate Planning is an important part of financial planning. It is necessary to have an estate plan in place so that your wealth is transferred to intended beneficiaries without hassles. It is not a simple process and therefore enlisting the help of a financial planner or a professional will help you in getting it right.

Estate means the net worth of a person. Estate planning refers to making arrangements such that your wealth is taken care of and distributed to beneficiaries, as you desire after your death without too many legal hassles. It is an important aspect of personal finance and financial planning, irrespective of how big or small your net worth is in your opinion. It is better to take professional assistance for estate planning, as it is a tough task. Here are some guidelines. Creating a will: It is important to draft a will. The will should state the wealth that you have and how it should be divided between your beneficiaries. It should also contain information about how donations should be taken care of. It can be either handwritten, in a computer file or there are even online services that can draft your will. It is important to name a person who will execute the will when you are not there. You should sign the will in the presence of witnesses. For more information on creating a will, you can read our article by clicking here. Setting up a Trust: The other way to secure the transfer of ones net worth as desired is to set up a trust. This is normally done when the intended beneficiaries of the estate are not ready to take up the responsibility. The trust will take care of the estate and when the beneficiaries are ready to take up the estate, it will be handed over to them. Division of assets and liabilities among heirs: Estate Planning involves listing down legal heirs who may not necessarily be relatives and detailing out who gets which part of the estate. Documentation of this aspect is important so that there is no confusion on who gets what. Nominating a guardian for dependents: If you have any dependents, the estate plan should state how they should be taken care of in your absence. The plan should highlight who should be responsible for the dependents. For example, if you are taking care of disabled relatives, you should detail out how they should be taken care of when you are not there. Financial Planning: As you know, financial planning is an ongoing exercise, it is important to have a broad outline of steps in place so that the ones taking care of your finances and do what is required to reach the financial goals set. Review your estate plan: It is important to review/update the plan once in a while. Some reasons which could mean an update to the estate plan

Value of net worth changes Your relationships changes like you have a child or you remarry

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Laws related to estate planning change.

It is important to have an estate plan in place. Otherwise the estate would be given to legal heirs, as per the existing laws of the state, and not in the manner you had in mind. It has to be in place so that there are no complications on how your wealth should be distributed after your death.



20 Tips To Come Out Of Liquidity Crisis

If you are in need of money, let's get creative. There are many ways you can obtain low

or no cost loans. You can reduce your expenses and take steps to progressively increase

your income. You can also check if you can leverage your financial assets.

When you have purchased a new house and settling down with the EMI or say spent a lot of money recently in your marriage, you may face a severe liquidity crunch, unless planned well. This means expenses shooting far higher than your income. Once you start using expensive credit card, home top-up or personal loans, you start getting stuck in a debt trap. So if you are in such a crunch, consider below suggestions. Obtain Low or No Cost Loans

1. Request an interest free loan from your or your spouses employer. 2. Take loan against your Gold 3. Use the home loan porting facility & reduce the EMI. You will have to pay a one-time charge

of around 0.5% of the outstanding loan to the new bank. Your existing bank may as well allow you to switch to a cheaper rate loan with a similar one-time charge.

4. Withdraw or take a loan from your insurance policies 5. Get a loan from your parents or your spouses parents. 6. Borrow money from a close relative or a good old friend at say 10% p.a. This is far cheaper if

you are using the credit card to fund your deficit.

Reduce the Outflow 1. Extend the home loan from say 20 years to 25 years. 2. Target say 10% cut in your household spend. Announce this in your house. Lead by example. 3. Look at your Top 5 spends. If the discounts are not possible, ask them to give more quantity

and or value at the same price. If not, hunt for bargains. Use internet. 4. Defer expenses to next week, next month, next quarter or next year. In a liquidity war, say no

to every rupee that wants to go out of your pocket. 5. Stop all financial investments till the time you reach a surplus situation.

Leverage Assets 1. Sell non-performing investments & pay-off most expensive liabilities. 2. Surrender insurance policies not earning good returns & reduce liabilities. Use the surplus by

not paying premium to service the remaining loans. 3. Withdraw from Provident Fund. This can take 2-6 months. Use RTI if you get stuck. 4. Withdraw from your Public Provident Fund (PPF). Use internet calculators to know the

eligibility. 5. Check for hidden assets. Any inheritance that you can leverage right away? Any NSC

certificate or Fixed Deposit forgotten in your wifes cupboard? Any Gold that you purchased



for investment purpose? Any pending refund from Income tax? Old physical shares? Any loan you gave to a friend?

Increase your income 1. Are you taking all tax benefits? Can you restructure your package with your employer? Any

claims pending for reimbursements? Can you stop your Voluntary PF contribution, if any? 2. Is there a way you can increase your income? Can you take part time tuitions or write on

blogs? Check out freelancer websites for opportunities. 3. Can you change your profile and earn more, say by joining sales team? Time to change your

job? Working abroad is generally very lucrative. But you will first have to create an emergency corpus.

4. Can your spouse earn more by changing the job? If she is not working, can she work part time and earn? Check out freelancer websites for opportunities

Best Practices 1. While you make these efforts, below best practices are worth keeping in mind. 2. Take a few days leave from work & focus fully to achieve your liquidity goals. 3. If you have multiple loans and multiple sources of funds, make a mapping table. Take the

most expensive loans and map them to the cheapest source of funds. 4. Take one step at a time. First, get from deficit to neutral situation. Then move from neutral to

surplus situation. 5. Have Plan A & Plan B & Plan C. One of them has to work in your favor. 6. Use Personal Finance Ratios. As an example, as you progress, your debt repayment as a % of

monthly income has to come down. Your savings ratio has to go up. Your solvency ratio has to improve.

7. We wish you a best of luck, on your way to prosperity



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