“Financial independence is prerequisite for good health, emotional security, social security and quest for spiritual peace” thus said Deepak Chopra in his blog recently.
Reproduced with permission from SEBI RIA, Mr Prakash Praharaj from http://maxsecfp.in/component/k2/item/115-increase-your-happiness-index-in-2015
“Financial independence is prerequisite for good health, emotional security, social security and quest for spiritual peace” thus said Deepak Chopra in his blog recently.
Many have planned for new year vacations but very few plan their personal finance.The irony is that many work hard for 35 years to earn money but rarely do they manage their personal finance properly.As a result,they end up with buying toxic financial products which does not match their needs .By the time they realise their mistake, it is too late.
However you can pause now, take stock of what you want to achieve in life , what you have done till 2014 & lay a road map in 2015 with course correction and improve your happiness index .Here are some of the areas for your review;
1. Create a contingency fund
Future is uncertain. One may lose job, income may decline or any family member may have to undergo major medical treatment etc. It is advisable to keep sufficient cash either in Bank or Liquid MF to meet 3/6 months of expenses.
2. Financial Goals and prioritise i.e Buying a house, Saving for Children’s education& marriage, Buying a car, Going for vacations, creating sufficient retirement corpus etc.
3.Get rid of Toxic Life Insurance Policies;
Do not mix up your Insurance with investment. Endowment, money back and ULIP policies are combinations of insurance and investment. They are also packaged as child plans, pension plans etc.It is advisable to take adequate Term Insurance for protection. The cover should be atleast 8-10 times your annual income. You may surrender the toxic insurance policies.
4. Take adequate Health Insurance
You can take family floater policy if you are young say 40 years or less and prefer individual policies if you are above 40.It is advisable to take a base cover and top up it with a super top policy. This combination will be cheaper
5. Save regularly and invest long term
Before investing, you should know your risk tolerance and risk capacity.Your investment should match your goal horizon. Regular saving and investing preferably through SIP is better than trying to time the market
6. Do not put all your eggs in one basket:
You should spread your investments into various asset classes i.Equity(Stock and MF), Debt (Bank FD and Fixed Income Securities),Real estate and Gold.
7. Monitor your portfolio
You should monitor your portfolio through rebalancing and ensure that your networth is increasing every year.
8. Do your Tax Planning
The 80 C benefit has been increased to Rs1.50 lakhs and interest benefit on home loan has been increased to Rs2 lakhs per annum.Further you can also avail 80 D benefit of Rs15,000/- for medical insurance premium.The agents of Inurance companies will approach you to buy their products but buy them for protection purpose only.
9. Ensure nominations and make a will
All your financial assets should have nominations. You should not forget to prepare a will which should always be attested by two independent witnesses.
10. Do exercises regularly
Regular excercise besides proper food and sleep are essential for good health.
11. Donate for the social causes
Helping the poorer sections of the society improves your happiness index.
Lastly, if you do not have time or are getting confused in handling personal financial matters,it is always preferable to approach a Fee only certified Financial Planner and SEBI Registered Investment Adviser who are client centric in their approach.
About the Author
Shri Prakash Praharaj topped the university during his graduation and post graduation in Commerce and has been awarded two gold medals. By training, he is an MBA and he has been awarded a Diploma in Treasury, Investment and Risk Management besides CAIIB from the Indian Institute of Bankers. He is also a CERTIFIED FINANCIAL PLANNER CM and a Certified Personal Financial Adviser with 30 years of experience in the financial services sector under his belt, which include service at financial sector pillars like the Reserve Bank of India, United India Insurance Company, State Bank of India and SBI Life Insurance Company.
During the year 2010, he promoted Max Secure Financial Planners to provide fee-only financial planning advisory services and promote financial literacy. Today, he is a SEBI-registered Investment Adviser and helps plethora of investors to plan their financial lives and achieve their aspirations.
Mr Praharaj is listed on finvestor.in and you can ask him a query at finvestor.in
Image courtesy of stockimages at FreeDigitalPhotos.net
Bhoi Smrutirekha Dharanidhar