Category Archives: Financial Planning

Time to review your portfolio & rebalance it!

 

Unknown11

Due to Global Factors like fall in Chinese stock market and domestic issues like delayed GST bill and no immediate positive trigger coupled with insane valuation of many small cap companies has led to a very negative and å fearful start for the Indian Share Market; it has already sent shivers down the spine of investors and traders community.

Should Investor Review Their Portfolio?

Yes; an Investor should always review their portfolio from time to time, but first we really need to understand the meaning of review. An investor can look at the daily price chart; Highs & Lows and then try to predict the stock’s price one month away, one week away or sometimes even one Hour. Many times investors end up buying stocks on the basis of its current market price rather than focusing on its core strength and Business fundamentals.

An Ideal investor is one who do not watch the market daily and stay away from the wagaries of market’s up and down movements in a day to day life. As long as you have paid a good bargain price and the business you had invested hasn’t changed dramatically, then there is no need to worry about the future. So a proper review of portfolio is required and one have to exit from overvalued stocks of his portfolio.

Should you stay invested in Medium to Longterm?

Yes; looking at the Indian economy and a fact that it is on growth track along with a political stabality, falling crude prices, increasing GDP and along with other positive factors; one should not remain invested based on their long term financial planning. We may become the largest economy among emerging markets and outshine China in growth terms.

This particular phase is unlike 2008 where negative sentiments were way too higher so keep investing money at every good correction you see and take a review of your current holding to incorporate some bluechip stocks as most of them are undervalued and avaialable at a great price; you may expect some correction in mid and small cap stocks.

GLOBAL factors affecting us?

US and China are Big markets. So any correction in these economies always have a big impact on Indian market. Like the recent fall in Chinese market has affected Indian market as well but we need to keep this in mind that this impact is short term in nature and focus on internal growth of our country which is improving. In fact if Indian markets correct at a reasonable valuation because of these global factors then it will provide a wonderdful opportunity to enter in the market.

Advice to Retail Investors & Which other instruments can they look at? 

Most of Indian retail investors speculate than buying fundamentally solid Stocks and depends more on tips but considering the fact that equities are one of the best asset class which tends to outperform other investment avenues an investor should always remain cautious while picking stocks.

Falling Rupee, volatile stock market and even the erstwhile safe haven options like gold & property market has also shown a bumpy ride. The question, which most people have, is about whether they should invest in Gold/Property market or Share market right now. Gold and property market had its run already and does not command strong positive sentiments in the near present and whereas stock market also is in a correction mode yet with a strong positive outlook in the near term.

So you should invest more in equities for the next 3 to 5 years and then make aim to make good money via stocks or mutual funds and then book profit and redeem capital and invest in gold or property to convert virtual money to a real money; so right now; go invest in mutual funds and stocks at every market fall and build a good portfolio.

All you wanted to know about Investment declaration to your Employer

Unknown

As you all are aware the financial year, which starts from 1st April and ends on 31st March of every year is round the corner. And those who are in employment must have received communication from their employers to submit their investment proofs for the year 2015-16. Let us understand this process and how you can save taxes with the help of investment declaration to your employer: –

What is Investment Declaration?

As you must be aware that that your employer is required to deduct income tax on your salary income on a monthly basis and the same needs to be deposited with the government. For calculating your taxable salary, your employer need to know tax savings investments made by you u/s 80C like Life insurance premium/tuition fees/Home Loan Principal, NSCs, PF, PPF, Mutual Funds ELSS, Tax Savings FDs etc. and also other sections like 80D/8DD/80DDB/80E. Apart from that you are also entitled to claim benefit for LTA, HRA, interest on your home loans and Reimbursements of Medical expenses etc.

How it works?

At the start of every financial year, your employer asks you to submit a “declaration” of your proposed (existing) investments/options as mentioned above, so that your net taxable salary can be calculated and there by tax will be deducted and you get the net in hand every month.

Do you need to submit any proofs at the time of Declaration?

Please note that this declaration does not require you to submit any actual proofs, which will be generated only at a later stage once you make a particular investment. All you need to do is to plan your tax savings in advance in terms of how much is your obligatory/ongoing existing investments like PF, insurance premiums, tuition fees etc. so that you can plan to invest the shortfall if any and declare the same. Let’s take an example of section 80C, wherein you can invest or claim benefits up to Rs. 1,50,000/- towards various options as mentioned above. And by default the said limit gets partly covered by your existing ongoing PF which is say Rs. 25,000/- and life insurance premium say Rs. 15,000/- and PPF contribution say Rs. 10,000/- apart from the tuition fees for your children which is say Rs. 50,000/-. So your actual investment/contribution for a particular financial year will be Rs. 1,00,000/- (25,000+15,000+10,000+50,000) as against the limit of Rs. 1,50,000/-.

Now at the time of declaration, you know that you still need to invest additional Rs. 50,000/- to optimize your total tax savings and which can be invested say in tax saving mutual funds schemes. You can go ahead and submit a declaration that you “WILL” be investing in all the above mentioned items, this activity does not require you to submit actual proofs because it is just the start of the financial year, you only need to “Declare” that you will be investing in various 80C options, paying off rent to claim HRAs or claiming interest on your home loans.

What is Final Submission of Actual Proofs?

During the months starting from December to January your employer will ask you to provide actual proofs against your earlier declaration so that they can verify and finalise your tax computation. So you need to submit them all the copies/receipts/statements/proofs as against your declaration.

Do you need to invest in the same options as per your declaration?

Please note that your investments need not be exactly same as per your declaration. For example in your declaration, you might have mentioned that you will be investing in PPF or life insurance but rather at the end you might have invested in a mutual funds ELSS or your home loan principal amount itself is more than Rs. 1,50,000/- then in that case if you provide actual proofs of these investments which are different than your declaration, then also you will be eligible to claim the tax benefits. Your employer will take those in to account and calculate & finalise your tax liability.

What If you could not submit investment proofs?

If you could not submit investments proofs in time either because you have actually not invested the money as required or due to certain reasons even though you had invested but you could not upload or submit the proofs to your employer. In this case, your employer will recalculate tax liability and will adjust the additional tax in the remaining months of January or February to March.

Do you lose the benefit in case you didn’t submit the proofs to employer?

This is one of a biggest myth that if you don’t submit proofs to your employer then you lose all the tax benefits; No, you don’t. You can still claim the benefits of your investments by filing your tax returns and claiming a refund. But you should always make sure that you submit this in time to avoid going through claiming it via refund, which unnecessarily delays the entire process.

Let us understand it with the help of an example: –

Smita draws a yearly salary of say Rs. 10,00,000/- and have already declared to her employer about her proposed investment of Rs 1,50,000/- under 80C.

Her employer based on her declaration calculates her tax liability on the net taxable income which is Rs. 8,50,000/- (10L-1.5L) and assuming that she does not have any other exemptions or deductions to claim, this will become her net taxable income on which the total income tax as due for the entire year will be say Rs. 95,000/- (approx.). Now this 95,000/- will be divided in to twelve months, which comes to approx Rs. 8,000/- which her employer will deposit every month to the government

Now at the time of actual submission of proofs say in December, Smita could not submit the proofs because she could not invest the entire amount as declared. Now her employer will recalculate her tax liability and she needs to pay the additional tax which will get adjusted from her salary in the ensuing months.

But Smita did invest the entire amount before the end of march but by then her employer had already deducted tax without considering the benefit of this particular investment. But she can still get the benefit of this investment by claiming for refund at the time of filing her return.

But make sure that you plan your taxes in advance and do invest in time so that you can save more and avoid the hassle of claiming refund at a later stage.

Financial Resolutions to make in the New Year – 2016!

By now you must have been over with your year end celebrations planning and it’s indeed a great opportunity to welcome 2016 by including some financial resolutions too. A first step towards happiness is being stress free & well managed finances always lessens half of your stress but just framing words for resolution is insufficient.

The need for setting up clear financial objectives along with flawless execution is just as vital; here are some tips and tricks to set your financial figures right as follows:-

Start with a review of your financial performance in 2015:

It’s time for doing some self-appraisal by asking yourself the following questions:-

  1. Did I accomplish my financial objectives last year?
  2. What was my income & Total Expenses both expected & unexpected?
  3. Did I pay my EMIs/Dues in time or any Late payments; if any?
  4. How much returns I made on my investments; did I exceed my target?
  5. Did I have any surplus money which was lying dead in account only?
  6. Did I touch my emergency fund or didn’t even create the one?
  7. Did I borrow any money and if yes then for what purpose?
  8. How did I perform monetarily in 2015?

Doing this self-examination will open up the ways to set your new year targets for accomplishing your Financial objectives.

How to set your financial goals & make resolutions for 2016?

You should make new financial resolutions based on the review of your last year’s financial performance as follows;

  1. “I will strictly follow my budget”
  2. “I will pay my EMIs/liabilities/credit card payments on time”
  3. “Optimize my tax saving investments”
  4. “I will save 20% of my total income”
  5. “I will start SIPs and also invest in new ways of investment than traditional ways”; and so on.

Here are some resolutions you can set for 2016 & achieve Financial Peace!

Know your financial health: Yes first important resolution is to analyse your financial fitness and check where do you stand in your financial life followed by a detailed plan with proposed income, savings & expenses in 2016.

Prioritize your expenses: There are expenses which are unavoidable & unnecessary and you need to priorities between your essential & luxuries by finding out the gaps & deciding thpse expenses which you can cut down.

Review & Reduce Debt: You can reduce your debts which has higher rate of interest & gives you a flexibility for prepayment or closure. Howevery you should always optimize your debt wherever it is possible like in case of a home loan which also offers tax benefit and thus overall cost of serving this debt can be lowered down.

Make your Monthly & Annual budget: Prepare a monthly budget & an annual budget with the details of expenses & income and review your budget on a monthly basis and following strict execution is the only key to success.

Emergency Corpus: If you don’t have an emergency fund, take a first step & start with the same in 2016. If you already have an emergency fund, make it stronger this year.

Pay your Dues in time: Do not pay any penalty for late tax payments or EMIs or credit card payments; you should make a due date diary and wherever possible set up auto debits.

Save more; save big: Let us make it big this year, increase your saving percentage & create a handsome corpus for future.

Systematic investment planning: Dead investments or savings with minuscule returns are a deterrent in creating wealth. Make a proper investment plan; diversify your portfolio. Calculate your needs, risk appetite & categorize you investment as follows:-

  • Tax saving investments
  • Life, mediclaim, general insurance policies
  • Mutual funds, stock market investments
  • Traditional investments
  • Retirement planning
  • Child education related investments

Joy of giving: Each one of us owe to our society & we should also make a pledge in the new year to contribute for the wellbeing of our society by contributing some part of our earning as well as time towards social upliftment.

Additional income source: Why not we think of adding an additional source of income; It may be your hobby or a skill which can help you generate that additional income.

Conclusion: Savings and smart Investents are simple steps to create long term wealth & assets for securing your future so make your yearly finance plan today and be stress free & welcome 2016 with a financial bang.

Happy Financial Year.

7 ways to protect yourself from any Financial Crash!

A good management of money always delivers a security in life. Though you must have been planning your investments after a through financial planning to protect yourself from any financial hazards which may happen in your personal life, isn’t it? But what will happen when things happen beyond your control, for e.g. a global slow down? Lets understand how you can protect yourself from any emergency beyond your control: –

  1. Emergency Fund: An Emergency Fund is that part of your savings; which is kept untouched. It should ideally cover up your basic needs for 6 months and can be created with SIP or with any bullet payment you received (yearly bonus or maturity of existing investments)
  1. Continue with Routine Investment: As per your budgeting and after eliminating the debts, continue with your regular SIPs, monthly investments and savings to create a corpus.
  1. Diversify the portfolio: Don’t put all your eggs in one basket, you need to create a well diversified portfolio consisting of all the assets class.

    4. Get out of Debt: The financial crash leads to recession and impact your earnings, job security or business prospects. You           need to raise debts only for the essential priorities and should also budget a space for 4 months for servicing your debts without compromising on your basic needs in case of any emergency.

  1. Medical Expenses: A good health can create a wealth and if you are in your late 30s, you are still in good position to go for a Mediclaim policy for your family. Medical emergencies are unexpected, unavoidable & nobody even wants to think about it; but this is right time to think on the same. You need to make sure that at any point of time in your life, you have sufficient financial protection for any medical emergency.
  1. Monitor Expenses: Some expenses are essential while some are driven by your temptations and there is a very thin line between a necessity and luxury. It is always prudent to reduce your unnecessary expenses or delay the same. Use your credit card wisely and always remember the fact that credit card just gives you an extended time for making payment but what you pay is purely your out of pocket expense.
  1. Additional Income: Always try for an additional income specially in this era of Global-local market , there are many opportunities which are available for doing a side business, freelancing. Your hobbies or other passion may also earn extra money, think out of box and take the benefit of an era of Internet which has made it very easy for marketing your talent and ideas very easily.

What is the reason behind Indian Rupee Depreciation?

Market volatility is nothing new under the sun and with too much of variation & fall of rupee in the market have already fagged many Indians due to its effect on price rise, money inflation, increased interest rates etc.

So let’s find out the reason behind this and understand what is making Indian rupee vulnerable every time:

Fed actions:

Increase in interest rates means Indian currency is depreciating and $ is gaining more value. The foreign exchange rate for conversion of currencies completely depends on the current market scenario and the exchange rate that many countries are following. In contrast, whenever the export rises and currency inflows goes on a higher side rupee start strengthening.

Earlier most of the countries used to have fixed exchange rates but this system was discontinued by most of the countries to stay far from the risk of devaluation of currencies. Many a times countries opt for ways so to keep their currencies undervalued to promote exports.

Money Inflation:

It’s the difference between increase in money flow outside India and economic growth and this mismatch can cause a surge in inflation. Increase in money supply will pull down the economy growth.

Deflation will not be of much help, if the price of commodity and other goods doesn’t fall. Also, if you’ve fixed interest rate then you’ll have to bear higher valuation of debts and loans.

High gold import demands:

When the gold price is reining cheaper, internationally, most of the Indians hover on buying as much as they can which ultimately cause more demand from gold importers. Hence, they are importing more gold than ever and this is causing gold price fluctuate.

Increase in demand of imported products:

The value of currency largely depends upon import and export of goods. Imported items like clothes, cosmetics, food & beverage, gadgets, automobile, etc. on which we rely. This boosts the foreign currency and rupee also falls for the same reason.

How Rupee fall will have an effect?

Indian rupee depreciation would make you pay more at petrol pumps. As India gets 80% of crude oil imported due to heavy requirements, so weaker rupee would also affect our import bill and that which global oil prices would warrant.

This also prompts oil companies to lift, petrol and diesel prices and that makes transportation costlier which will inflate the prices of most stokes and goods.

Also, it’s expected to reflect on all imported items like gadgets, gold, any electronic items. It also automatically implies on your foreign education, you’ll end up paying more for your foreign education due to the fall of Indian currency. Or Likewise, if you had planned a vacation abroad, then your air tickets, travel insurance, hotel tariffs, shopping and other additional cost would go up.

How we can get control over this?

Decrease in usage of imported items like many foreign brands for clothing, electronics we depend on every day. To an extent, if we can neutralize the buying of gold and other non-essential items then it can relax the burden on forex department and wouldn’t worsen the CAD (current account deficit), which is getting more and more murky.

Given an estimate that we siphon around approximately 30 thousand Crores abroad in exchange of products like cosmetics, food & beverages, tea, etc. Consumtion of indigenous goods and use of public transport and innovative products should be implanted to minimize the consumption of fuel and natural gases.

How to get alarmed about the Indian currency fall?

It can be guessed from a current account deficit (CAD) and foreign exchange inflow rate, inflation rate domestically, interest rates of funds and other government policies. And also depends up on other countries economy state of affairs.

By analyzing these factors one can try to get a decent idea and foresee the possible rupee fall or rise.

All you wanted to know about PPF (Public Provident Fund)

What is PPF (Public Provident Fund)?
PPF is one of the most popular modes of investment in India, which is backed by government and work as a long term saving instrument. This is very useful for those investors who are either self-employed or working in company/ small organization, which does not have GPF or EPF (provident fund); in that case it serves as the best tax free long term investment option.

What are the returns on PPF?
Interest rates on PPF are notified every year by the government and currently it is 8.70% p.a. for the financial year 2015-16. The interest calculation is done on a monthly basis but actual credit happens only at the year-end. The best part of PPF returns is that it is tax-free on maturity and you also get tax benefit under section 80C for the investments you make in PPF every year.

How it is different from GPF or EPF?
Many of us who are working with professionally managed companies, must be aware of General Provident fund (GPF) or Employee Provident Fund (EPF). Employer and employee equally contribute to these funds, the return of investment is interest earnings and the total amount invested by an individual gets tax exemption under 80C.

The option to increase the employee contribution is also available; you can withdraw your PF based on a pre-defined upper limits and it is allowed for some specific purpose only. If you switch your job or you quit, then you can withdraw the PF or transfer with your new employer. It is also taxable if a criterion of continuous service for five years is not fulfilled apart from certain other conditions. Returns on PF are also similar to PPF and you can always opt for the PPF scheme to deliver similar purpose of investment and saving; let’s understand more on PPF as follows:

Salient Features of PPF:
• It is very easy to open &maintain PPF account; Several banks are authorized to facilitate PPF account facility, it is also available with Indian post. Some banks, even offer online opening of the PPF account through net banking or you can walk down to any nearest branch of the authorized banks.
• Long term saving and a Maturity period of 15 years makes PPF investment a wonderful tool for your retirement planning.
• This is totally a secured government backed investment, no risk involved.
• PPF returns are tax-free.
• You get Tax exemption for your investment amount under 80C.
• Funds in PPF account can’t be attached by any court orders
• Initial contribution for opening PPF account is as low as Rs. 100/-.
• Annual deposit limit for investment is min Rs 500/- and max Rs 150,000/-
• PPF account is transferable.
• Change in name is also allowed (for e.g. if a women’s name post marriage gets changed and if she wish to change the same for her PPF account; then it is allowed)

Eligibility criteria to open PPF account:
• Any individual can open a PPF account except NRI and HUF.
• “One individual-One PPF account”, you can open only one such account in your own name.
• PPF account can be open for minors by their parents or guardian (tax exemption benefit is still available subject to a maximum limit allowed).
• Nomination facility is allowed, except for minor account.
• Even if you have GPF or EPF account, you are allowed to open a PPF account in your name.

What is the maturity period & withdrawal options available in PPF account?
The maturity period for the account is about 15 years and on maturity you can have the following three options:

1. Withdraw your accumulated money in PPF account and close it; Or
2. You may even extend your PPF account for another 5 years without paying any further contribution: Or
3. You may extend it for another 5 years with regular contribution.

Can I have a Partial withdrawal facility in between the lock in period of 15 years?
Though the maturity period for PPF account is 15 years as seen above, but partial withdrawal is allowed form 7th year onwards subject to the prescribed specified limit.

Loan against PPF: Yes, loan against your PPF account is also allowed and the same can be availed during a specific period.

Should you invest in PPF?
Yes, Undoubtedly because PPF comes across as one of the best & simplest investment tool to serve your long term financial needs and to top it all; its returns are completely tax free and offers you tax savings u/s 80C as well. One should invest in it though small or big but consistently. Ideally every fresher or a new joinee should open a PPF account right when they start working and as a parent also you should open PPF accounts in your children’s name so that once they attain majority they continue it and enjoy the free from lock in PPF account.

Financial planning Tips in case of Divorce!  

Continuing the series of “Women and Her Financial Planning” let’s understand in this article about some important financial planning tips for a woman undergoing Divorce. What happens if your partner whom you choose to walk your life with, doesn’t want to be anymore by your side and things which didn’t threaten you, is haunting you now?

Yes, I am talking about divorce when one of you decide to part ways, the time, when you shouldn’t be carried away by sorrow but need to act to foresee the future financial needs.

The first step

One should try not to mix the emotional quotient with financial matters which mostly worsen the entire proceedings. The key is to identify your present and future cash flow requirements and make a stock of things including maintenance of child.

Effective financial planning

This is the foremost thing one should do. Ultimately, you’ll be at loss if you don’t plan it. And that will substantially drop your living standard. Women who devote full-time or part-time get substantially less from earning because of managing their home, raising children, etc. and were not having any right on her spouse’s earnings. But now modification is done, equitable distribution of marital property is allocated.

Acquire you share

Rapidly the definition of “Assets” is changing. Family wealth is now known as “career assets”. Under this it includes benefits of employment like pensions, health insurance cover, and the calculated sum of future earnings; which then gets divided at the time of divorce.

Joint Assets & Liabilities

In case the property is owned jointly then the women will get her share as per the latest property valuation. Ideal way is to make a list of all your assets inlcudig fixed investments like property or insurance etc.  This will help you mutually before you set out to take a help of a lawyer or a legal counsel. Your assets will be divided based on your individual contribution if you fail to reach to an amicable arrangement.

Alimony

Married women receive alimony, post- divorce. The following factors decide the duration and amount to be paid as alimony.

  • The amount and duration of alimony generally depend upon how long the marriage existed because marriages that lasted more than 10 years are entitled to be granted a lifelong alimony.
  • Depending on the age of the spouse: Normally a young working woman gets alimony for a short period of time, if the court finds that she can manage financially through career excellence prospective.
  • If the woman is suffering from poor health, the husband is subjected to pay higher alimony to provide proper medication and well being. The terms & conditions of alimony in India vary according to the law.

Divorce advice for mothers

It is very difficult for a woman in India to become financially independent post divorce more specially when she was depending on her husband’s income for raising kids. It has been seen that a living standard of a mother post divorce comes down to almost one third of what it was before divorce and the same has very excavating effect affecting her ability to rise in career & life. However a women should not get distressed and take focused steps to enhance her skill set and also take keen interest in managing and building her finances.

Important Financial Planning Tips For a Widow!

As we know that losing a spouse prematurely is surely one of the worst phase of a woman’s life coupled with the trauma of handling the legal and financial matters; let’s understand some very important financial planning tips for a widow and why it is so  important:

Why it is very critical?

This is critical in India because of the fact that women tend to pass control onto their closed family member specially husband. While blindly following someone close in the family is not at all wrong, but the same dependence may result into a situation which impacts the entire life when one is left alone. Therefore, to ensure financial security in today’s world, it is very important for a woman to have a clear understanding about their overall financial planning.

Assess your needs!

First thing which you need to do is to have a thorough assessment of all the things which has changed and specially those on which you were depending on your spouse. There could be instances where you may have to make few compromises, so don’t take any hasty decision. Make an inventory of investment your spouse had done like insurance, pension, savings, etc. And then find out how much you’ll need more to proceed with a financial plan.

Know your risk appetite!

The result of thorough assessment of your financial standing will help you know your risk appetite and to further plan about how to manage investment going forward.

Invest wisely!

After knowing your standing and the risk you can take, now comes a very crucial step is to manage the corpus which is left behind. You need to plan well, considering your present and future needs and then create a diversified portfolio consisiting of PPF/FDs/Mutual Funds/Property etc.

Get an Insurance!

You also need to assess your insurance needs both medical and life because in case anything happens to you then your dependants will be left in a big soup. So buy an insurance policy which satisfies all your needs & which can bear loss at the time of emergency.

Spend & save smartly!

Leaving a life without your better half will be extremely difficult and unpredictable and your Lifestyle won’t be the same and your spending too will need an assessment. You must start to save from a very early stage which will help in achieving your financial goals.

Re-check & Revise your financial plan!

You need to review your financial plan again and take the help of a planner if needed. Updation in insurance and other saving accounts, documents are important apart from keeping a check on the market change in your investments like equity market, risk-appetite, goals, inflation, etc., which calls for a change in your asset allocation.

Retirement Planning!

You also need to plan for your retirement and start saving as much as you can. You need to get out of all the debts and EMIs before your retirement time comes apart from thinking of an alternative source of income that can stretch your financial stability.

Look for an occupation!

If you feel that how much you have now isn’t enough, then find an occupation. Your earning will boost your financial stability. Anything full/part time will make a significant difference, so make a start and grow financially and intellectually as well.

Timely claim for Life Insurance!

You must claim for your husband’s life insurance policy in time and as per the policy document. Do not forget to get the death certificate, check one of my previous article on death claim to know more about the process.

 

Financial Lessons to be learnt from Nepal Earthquake!

0000023216-disaster

Part- I

We all have seen the recent earthquake in Nepal and its aftermath on public lives, have you ever wondered how severely these natural calamities affect ones financially? Let’s discuss the financial lessons learnt from these disasters and how you can protect yourself getting affected by them financially.

1) How important is it to guard oneself financially, against these natural calamities?

Whether it is a calamity or something else, which severely affects a person’s financial life, should always be protected because financial freedom and security is one of the paramount objectives of doing the entire financial planning. It is very important to guard oneself against any natural calamity because that has the effect of completely wiping out all the belongings and leave a person without food, water, clothing and shelter. If you aren’t prepared for it then one might just lose all of their belongings and may get wiped out financially.

Worst case, these disasters may even bring injuries which can make them physical unfit to work for time being to life and their entire life will go haywire without a sound financial back up.

2) How can one get financially prepared to protect them against any disaster?

Well, irrespective of the fact that whether one is a victim of a disaster or not, person should always have a foolproof financial plan to protect their financial life from any unfortunate event. While talking about disaster affecting financial life, there is little which one can do to prevent it but certainly there are steps which one can take to protect their families from getting financially hit in case a disaster occur. Following are the ways one should follow to prepare themselves against any disaster:-

C) Regularly review & Monitor all your insurance Policies & Coverage.

  • Insurance Audit: first thing you should do it is to do a through insurance audit, it means calculate how much insurance is needed to protect your family in case of any unfortunate event affecting you severely. Second step is to identify the need of buying adequate cover for Home Insurance, Life Insurance and Personal accidental policy.
  • Check Inclusions & Exclusions:The biggest disaster would be a situation that in spite of having an insurance plan in place, one doesn’t get the cover or get insufficient amount. This happens mostly because of the various exclusions as attached to one’s insurance plans. First thing to check before buying a cover is to know what all it covers!
  • Review by a financial planner: if needed, get your insurance audit done by an ethical financial planner so that you can buy a product, which is based on you & your family’s health and life insurance needs. 

B) Do you have an Emergency fund?

As you are aware that in case of any natural calamity, we will find most of our financial institutions getting closed down or ATMs going out of order for a no. of days to months together. What will you do in this scenario? Always have your emergency fund ready for meeting any unpleasant financial situation; ideally you should always have at least 6 months of provision to manage your household expenses.

C) Prepare an Inventory of all your Possessions & Belongings.

The first thing before buying a cover for any probable disaster is to make a list of an inventory of all the assets & personal belongings. It will be required to assess what’s been lost at a later stage and this will help during the process of insurance claim. You can also digitally record it either by a video shoot or photos for your own reference. You also need to keep a back up of this written/digital record for a ready reference and don’t forget to update it whenever you make any major purchases.

D) Handy information for all your policies!

You should prepare a list of all the policy you have in terms of its Policy numbers, contact details like telephone Numbers, Email ids and claim settlement process. Give it to a trusted family member or a friend to be stored at a distant place.

E) What are the other documents to be kept safely?

Some of the other documents you need to have a back up are as follows:-

  • All your Insurance policies.
  • Your property titles, deeds etc.
  • Registration papers for your car and other assets.
  • Last 8 year’s Tax and financial records.
  • Your originals will or power of attorney, if any.
  • Details of all the liabilities like credit card statements/ home loan/personal loans etc.
  • Details of jewelry and other personal belongings.
  • Share Certificates/ Demat account details for stocks/ bonds/Mutual funds.
  • Any other documents having a financial bearing.

3) Are there any financial products available in the market to safeguard against this?

We do have various policies that cover property and life from any natural calamity like fire, floods or an earthquake but still we do not have any ‘natural catastrophe cover’ for specifically catering to the dire need of protecting against these natural disasters. There are majorly three types of financial products in the form of an insurance policy available in India which can help you cover in different ways as follows: –

Home insurance

The first thing, any natural calamity affects is usually the property. Many times we have seen people buying cover to protect against basic fire insurance, which covers their house against fire or lightening, storms or even floods. Any cover against earthquake generally comes as an add-on due to the fact that it depends primarily on the geographical location your house falls in. You can also protect your house by buying an overall householder’s package policy, which apart from protecting your house from fire also protects you from burglary or any other mechanical or electrical breakdowns.

Personal accident insurance

Any natural disaster may have the effect of seriously injuring or making a person disabled for life. To provide compensation against any such calamity having a bearing on your working conditions, personal accident policies are in place. These plan covers death, permanent disability, permanent partial disability and temporary total disability.

This plan also comes as a part of your household policy but one can always buy it separately after analyzing the pros and cons of buying a customized product than a ready made product.

Life insurance

What is worse than loosing a life in case of any natural calamity and leaving a family without a future? To offset this, always make sure to have an adequate insurance cover to protect your family even in your absence. Buy a good term insurance plan to meet your financial needs based on your overall comprehensive financial planning.

Let me explain these plans in detail in the upcoming & concluding part of this article, till then do your financial audit and protect yourself from any sort of financial disaster. Keep reading this space and stay tuned.

 

To Be continued…

How People convert Black Money to White!

imagesWe Indians have heard this black money issue a lot over the last few years, this whole issue of black money has many facets to it, and in this article I am highlighting the ways in which an individual converts his or her black money to white. In no way I intend to encourage people to use any of these methods and it is purely to make you aware how people does it.  Let’s see and understand the concept of black money.

What is black money?

Black money means that income on which there no income tax has been paid and which has never been put on the accounting records.

Popular ways to convert black money to white:-

1. Getting money as a Gift

One of the most popular ways for converting black money to white is to get a gift from a relative. It applies in cases wherein a person’s relative has white money means money lying in his or her account and the person intend to convert similar amount (or more or less) of black money lying with him. The relative issues a cheque as a gift and the person will give back the cash to the relative.

Why people opt for this route is that any money received from a relative is tax free as mentioned in my previous column.

2. Showing Cash Income from Profession

People also convert their black money by filing tax returns in their relatives name like wife or parents who otherwise does not have any income. They show income from tuition fees/professional fees or commission earned in the name of their relative and later justify it by filing their taxes with income as mentioned above.

3. Loan Entry

Another method which is closely link to the above mentioned option of using relatives is showing money received by a third party (not only restricted to a relative but even a friend or so) as a loan entry. This way people part away with black money and get white money in their account and show it as a loan in their balance sheet/books, which is never going to be repaid.

4. Trust Formation & Charity

This is again one of the popular methods of converting the money by   forming a trust for a social cause like forming a charitable trust. People who have huge black money mainly adopt this route and donate black money to these trusts as charity, there are lot of trust which are operating like this and even offers income tax benefits to the donor u/s 80G of IT act.

5. Investing in Life Insurance/KVPs & other products

There are couple of investment option wherein one can invest in Cash like the most popular is your buying an insurance policy for which you can pay in cash and when the maturity period arrives say at the end of 10 or 20 years you will get a cheque and all your black money will get converted in to white.  The main logic is that IT department cannot go back and ask you the source for a policy which has been purchased 10 or 20 years back.

Even you have these KVPs i.e. kisan vikas patra resurfaced again recently to be used by people for converting their cash. However there is a maximum limit of Rs. 49,000/- for buying a policy or any other investment product. But people have an answer for this also and a way out is to either buy multiple policies/multiple names or investing in these policies by getting a demand draft made from a small sahakari banks for an amount more than fifty thousand.

6. Real Estate/Property Market

This is a sector wherein the majority of black money is parked, lot of people use property deals to convert their black money to white mainly because the real value of a land or a flat or any other property is always higher than its municipal value used for paying stamp duties.

It gives a huge scope for paying very less amount in white and the remaining in black and person can keep going on playing in the real estate market to convert black money to white while selling or purchasing properties.

7. Sale of Jewelry

This is one of the most common method by going to a known jeweler and giving him the black money and he will give you a cheque for the same amount after reducing some taxes like VAT and this transaction is done on the pretext that you have sold your personal jewelry to the said jeweler.

8. Showing Income as an Agriculture Income

In case a person possess a land which is termed as an agriculture land as per the act then they tend to show their black income by way of showing it as an income of agriculture activities like agri products or plantation or garden or nursery etc.

 

DISCLAIMER:-

I once again do not recommend readers to follow any of these steps and the above article is purely to make you aware about the numerous ways people use to convert their black money. And I firmly  believe that every Indian should do a thorough tax planning  as per our Income Tax Act and should always abide by our tax laws by begin on the right side of it, always!

After all it’s your life, why complicate, just make it large!!!