Blog

Zindagi Na Milegi Dobara is a movie that celebrates life and friendship. It tells the story of three friends who go on a road trip in Spain and overcome their fears and insecurities. The movie has many lessons for personal finance too. Here are some ways to be a Zindagi Na Milegi Dobara investor:

Live in the present and enjoy the journey.
The movie shows how the three friends live in the present and enjoy the journey of life. They do not worry about the past or the future. They also do not let their work or money interfere with their happiness. Similarly, in personal finance, you should live in the present and enjoy the journey of wealth creation. You should not worry about the past or the future. You should also not let your money or work interfere with your happiness.

Here are some tips for living in the present and enjoying the journey of wealth creation:

1. Set financial goals, but don’t let them consume you.
2. Focus on your income and expenses right now, not what they might be in the future.
3. Take some time each day to do something you enjoy, even if it’s just for a few minutes.
4. Spend time with your loved ones and make memories that will last a lifetime.

Face your fears and overcome your challenges:
The movie shows how the three friends face their fears and overcome their challenges. They do various adventure activities like skydiving, scuba diving, and bull running. They also confront their personal issues like commitment, divorce, and death. Similarly, in personal finance, you should face your fears and overcome your challenges. You should do various financial activities like budgeting, investing, and planning. You should also confront your personal financial issues like debt, inflation, and retirement.

Here are some tips for facing your fears and overcoming your challenges in personal finance:

1. Start small. Don’t try to tackle everything at once.
2. Find a mentor or coach who can help you.
3. Break down your goals into smaller, more manageable steps.
4. Don’t be afraid to ask for help.

Follow your passion and fulfill your dreams:
The movie shows how the three friends follow their passion and fulfill their dreams. They pursue their hobbies like photography, painting, and poetry. They also achieve their goals like marriage, reconciliation, and freedom. Similarly, in personal finance, you should follow your passion and fulfill your dreams. You should pursue your hobbies like traveling, reading, or music. You should also achieve your goals like buying a house, educating your children, or retiring early.

Here are some tips for following your passion and fulfilling your dreams in personal finance:

1. Identify your passions: What are you passionate about? What do you love to do?
2. Make a plan: Once you know what you’re passionate about, create a plan to make it happen.
3. Set financial goals: How much money will you need to achieve your goals?
4. Start saving and investing: The sooner you start saving and investing, the sooner you’ll be able to achieve your goals.

Following these tips will help you become a Zindagi Na Milegi Dobara investor. You’ll be able to live in the present, face your fears, and follow your passion. You’ll also be able to achieve your financial goals and live the life you want.

Planning for retirement is an essential aspect of personal finance. In this blog post series, we will explore the key steps to secure a comfortable retirement and achieve financial freedom. Stay tuned for valuable insights and practical tips!

Planning for retirement is often an overlooked aspect of personal finance, especially in a fast-paced world where immediate financial goals take precedence. However, it is crucial to start early and prioritize retirement planning to secure a comfortable future and achieve financial freedom. In this blog post series, we will delve into the key steps and strategies for effective retirement planning, providing valuable insights and practical tips along the way.

Step 1: Set Clear Retirement Goals

The first step in retirement planning is to define your goals. What kind of lifestyle do you envision for yourself during retirement? Would you like to travel the world, spend time with family, pursue hobbies, or start a new venture? Understanding your retirement dreams will help you determine the financial resources you will require to achieve them.

Step 2: Assess Your Current Financial Situation

To effectively plan for retirement, you need to evaluate your current financial standing. Take stock of your assets, investments, savings, and debts. Consider consulting a financial advisor who can assist you in assessing your financial situation comprehensively. By understanding your current financial status, you can set realistic targets and develop an appropriate retirement plan.

Step 3: Calculate Your Retirement Needs

Once you have a clear vision of your retirement goals and have assessed your current financial situation, it’s time to estimate your retirement needs. Consider factors such as daily living expenses, healthcare costs, inflation, and potential emergencies. While it may seem challenging to predict your expenses decades in advance, having a rough estimate will provide a solid foundation for your retirement plan.

Step 4: Create a Retirement Savings Strategy

There are different types of retirement plans in India, such as the National Pension System (NPS), Public Provident Fund (PPF), Employee Provident Fund (EPF), mutual funds, annuities, etc. These plans offer tax benefits and help you save for retirement. You need to understand the features and benefits of each plan and choose the one that suits your needs and preferences.

Step 5: Diversify Your Investments

Diversification is a key principle in retirement planning. Spread your investments across different asset classes like stocks, bonds, real estate, and international markets. Diversifying your portfolio helps reduce risk and increases the likelihood of earning returns even during market fluctuations. Regularly review and rebalance your investments to ensure they align with your changing circumstances and risk tolerance.

Step 6: Prepare for the Unexpected

Life is full of uncertainties, and retirement planning should account for them. Consider investing in insurance policies like health insurance, life insurance, and long-term care insurance to protect your assets and provide a safety net for unexpected events. Adequate insurance coverage ensures that your retirement savings are not depleted by unforeseen circumstances.

Step 6: Prepare for the Unexpected

Life is full of uncertainties, and retirement planning should account for them. Consider investing in insurance policies like health insurance, life insurance, and Critical insurance to protect your assets and provide a safety net for unexpected events. Adequate insurance coverage ensures that your retirement savings are not depleted by unforeseen circumstances.

Conclusion

Retirement planning is a journey that requires careful thought and consistent effort. By setting clear goals, assessing your financial situation, calculating your retirement needs, and implementing a savings strategy, you can unlock a financially secure future. Remember to diversify your investments, prepare for unexpected events, and regularly monitor and adjust your retirement plan. Stay tuned for more insightful blog posts on retirement planning, as we delve deeper into each step and explore additional strategies to help you achieve your financial freedom and enjoy a comfortable retirement. #RetirementPlanning #FinancialFuture

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a pension scheme available for senior citizens.

The Indian Government launched a pension scheme and it can be taken from 4 May 2017 to 31 March 2020. In the 2018-2019 Budget Speech, the Government of India increased the maximum limit to Rs.15 lakh under the Pradhan Mantri Vaya Vandana Yojana scheme. 

The scheme can be bought via online and offline modes from Life Insurance Corporation (LIC) of India. The main aim of the scheme is to provide senior citizens with a regular pension during the time when there is a fall in interest rates.

Eligibility of PMVVY:
Given below are the eligibility criteria that individuals must meet in order to be eligible for the PMVVY scheme:

• Minimum age of entry: The individual must be 60 years or higher.
• Maximum age of entry: There is no limit.
• Duration of the policy: The tenure of the policy is 10 years.
• Minimum pension that is earned: The minimum pension for a month, quarter, half-yearly, and yearly are Rs.1,000, Rs.3,000, Rs.6,000, and Rs.12,000, respectively.
• Maximum pension that can be earned: Rs.10,000, Rs.30,000, Rs.60,000, and Rs.1,20,000 is the maximum pension that can be earned for a month, quarter, half-yearly, and yearly, respectively.

The entire family is considered when deciding the maximum pension ceiling. The family under this scheme consists of the pensioner, his/her dependents, and spouse.

How to apply:

A form needs to be filled up and requisite documents need to be attached along with the form. One can also invest in the scheme online at the following link: https://onlinesales.licindia.in/eSales/liconline;jsessionid=ED994DB57C625E21BF155420814808A0

Documents required:

• Copy of PAN card.
• Copy of address proof (Aadhaar, passport).
• Copy of cheque leaf or first page of bank passbook of the account in which pension needs to be credited

• LIC’s annual bonuses come out of the valuation surpluses in policyholders’ funds. They are not guaranteed
• They are simple additions to your account and don’t compound.
• They are not comparable to other kinds of returns because they are calculated on your Sum Assured and not Premiums paid.

Strongly refuting social media rumors that it was in financial trouble. LIC (Life Insurance Corporation of India) has recently pointed out that it has just declared a record bonus of over Rs 50,000 crore to its policyholders for 2018-19.

Many investors flocking to traditional insurance plans are also attracted by their annual bonus declarations. The latest set of bonuses declared by LIC on its various schemes are available in this link.

https://www.licindia.in/getattachment/Bottom-Links/Public-disclosure/2018-19/Mar-2019/L-42-(Valuation-Basis-Individual)-Annexure-(1).pdf.aspx

The simple Reversionary Bonus
The word ‘bonus’ conjures up visions of a freebie in the minds of most of us. If a company whose shares you own declares a 1:1 bonus, you get a free share for every share you already own. If the company you work for suddenly decides to give you a hefty ex-gratia payment for Diwali, that’s a bonus you  look forward to.

But bonuses declared by life insurance companies are not really freebies, but come out of the valuation surpluses on their policyholders’ funds.

To explain, LIC’s main business is to provide life insurance covers to policyholders who pay it an annual premium. Of all the policyholders who may sign up for life insurance, only a few will likely pass away within the policy term, allowing their nominees file a claim.

Now, the premiums collected from all policyholders is invested in a Life Insurance Fund that is managed by the LIC. This Fund is meant to pay out death claims to the beneficiaries who claim it each year. But how does LIC know if the sums sitting in its Life Fund are enough to meet the claims of all its policyholders’ who may die in future?

To gauge this, it appoints a specialist known as an “actuary” to do a comprehensive valuation exercise of all its insurance liabilities at the end of each year, based on assumed mortality rates. Once this valuation exercise is complete, LIC may find that the Life Fund that it is sitting on is in excess of the liabilities forecast by the actuary.

It is this sum, known as valuation surplus, which is distributed to policyholders in the form of annual bonuses. In LIC’s case, 5 percent of the valuation surpluses that are discovered each year go to the Central Government, which provides a sovereign guarantee on LIC’s life policies. The remaining 95 per cent is distributed as bonus to policyholders.

At the end of FY19, LIC had Rs 28.31 lakh crore in its Life Insurance Fund and the actuary estimated its net liabilities at Rs 27.78 lakh crore. The difference of Rs 53,211 crore was the distributable surplus. Of this, the Government bagged Rs 2660 crore, allowing Rs 50,551 crore to be paid out as bonus to policyholders in LIC’s traditional plans.

Though LIC policies have paid out steady Simple Reversionary Bonuses each year, you as an investor need to note that these are not guaranteed. Should the LIC’s Life Fund fall short of its actuarial valuations in any year, it has every right to skip the Reversionary Bonus.

The bonus paid out of the valuation surplus is called a Simple Reversionary Bonus. Though LIC policies have paid out steady Simple Reversionary Bonuses each year, you as an investor need to note that these are not guaranteed. Should the LIC’s Life Fund fall short of its actuarial valuations in any year, it has every right to skip the Reversionary Bonus.  

Do note that the Reversionary Bonuses declared by LIC are calculated as a proportion of the Sum Assured in your policy and NOT the accumulated premiums paid by you. For instance, if your insurer has declared a bonus of Rs 45 per Rs 1000 on your endowment plan with an annual premium of Rs 25000 and a Sum Assured that is 20 times of Annual Premium, your bonus will amount to Rs 22500 (Rs 500,000 x 45/1000).

The other bonuses
Apart from the Simple Reversionary Bonus, many LIC policies also offer two other kinds of bonuses. One is Guaranteed Additions, often for the first few years of the policy. As the name implies, this is a fixed sum added to your policy and is generally calculated as a percentage of Sum Assured.

It will be paid irrespective of the valuation surpluses made (or not made) by LIC in any given year. In the above example, a Guaranteed Addition of 3 per cent for the first five years will mean an annual addition of Rs 15,000 to your account (3 percent of Rs 5 lakh).     

A second form of bonus is the Final Maturity Bonus or Loyalty Addition. This is usually one-time sum promised to you at maturity of the policy, provided you stay with the policy (paying regular premiums) for a minimum number of years.

Final Maturity Bonuses or Loyalty Additions are usually not quantified at the beginning. They are paid out of LIC’s surpluses after reversionary bonus payouts.

What you need to know
Now that you know how bonuses are decided and paid by traditional insurance policies, tempted to buy one? Well, there are three caveats to bear in mind.

One, bonuses in life policies work on simple interest basis. Unlike the returns on bonds or cumulative fixed deposits, the bonuses declared by insurers are simple and not compound additions to your Sum Assured.  This means that, while declaring a bonus for any particular year, the insurer does not factor in all the past bonuses you have earned to calculate the payout.

Two, you do not receive any of the bonuses in your hand and stand to receive them only at maturity. Though insurers may declare a simple reversionary bonus or guaranteed additions every year, these sums will add to your Sum Assured and will be eventually paid to you only at maturity. If you surrender the policy midway, you may not receive them.

Three, given that they are calculated on the Sum Assured under your policy and not on the premiums you pay, they cannot be compared to the returns on your other investments, which are calculated on your principal.      

Source: www.primeinvestor.in

For better or worse, money is a big part of most people’s lives and it’s easy to get caught up in financial mistakes that will hurt you in the long run if you’re not careful.

Certain financial mistakes can wreak havoc on your financial future, leaving both you and your loved ones under the shadow of uncertainty. If you are constantly putting off decisions relating to insurance and investment planning, you may be doing a disservice to your financial health.

Read on as we discuss 5 such common financial mistakes that can have dangerous ramifications.

1. Not buying insurance(Term/Medical)

If you think buying insurance is a waste of money, you’re probably making a costly mistake. Insurance comes to the rescue to bail us (or our dependents) out of a serious crisis like no one else. One must ensure that they’re adequately covered. So that their family members are not left in the lurch after their demise. As far as life insurance is concerned, you’ll be well-advised to go for a policy with a sum assured that’s at least 10 to 15 times your annual income. You may also consider to go for a no-frills term insurance plan. It can get you adequate coverage without steep premiums, especially if you start the policy at a young age.

Also, in the present times of high medical inflation, it’s always advisable to have a comprehensive medical insurance cover for the entire family.To prevent precious savings or investment returns from getting drained to fund hospitalisation expenses. And no, your office-provided group health insurance policy may not provide adequate coverage or complete protection in the absence of important add-ons (like critical illness cover, pre- and post-hospitalisation cover, etc.). You should consider going for a personal health insurance plan with sufficient coverage amount and choose a plan that meets the medical requirements of all the policy beneficiaries.

2. Not having in place an emergency fund

Well, you may have no control over life’s uncertainties (like a sudden job loss or a family emergency), but you can definitely try to immune your finances from their impact by being farsighted. And having in place an adequate emergency fund is perhaps your best bet to that end. Ideally, you should set aside at least 3-6 months’ worth your expenses in a separate savings account as your emergency fund. And, contrary to popular opinion, it’s okay even if you build your emergency fund in a fixed deposit account and let it earn more interest than a normal savings account. You can easily liquidate it in minutes through your mobile banking application in the face of an emergency by losing just 1% of the interest value.

3. Not budgeting

For most people the word budget evokes a negative feeling, something that restricts us from living life freely. However, truth be told, reckless spending can lead to depletion of savings, emergency fund or investment capital in no time. Worse, this may leave you in an avoidable debt situation (and sink your credit score) that can put breaks on your journey to attain financial freedom.

It’s very important that you have in place a proper budget for your expenses and avoid random overspending to ensure you meet your important financial goals in time, like raising down payment fund for your home or setting up a retirement corpus (more on this in the point below). And yes, it’s better if you plan out even for your “desire spends” like vacations, gadgets, etc.

Here are some helpful pointers:

•  Allocate a realistic budget for your expenses (like groceries, conveyance, shopping, etc.) at the beginning of the month and try not to breach them
• Take help of a budgeting mobile app if need be
• Track all your expenses and look for ways to cut down on wasteful spends (like skip hefty gym memberships if you prefer to work out at home, ditch frequent cab rides if you can manage with public transport, start cooking at home if you spend a lot eating out, so on and so forth).

4. Investing without predefined financial goals

Setting precise short, medium and long-term financial goals provide direction to your investments. Once you have in place a specific goals, it becomes easier to channelize your savings and other investment returns to meet that goal within the time-frame. On the contrary, investing without proper goals may lead to confusion and you may have to struggle to arrange for funds to meet an important requirement at the last minute, something that could have easily been achieved if you had planned for it in advance.

One more thing: investing just to save taxes shouldn’t be your only financial goal.

5. Investing only in low-risk low-return instruments

It’s a fact that no one likes to lose money, but investing only in low-risk and low-returns instruments (like only fixed deposits or recurring deposits) can jeopardise your financial goals. In other words, not taking any risks is risky too. So, depending on your age and financial goals, one must look to intelligently spread out their investments in a number of low-risk, medium-risk and high-risk instruments so that one ensures they grow their wealth over time while keeping the overall risk factor under control.And avoid some financial mistakes.

This is important, especially to meet important goals like raising an adequate retirement fund. If you only invest in low-returns “guaranteed” instruments, you might find your fund inadequate to sustain your post-retirement life, especially when you consider inflation eating away value of returns and the rising cost of living. Things can complicate further as you might not have a regular source of income then.

As a result, it’s better that you add slightly riskier instruments in your investment mix too, like equity mutual fund SIPs and even real estate. That being said, it’s superlatively important that you have complete clarity on how different investment tools work, what’s the inflation-and-tax-adjusted returns and other exit loads, etc. before making any investment decision. Do thorough research, seek professional help if need be, but don’t take the plunge based on hearsay or assumptions.

These prudent strategies will go a long way to ensure you hold your ground in your journey to grow your wealth. 

Source:financialexpress.com

The importance of making a will.

A will is a written document that speaks for you after you die. It can communicate how you want your property and assets to be distributed; name a guardian for your children if you pass away before they reach adulthood; and leave specific instructions like arrangements for your funeral.

Ask anyone if they have made their will, and the answer you will probably get is ‘I don’t need it right now’. It is estimated that 80% of Indians do not have their wills made. Many reasons contribute to this inaction. Some of the most popular ones include:

• I don’t have a lawyer… making a will is too much bother.

• I’ve told my spouse and children of my intentions, that’ll do.

• It’s too soon to think about it. 

We’ve all come across or heard of instances of the mess that families deal with after the passing of a member who hasn’t left a will. The truth is that the benefits of having a will are many. 

1. A will makes it much easier for your family or friends to sort everything out when you die – without a will the process can be more time consuming and stressful.
2. If you don’t write a will, everything you own will be shared out in a standard way defined by the law – which isn’t always the way you might want.
3. A will can help reduce the amount of Inheritance Tax that might be payable on the value of the property and money you leave behind.
4. Writing a will is especially important if you have children or other family who depend on you financially, or if you want to leave something to people outside your immediate family.

How to make a will?

Making a will doesn’t have to be difficult or expensive. There are three common ways to create one:

As life changes, it is also best to revisit your will periodically or upon certain major life events to ensure that your will still reflects your desires. 

Resources: Money Advisors Services, UK,  Economic Times, Co-operators, The Balance.