Procrastination has a serious impact on your financial health

Procrastination is a bothersome habit when it comes to performing personal errands or professional work, but it is especially damaging when it is related to financial decision-making. Putting off financial decisions can not only lead to leaks and losses but also impact the financial lives of those who are close to you.

There are many serious issues that can come up like:

(i) If you do not start investing on time, you may run short of funds for your own/children's goals;

(ii) if you do not invest in the right instrument, you will pay in terms of the lost opportunity;

(iii) if you do not pay your premiums or EMIs, you will be saddled with penalties and lapsed policies.

 

As we can see the dangers of financial procrastination are immense and long-lasting. However, it is a peril that many investors live with, knowingly or otherwise. The good thing is that you can avoid it if you know why you are doing it and find the solution for the same.

Procrastination is a behavioural issue and one way to fight financial procrastination is to understand the reasons for it and find a proper solution for the same. Let’s understand the main reasons for it and how each of these translates to financial procrastination.

 

1. Fear of failure:

A common reason for not investing on time is the anxiety about losing money if put in an unsafe or wrong instrument. Highly risk-averse people prefer to put off decisions rather than start putting their money to work.

 

2. Tedium or laziness:

A simple reason for putting off payments of bills, premiums or EMIs is that people find it too tedious and boring to perform these tasks. So they take refuge in laziness and do nothing instead.

 

3. Ignorance:

Most decisions regarding investment are put off simply because people do not know where to invest or how to identify the right instruments. They even dither about finding the experts they can consult regarding the same because either they are introverts or they don't know whom to approach.

 

4. Too many options/ decisions:

Most financial decisions are delayed because there are too many decisions to make, like: which health insurance to buy, which mutual funds to invest in, how to file tax returns, how to save tax, how to save for a vacation. There also are too many options available in the market, be it for mutual funds or health insurance plans, that it becomes difficult to choose. So, these people become overwhelmed, go into financial paralysis, and simply do nothing.

 

5. People think they have time:

Most investors keep putting off saving or planning because they think they are too young and have enough time to do so later on. They miss out on the magic of compounding and often fall short of their goals, be it for their retirement or children's weddings.

 

6. Unstable job or relationship:investments

An uncertain situation in life, be it a job or relationship, can make people procrastinate because they keep waiting for things to settle down or improve. If people think they are going to lose their job, they will not invest in mutual fund SIPs or take a home loan where regular payments are required. Similarly, an uncertain future with a spouse makes people put off joint investments.

 

How to solve this issue

Although procrastination could be sometimes due to habit and sometimes it could be a genuine also, however, it can still be managed. A good way to deal with most such reasons is first to identify the real reason behind the procrastination and then to take the help of a financial expert, or even a therapist if the problem is severe. To deal with tedium, automate your payments. Once you have identified the reason, finding a solution will be easier.

टालमटोल करने से आपकी वित्तीय स्थिति पर गंभीर प्रभाव पड़ता है

जब व्यक्तिगत काम या पेशेवर काम करने की बात आती है तो टाल-मटोल करना एक परेशान करने वाली आदत है, लेकिन जब यह वित्तीय निर्णय लेने से संबंधित हो तो यह विशेष रूप से हानिकारक होता है। वित्तीय निर्णय टालने से न केवल नुकसान हो सकता है, बल्कि आपके करीबी लोगों के वित्तीय जीवन पर भी असर पड़ सकता है।

ऐसे कई गंभीर मुद्दे हैं जो वित्तीय निर्णय टालने से सामने आ सकते हैं जैसे:

(i) यदि आप समय पर निवेश शुरू नहीं करते हैं, तो आपको अपने/बच्चों के लक्ष्यों के लिए धन की कमी हो सकती है;

(ii) यदि आप सही उपकरण में निवेश नहीं करते हैं, तो आप खोए हुए अवसर के रूप में भुगतान करेंगे;

(iii) यदि आप अपने प्रीमियम या ईएमआई का समय पर भुगतान नहीं करते हैं, तो आप पर जुर्माना लगाया जाएगा और पॉलिसी समाप्त हो जाएगी।

 

जैसा कि हम देख सकते हैं वित्तीय शिथिलता/ विलंब के खतरे बहुत बड़े और लंबे समय तक चलने वाले हैं। हालाँकि, यह एक ऐसा ख़तरा है जिसके साथ कई निवेशक जानबूझकर या अनजाने में रहते हैं। अच्छी बात यह है यदि आप जानते हैं कि आप ऐसा क्यों कर रहे हैं और इसका समाधान ढूंढ लेते हैं  तो आप इससे बच सकते हैं ।

टालमटोल एक व्यवहारिक मुद्दा है और वित्तीय टालमटोल से लड़ने का एक तरीका इसके कारणों को समझना और उसके लिए उचित समाधान ढूंढना है। आइए इसके मुख्य कारणों को समझें कि वित्तीय विलंब कैसे दर्शाता है।

 

1. असफलता का डर:

समय पर निवेश न करने का एक सामान्य कारण किसी असुरक्षित या गलत निवेश में पैसा लगाने पर खोने की चिंता है। अत्यधिक जोखिम से बचने वाले लोग अपने पैसे को उचित निवेश में लगाना शुरू करने के बजाय निर्णय टालना पसंद करते हैं।

 

2. नीरसता या आलस्य:

बिल, प्रीमियम या ईएमआई का भुगतान टालने का एक साधारण कारण यह है कि लोगों को ये कार्य करना बहुत नीरस और उबाऊ लगता है। इसलिए वे आलस्य का आश्रय लेते हैं और कुछ भी नहीं करते।

 

3. अज्ञानता:

निवेश के संबंध में अधिकांश निर्णय केवल इसलिए टाल दिए जाते हैं क्योंकि लोग नहीं जानते कि कहां निवेश करना है या सही साधनों की पहचान कैसे करनी है। वे इस संबंध में उन विशेषज्ञों को ढूंढने से भी कतराते हैं जिनसे वे परामर्श ले सकते हैं क्योंकि या तो वे संकोची स्वभाव के होते हैं या वे नहीं जानते कि किससे संपर्क करें।

 

4. बहुत सारे विकल्प/निर्णय:

अधिकांश वित्तीय निर्णयों में देरी बहुत सारे विकल्प उपलब्ध होने के कारण भी होती है, जैसे: कौन सा स्वास्थ्य बीमा खरीदना है, किस म्यूचुअल फंड में निवेश करना है, टैक्स रिटर्न कैसे दाखिल करना है, टैक्स कैसे बचाना है, छुट्टियों के लिए कैसे बचत करना है इत्यादि। बाज़ार में इतने सारे विकल्प उपलब्ध हैं, चाहे वह म्यूचुअल फंड के लिए हों या स्वास्थ्य बीमा योजनाओं के लिए, कि उन्हें चुनना मुश्किल हो जाता है। तो, ये लोग असहज हो जाते हैं, वित्तीय अनिर्णय में चले जाते हैं और कुछ भी नहीं करते हैं।

 

5. मेरे पास समय है:

अधिकांश निवेशक बचत या योजना बनाना टालते रहते हैं क्योंकि उन्हें लगता है कि वे अभी बहुत जवान  हैं और बाद में ऐसा करने के लिए उनके पास पर्याप्त समय है। वे कंपाउंडिंग के जादू से चूक जाते हैं और अक्सर अपने लक्ष्य से पीछे रह जाते हैं, चाहे वह उनकी सेवानिवृत्ति हो या बच्चों की शादी।

 

6. अस्थिर नौकरी या रिश्ता:

जीवन में अनिश्चित स्थिति, चाहे वह नौकरी हो या रिश्ता, लोगों को काम टालने पर मजबूर कर सकती है क्योंकि वे चीजों के ठीक होने या सुधरने का इंतजार करते रहते हैं। अगर लोगों को लगता है कि वे अपनी नौकरी खोने जा रहे हैं, तो वे म्यूचुअल फंड एसआईपी में निवेश नहीं करेंगे या होम लोन नहीं लेंगे जहां नियमित भुगतान की आवश्यकता होती है। इसी तरह, जीवनसाथी के साथ अनिश्चित भविष्य लोगों को संयुक्त निवेश से दूर कर देता है।

 

इस समस्या का समाधान कैसे करें

हालाँकि टालमटोल कभी आदत के कारण हो सकती है और कभी-कभी यह वास्तविक भी हो सकती है, तथापि, इसे रोका जा सकता है। ऐसे अधिकांश कारणों से निपटने का एक अच्छा तरीका यह है कि सबसे पहले विलंब के पीछे के वास्तविक कारण की पहचान की जाए और फिर यदि समस्या गंभीर हो तो किसी वित्तीय विशेषज्ञ या चिकित्सक की मदद ली जाए। नीरसता/ आलस से निपटने के लिए, अपने भुगतान स्वचालित करें। एक बार जब आप कारण की पहचान कर लेंगे, तो समाधान ढूंढना आसान हो जाएगा।   

Investments Sahi Hai Par Financial Advisor Jaruri Hai

This week many of us have paid respects to our teachers on the occasion of teacher’s day. Most of us will agree that teachers are very important in everyone’s life. Many of us will also agree that whatever we are today, our teachers have played a great role on this. Even in sports also every player thanks his/her coach after winning. Similarly our parents and elders have advised us on various stages of our lives since our childhood and many people also have gurus or mentors who have given a direction to their lives.

In this age of internet and especially the Google, anything and everything is available on a click of a button. So whether we want to buy something or invest or even want to cure for a disease it is just a click away. But is it really workable; think about this—can we cure ourselves by googling except may be a basic problem like cold and will that be right? Similarly, for investing, while we may have an idea about the type of investment to own, most of us lack insight and expertise.

Let us understand the reasons why we should have financial advisors:

1.    Investment products are becoming more dynamic and complex. Two decades back we use to have few products like Bank FDs, PPF and Post Office Saving products etc. That time the investment decision revolved mainly around comfort with the bank, rate of return and tenor of the investment. However, now there are so many options that selecting the right option itself is a tedious job. For example in mutual funds there are equity-Large, Multicap , Mid cap, small caps, thematic, tax savings etc, hybrid, dynamic asset allocation, arbitrage funds, debt funds- liquid, duration , credit risk funds etc. Further there are different PMS products, derivatives, direct equity, insurance, Alternate Investment Funds etc. So what is right for one person may not be suitable for the other. Just by googling it may not give you what actually fits in your specific requirements.

2.   Another important point which we should always keep in mind is that investing is not just about making money but also about avoiding mistakes. While taking investment decisions we often get influenced by emotions, past experiences, advice from friends/relatives and our own attitudes etc. During negative markets, most common cognitive bias of investors are loss aversion, panic sell, and herd mentality. Many of us have heard how people were crazy in equity market investing during 2007 and early 2008 and then the panic sale in late 2008. People have invested in real estate market in 2010-13 with the hope of 2005-10 kind of bull return but actually landed up in no return assets. An advisor can actually help the investors in those times to see beyond the current hype and help him to take a rational decision.

3.  We should understand that investment is not one time decision but a lifelong process and is different for every individual. A person stars investing when he/she starts working i.e. generally in mid 20s, and keeps on investing till he stops working i.e. retirement. As a person keeps on investing for his entire working life similarly he needs constant advice and different strategies for different life-stages. Every individual have different income/expenses/requirements, risk appetite and cash flows and accordingly his investing requirements also differ and needs to be customized base on his own specific need rather than a general solution.

4.      A Financial advisor not just helps an investor to take right decision about where to invest, when to invest, how much to invest and how long to invest but also performs various other things. Like keeping track of performance, analysing the funds doing asset allocation and rebalancing, risk profiling etc. He also helps in providing consolidated picture of investments, taxation and capital gain calculations and to keep the record in proper and systematic way.

Every profession needs its own expertise and no one other understands their roles & responsibilities better than the one who is in charge of the respective role. Hence It will always be better if we spent more of our time in our primary roles rather than getting into some serious trouble by trying to save some money.

And lastly remember the youdh of Manabharata was won by Pandavs despite Kauravs have the biggest army and great warriors and this happen because they have the great advisor Shri Krishna.

Mutual Funds are not just Right, they are Better also

There are various options available for investments but why mutual funds stands out as compared to insurance products, let's understand it in more detail.

1. Mutual Funds are not an insurance but an investment product. Here our money is invested in market securities so that we get a better and inflation hedged returns which can meet our future financial requirements/goals.

2. Insurance means if something happens to the policy holder then his family/nominee will get a pre-defined lum-sum money. Although no one can fill the gap of that person emotionally however this money helps the family members to get financial support.

3. In Insurance only the cover amount is fixed not the bonus amount. Bonus is declared every year based on the company’s returns like in case of mutual funds.

4. In Insurance to cover your risk tem insurance products can be taken, where the premium amount is much less as compared to normal insurance policies.

5. For example if a 30 Year old person wants one crore coverage. Then if he takes normal policy of Jeevan Anand (with 35 years coverage) then he has to pay a premium of ₹2,99,434 (₹2,86,540 premium +₹12,894 tax). The same one crore coverage can be taken by LIC’s term insurance policy Jeevan Amulya where the premium will be only ₹32,096 (₹27,200 premium+ ₹4,896 tax). Please also note that in case of Jeevan Anand, policy holder has to pay a tax of ₹12,894 every year in which he did not gets any returns.

6. In mutual funds there is no tax at the time of investments and your whole money is invested in the scheme without any deduction. Whereas in case of Insurance approx. 4-5% of total premium goes to tax. Yes it is 4-5% of the total premium in which you do not get any returns. Since your investment amount is reduced so only because of this reason the total returns on investments comes down by 4-5% (actually it will be much more but for simple calculation let’s assume that only).

7. However no Insurance agent tells about term insurance, why? Because in term insurance schemes the commission to agents is very low which makes it unattractive from selling point of view. And the argument given is “You don’t get any return on term insurance”. Do you get any returns in Mediclaim policy or car insurance if there is no claim? then why do we need returns in life insurance? If we take term insurance and invest the remaining amount in a good return products then we can get multiple time returns as compared to normal insurance products. As well as our life is also covered by right product.

8. For example as mentioned in point no. 5, if we take term insurance instead of Jeevan Anand and invest the remaining amount ₹ 2,67,338  in a mutual fund with expected 10% P.a. then we can get almost ₹ 7.97 crores in 35 years.  And remember this money is additional to the insurance cover of one crore.

9. It is said that mutual funds invest in share market where your all money can be wiped out. Let’s understand this more.

(i) First thing mutual funds also invest in bond/debt market. In fact almost 60% of total mutual fund money is invested in Debt market, yes this is the same market where LIC also invests.

(ii) Secondly mutual funds have various different type of schemes wherein a person can invest for a week to a year or 5-10-20-30 years.

(iii) Mutual funds have schemes which invest only in bond/debt market and not a single penny is invested in equity shares. A person can invest in different schemes based on his/her financial goals, risk appetite and investment horizon.

(iv) There is no binding for investment in mutual funds, if due to some reason someone wants to stop the investments it is possible without any penalty whereas in case of insurance if we stop the policy in between it can lapse or forfeit.

(v) In mutual funds you can start investments with as low as ₹500.

(vi) In mutual funds you can increase, decrease the amount any time. You can stop the investment and also can restart as per your convenience.  All these facilities are not available in Insurance.

(vii) Share market goes ups and downs, it is volatile and this is the fact, but if we invest our money for long term like we do in insurance then chances of losses are very rare.

(viii) Share market is a reflector of the country’s economy. If economy is growing and getting stronger then share market also goes up. For example in 1979 BSE Sensex was 100 points which is today at 33000+. This is true that it goes down in between but it also comes back from its lows and goes up again.  Like our incomes is growing similarly as the companies make more profits then there share prices also goes up.

10. Mutual fund companies provides all details where the investor’s money is invested, Insurance Company’s do not provide these details.

11. All the portfolio details of each and every schemes of mutual funds are provided at the website of the company on monthly basis as well as other websites also. Whereas Insurance Company do not provide any details where they have invested the money this itself shows who is more transparent and honest.

12. “Mutual Funds are subject to Market Risk” this warning is given by mutual funds so that if a person is investing he/she should be aware about the risks involved and invest only after having full information. Mutual funds give back all returns (after deducting expenses) and do not keep a single penny with themselves. Insurance company do declare bonuses but it is discretionary and not necessary that they pass on all the profits.

13. The NAV (Net Asset Value) of mutual funds are declared everyday which is not the case for insurance; therefore Funds Mangers have to very actively manage and perform in case of mutual funds this is also one reason that their returns are better as compared to Insurance products.

14. Fund Manager of Mutual funds knows that if I do not perform then investor can take out his money whereas in insurance company they knows that once the investor has taken a policy he will most probably continue as otherwise it will get lapsed/forfeited therefore they do not have pressure to outperform. This is also a reason that most of the mutual funds do better than insurance products.

15. Insurance companies are legally bound to pay the insurance cover amount only. How much bonus is to be paid depends on performance of their investments and surplus money which is not guaranteed. And as mentioned at point no. 5 for life cover we can take term insurance then why should we buy normal insurance product by paying 9.5 times more for the same guaranteed amount?

16. In mutual funds there is very small commission as compared to insurance products.

17. Insurance products are generally sold by creating fear (what will happen to your family if you are not there) and emotional blackmail which is a negative marketing. Mutual funds are sold to meet your future financial plans/goals when you and your family both will be there and can enjoy the money which is a positive marketing.

TAKE INSURANCE FOR LIFE COVER AND INVEST IN MUTUAL FUNDS TO MEET YOUR FUTURE GOALS

DIWALI- “A Festival of Financial Enlightenment”

Diwali is a very old festival which is celebrated on the return of Lord Ram to Ayodhya after fourteen years of exile. Diwali is celebrated on a new-moon day and the lightening of lamps indicates the destruction of darkness and evil. For all Indians Diwali is one of the most popular Indian festivals which is celebrated with lot of pomp and splendour. “Lakshmi” The Goddess of Wealth is worshiped on this festival. It is an important occasion for many reasons like the importance of human bonding, celebrations in family, reunions of friends and relatives, etc.

This is an occasion not only for a traditional reason, but also for its significance to organise all the financial information. This tradition is equally significant for the business as well as many business starts new account books on this day, in Stock exchange also there is Muhurat Trading, a special occasion for the stock markets.

The Diwali festival also gives us a great learning about money which we have tried to discuss as below:

1. Dhanteras: Bringing home the “Dhan” –

The first day of Diwali, Dhanteras (“Dhan” meaning wealth and “Teras” meaning the “thirteenth day”) falls two days before Diwali. The day pays homage to Lord Dhanwantari who is associated with Ayurveda and various healing practices for the good of mankind. This day marks the day to make new purchases and investments and can also be referred as start of financial wellbeing. This day is considered to bring good luck and prosperity to the family. The popular belief is that any investment made on this day will grow and multiply throughout the year. It is the day chosen by most people to make investments in gold, silver, platinum or any other metal.  Regularly investing in precious metals, every year during this special day also helps you in growing and accumulating wealth over a long period. Off late, stepping aside from the traditional definition of investing in physical metal, it is seen that many investors also invest in gold ETFs, or financial instruments which is akin to investing in physical gold. The key learning is that we should keep on accumulating wealth regularly which will lead us to our financial wellness.

2. Narak Chaudas: To Clean up -  

The significance of this day is grounded in the story of Lord Krishna's overwhelming triumph over a ferocious demon named 'Narakasur', who kidnapped the 'gopis' This is the second day of Diwali wherein every one cleans up their home/work place and remove all the unnecessary things.

Similarly we should also check our portfolio thoroughly to ensure that it is aligned with our financial goals along with unforeseen/emergency expenses and also remove those investments which are no longer required. one of the key-learning’s on this occasion is to identify and eliminate the financial mistakes committed in the past be it availing high cost debt, wrong financial products purchase like endowment, ULIPs, etc.

3. Lakshmi Pujan: Respect the Money –

This is the day when Lord Rama finally returned home from exile and was welcomed with a glittering row of lights radiating from every household. It also coincides with the Pandavas' return from the forest. Lakshmi Puja is performed on this day. Lakshmi  is the Goddess of Wealth and her worship shows the respect of wealth and to preserve it in a pious way. This teaches us that we should do hard work with clean heart to earn so that goddess lakshmi will stay in our home forever. This day we also play with firecrackers and exchange sweets and presents which shows to celebrate happiness and share the joy of wealth with others. However we need to be careful and should not indulge into show offs which could be very dangerous.

4. Govardhan Puja or Padva: Anything can be achieved -

The fourth day is Govardhan Puja or Padva. It is the day when Lord Krishna defeated Indra by lifting the huge Govardhan Mountain. This gives us a learning that anything is possible if we believe in our self and put hard work. This is also New Year for many communities in India and symbolises a new start by overcoming past mistakes. We can start a new financial plan and make new commitments to ourselves so as to come out of our old perils and achieve new success in life.

5. Bhai Dooj : To share with our Loving Ones-

The fifth and last day is Bhai Dooj. On this day sisters invite their brothers for a lavish meal and perform a ‘tilak’ ceremony. Sisters pray for their brother’s long and happy life while the brothers give gifts to their sisters. This also teaches us to share the things with our loved ones like employers giving bonus/ESOPs to employees and employees promise to work hard to make their company more successful. Bhai dooj occasion teaches us that everyone has a role to play and if all of us do our duties with sincerity great success can be achieved easily.

Diwali is celebrated on a new-moon day and the lightening of lamps indicates the destruction of darkness and evil. Everybody aspires for a good time, and spending for the same is human. But one should never forget that celebrating a festival or an occasion should never be a onetime affair but should be done every year. Meaning although spending now can add to the celebration, it may adversely impact the saving potential thereby resulting in weak financial planning habits which in turn may compromise the financial goals in the future.

The best financial practice on this front is to allocate a budget for non-committed or discretionary expenses such as a festival, occasion or a celebration every month/year and comply by the budget. Strict adherence to the budget negates the possibility of overspending thereby enhancing surplus which in turn leads to a higher likelihood of celebrating these occasions regularly and not just one time.

Making Young Generation financially responsible

We all want in our heart that our children should become responsible adults, without facing any hardships due to their ill-thought out actions that results in regret and remorse. So how should we make them more sensible and literate about money and make them mature enough to handle it more sensibly. In this post we will discuss few important points which can be taken up during the teenager time of our children and help them to become a responsible person in future.

1. The kids grew in the family so the first lesson towards money is also learnt in the family environment. If we deliberate and discuss the merits of every financial decision with other family members, our kids will also pickup this habit. We should make them understand that money is a limited source and we should be avoiding impulsive buying or swiping credit cards carelessly. Be careful and clear why we are buying anything.  For kids we may fix a monthly allowance and stick with it to make them understand the meaning of budget and spending within their means.

2. As money is a limited source so we should also plan it properly. Making budget a joint affair with all family members will make them understand the value of money and the limitations we have towards spending it. During this exercise we will make them aware the priorities of various expenses and how should we allocate funds towards them. They will understand the importance and difference between various expenses i.e. food, basic amenities over discretionary/leisure items as costly electronic gadgets.

3. Let the kids also maintain their own income and expense records and we may check it once in a while. This will help them to review their past expenses and correct the unnecessary things on regular basis. Nowadays many online apps are available which can be very handy for this.

4. Encourage our kids to do some works (howsoever small or menial it is) if they need more money for buying luxury items so as to make them understand the importance of work and value of money.

5. Make them value others money also. Encourage them to pool money for joint expenses like eating out with friends so that everyone contributes and values others money. This will help them to take joint decisions in equitable manner which is good for everyone and does not becomes a burden for few.

6. We should guide them about few basics of banks and finances. Open their own bank accounts and let them learn basics of banking like doing banking transactions, using ATM/Debit cards or online transaction with proper safety. This will make them more confident and also make them understand how different system works.

These small habits will make them self-independent and help them to become a responsible person in future while they grow older and have their own families.

Are we Financially Independent ?

This month we have completed 70 years of Independence, so have we also got financially independent. If not then it’s high time to think of our financial independence.

Financial independence occurs when we have saved enough to support for the rest of our life without needing to work for money. We can still choose to work for other purposes – like for some passion/hobbies or any other purpose - but we no longer need an income to meet our expenses.

Attaining financial independence requires discipline and limitation of wasteful spending especially on non-essential items. It's a myth that financial independence can be achieved only by wealthy, It all depends on developing good money management skills.

Achieving financial independence is an ongoing process; it's a behaviour pattern that must be practised consistently. We are outlining some tips for achieving financial freedom:

1. Invest on self to increase future Income

We should continuously improve our skills. By being better at our profession will pay us more for what we do. We should learn new technologies, on-going trends and future of particular business so as to keep ourselves updated with them and learn to use the best from them.

2. Choose the lifestyle

It Is always advisable not to spend all our Income just to maintain certain lifestyle.

Also never use debt to fund the lifestyle; the use of credit cards to fund a particular lifestyle will only move backwards. First we should conduct a careful analysis of where most of our money is spent and we may figure out the wasteful expenditures that are unnecessary and can be removed from the list. This is all about gauging what is important enough for me to spend our money on. You can use our calculators at www.capstreetconsultants.com to gauge the money required for future necessities.

3. Evaluate financial decisions carefully

Before making any financial commitments, we should look at our financial situation holistically, for example, Instead of buying something we really want on credit rather save for it. It's better to save for the items we want to buy, it's delayed gratification but much cheaper. Start a Systematic Investment Plan to fuel our dreams.

4. Not just Save but Invest Wisely

By putting money aside we let your money work for us. We should also take advantage of the Tax Saving plans too by which we can save tax as well as invest the money for future. We should Invest in Equity and equity oriented funds for achieving long term goals. Ignore financial news and the fluctuations of the market keep investing In good times and bad.

5. Be sufficiently insured

Life Insurance provides the much needed peace of mind while we Plan for our Financial Independence. Health Insurance is also very important to keep ourselves secure for medical emergencies. Though people argue that if you have Financial independence, then you don't really NEED Life Insurance. However, real life is usually more complicated than what we think.

Staying Financially Independent is not one day job but is an ongoing process, even after we have realised our goal off financial freedom, We need to ensure it stays that way. We should stay abreast with our economic conditions and how they affect us personally. Our financial needs will change according to various life stages. We must ensure that our finances are also tuned according to the stage of our life.

INVEST SIMPLY THROUGH FOUR BASKETS APPROACH

It becomes very difficult for a non-financial background person to have a detailed financial plan and follow it systematically. So how can we make the investing things simple? In this post we will try to simplify the investment process in a lay man’s way.

Firstly we have to figure out our income, expenses and savings. We should also identify our primary and secondary goals which we want to achieve. We can divide our total income into four baskets based on the priorities of the need for the money.

The first part of the savings should go for immediate requirements and emergency purpose; like if we lose job how are we going to survive and meet our daily expenses. We can keep 3-6 months expenditure in this basket. The money saved for this purpose can be invested in liquid/ultra-short term mutual funds or may be in short maturity fixed Deposits. The main objective of this basket is to get the money as and when required therefore liquidity of this investment is of paramount importance. Now, many app-based systems for investing and redeeming money from liquid funds have been introduced which can move funds back and forth with ease and speed. They offer almost double the returns of savings accounts while being potentially much more tax-efficient.

The second basket of savings could be statutory or forced savings. Under Section 80C government gives us exemption for savings. Certain instruments are qualified for this savings which includes PPF, Insurance, ELSS, NSC etc. This type of savings helps us in two ways: first it reduces our income tax outflow as well as it forces us to save for a minimum period of 3-5 years. Some of these investment like PPF, ELLS are tax free at the time of maturity also hence gives full benefits of the savings. We can save upto Rs. 1.50 lakhs under 80C and additional Rs. 50,000 in NPS under section 80CCD. This saving can be used for short to medium purposes and can also be recycled for future tax saving purposes. Apart from this we should also have proper mediclaim polices which are also tax exempted for self, family and parents under section 80D.

The third basket of our savings could be based on our specific medium term goals. These goals/expenses can be figured out with more certainty as they are in near future say 3-5 years’ time. For example we would like to buy a house in next five years and need to put down an initial payment. Or we need a new car in three years, as the existing one will be pretty old by that time. We can separate these needs from the long term needs as they are more predictable and have shorter time period as compared to longer ones. This kind of savings can be put into balanced or hybrid mutual funds which are more tax efficient and have better returns comparatively. They are less volatile, and have a lower tax outgo than bank FDs.

The fourth and last basket is the one where we would be investing for a longer time horizon for example eight to ten years and more. These savings could be for our own old age requirements, or for kids education/ marriage etc. These investments would be based on our age and specific needs. Since these investments are for longer durations they can be kept in equity based investments options i.e. equity mutual funds. Even though equity funds can be volatile in the short term, they are the only asset class which can provide good enough returns in the long term to beat inflation and provide substantial returns. The income earned from equity mutual funds is fully tax free so gives us the maximum benefits without any cut.

To achieve anything we first need to know our goal, similarly to achieve a financial freedom we must know our specific goals and plan accordingly. For a starter, the four basket approach could be a good beginning in this path of financial freedom.

Investment learnings from DHONI “The Great Indian Cricket team Captain”

We all know about Mahendra Singh Dhoni the great India Cricketer with highest winning ratio and his many more achievements in cricket. Let's try to learn some investment basics from this sporting giant so as to become more successful with our money. I tried to outline few things which could be very useful for us while managing our money.

1. EVERTHING STARTS WITH A SMALL BEGINNINGS

M.S. Dhoni was small-town boy from a humble background, however by his game and beliefs he proved that small beginnings were no hindrance in the path of big achievements. Similarly when it comes to our money, systematic investment plans are the small beginnings however they can lead to big earnings over the long-term, thanks to the magic of compounding. The important thing is to start, be regular and believe that even the biggest goals can be met.

2. BE COOL IN TURBULENT TIMES

We all know that Dhoni is also called as Mr Cool, he has taken his team out of crunch situations many times?  Numerous, right? This is just because of his cool mind at difficult times which makes him think clearly to achieve the goals. Similarly if we are cool and calm during the time of financial instability, it can be greatly helpful. Whether it's equity market crash or a medical emergency or a sudden loss of job/income, panicking doesn’t help but makes matters worse. Instead of that if we stay calm and tackle the situation with a clear head in order to make the right decisions we can easily come out of the situation and do better.

3. LEARNING IS A CONTINIUOS EXECISE

Dhoni wanted to be footballer, but actually went into cricket. However he turned out to be a natural sportsman not just a footballer, he learned the game and worked on improving himself in every aspect of it. In case of money, most of us know enough about how to earn and spend it, but not enough to make it grow. By learning some basic knowledge we can make a difference in our finances. Few basic things like the basic economic functions, need of insurance, various options of investments, can get us some clarity on how various things works and its impact on our finance. In finance, learning can translate into earning. Regular learning made Dhoni one of the greatest cricketer of current times. Regular learning can definitely make us more successful in reaching our financial goals even if we are not the greatest investors.

4. HAVE FAITH IN WHAT YOU BELIEVE IN

Sometimes we believe on something which nobody else does however due to fear we don’t take a decision on it. Remember Joginder Sharma? If we are captain had we even thought of taking him in our team, let alone give him the final over of a  2007 World Twenty20 in South Africa World Cup to bowl? But Dhoni had faith in him. And Sharma delivered. We should also stick to our beliefs if have something. Everyone around us might have an opinion contrary to yours, but if we're convinced about an asset, sector or financial product then we should go ahead and put our money where our belief is. As said by someone, “very few people go against the herd but those who do often turn out to be the biggest winners.”

5. BE DOWN TO EARTH

Dhoni was a great captain and had so many achievements still he was always humble. He never allowed his success to go to his head. Similarly as an investor, we should not get carried away by the successes of our earlier investments. Things can easily go wrong if we lose sight of our goals. Any of the investment is dependent on a lot of factors, some of which are beyond our controls. Therefore we should be happy about those investment which did well but not be overconfident of our achievements and ruin the future opportunities/options.