Skip to main content

Financial Life Pyramid

The pyramid of financial life can be divided broadly in three parts. The foundation is protection or risk management, in the middle is wealth accumulation and on top is wealth distribution.

INSURANCE

There are things beyond our control and we should be prepared for such untoward incidents and always be ready with a plan B. By the way, most people don't even have a plan A. But let me explain both.

Plan A: Everything goes well and one is able to fulfil his financial goals out of his regular income and investment.

Plan B: If something goes wrong, something that we can't foresee today, insurance takes care of our plan A.

So, insurance builds the foundation of financial planning for any family. Three of the most important policies that anyone should have are term plan, health insurance and accident insurance.

Term plan: Term policy is insurance in its purest and simplest form. You pay premiums because there is a guarantee that if something happens to you, your family will be paid out the pre-decided amount. Hence, you have peace of mind that even if you are not there, those loved ones you leave behind will not have to bear any financial loss. Term insurance is protection against risk of life.

Premium rises with age, so if you delay it for some years, your premium will be substantially higher. In case, you are diagnosed with some critical illness, either you will be denied insurance or your premium rate will be higher by 25 - 50 per cent. In case something happens to the bread winner in this period, the consequences are beyond any explanation.

Health insurance: Today, one of the world's biggest problems is health care. This is getting expensive by the day. Even Indian doctors want to use the latest available technology and the downside of that is the huge associated cost. So, a health insurance policy can be really helpful.

The biggest problem is if you develop a disease in this period and then approach an insurance company. You will either be denied a policy or that disease will be excluded. Even it is included, this would be done only after three to four years. You will have to keep praying the disease does not reoccur during the interim period.

Ask any friend whose family member was recently admitted in hospital - "what was the total cost?" There is a high probability the answer will give you a heart attack. If you survive, buy a health insurance policy the next day.

Accident insurance: Sometimes, life plays strange games. Think of someone in the 30s, who loses legs or hands in an accident. From being the biggest asset of the family, he suddenly becomes an economic liability. A comprehensive accident policy can be really helpful at such times.

WEALTH ACCUMULATION

Now, moving to the second level, which every one appreciates is the most important part of their life. Let us assume you are 30 and have planned for retirement at 60 and would like to invest monthly. At 15 per cent annual return that one expects from equity mutual funds, you will come up with some astonishing numbers.

You have three options - invest `5,000 a month starting now or 10,000 a month when you turn 40 or save `30,000 a month in the last 10 years of your working life. The total investment in the final option will be double of first one. And the retirement corpus - in the first case, it will be 2.82 crore. In the second case, it will be `1.33 crore. In the last case, the accumulated amount will be just `79 lakh.

Say you calculate the amount the other way. Say you need `2crore at the time of your retirement. Once again you have three options, starting at 30, 40 or 50. The monthly investment when you start at 30 will be `3,551and total investment will be `12.7 lakh. In the second case, the monthly investment needed will be `15,071 and total investment will be `36.26 lakh. And, if you start at 50, the figures are shocking - monthly investment will be 76,040 and total investment will be 91.2 lakh. You can clearly see the cost of delay is huge. Due to the power of compounding, investments made in the initial years are the main chunk of your final corpus. The amounts required to compensate time delays are huge.

ESTATE PLANNING

Division of assets is a sensitive matter and people keep delaying it but there is again a huge cost of delay. People fail to write a will or even check the basic things like nominations and so on for investments. A sudden demise makes the lives of their families miserable. Smooth succession planning is a very important part of one's life.

So, don't delay important financial decisions and consult a good financial advisor now. Being casual about finances now will spell trouble in future.

So act now. Like the NIKE slogan, ' Just do it '.
 

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver Mutual  Funds  Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

Popular posts from this blog

Post Office Deposits Interest Rates

Best SIP Funds to Invest Online   SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich For further information on Top SIP Mutual Funds contact  Save Tax Get Rich on 94 8300 8300 OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com

HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300     HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO will be open for subscription from 16th May 2014 to 30th May 2014. The key features of the scheme are as mentioned below:   Type of Scheme A Close Ended Capital Protection Oriented Income Scheme Benchmark Crisil MIP Blended Index Fund Manager Mr. Anil Bamboli , Mr. Vinay R Kulkarni & Mr. Rakesh Vyas New Fund Offer (NFO) Period 16 th May 2014 to 30 th May 2014. Minimum Application Amount Rs. 5000 and in multiples of Rs.10 thereafter Plans/ Options Offered Growth and Dividend Payout Facility Liquidity To be listed For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

How Tax Deducted at Source (TDS) works?

    THE tax season is here. And if you are an employee you can't blame your employer for deducting large chunks of money from your salary towards tax deducted at source ( TDS ), which he is legally obliged to do. Your bank will also deduct some percentage from your FD interest of Rs 10,000 or more towards TDS! So what is this TDS all about? How is it computed? Are there any changes this year? Read on... What is TDS? TDS reduces your taxable income and could even provide tax relief! The TDS collections account for 40 percent of the total taxes collected in the country. As the name suggests TDS is the amount of tax that is deducted at source in certain types of income . The TDS thus collected is deposited in the Government treasury within a specified time. How is it computed? Some of the types of income where TDS is applicable include salary, interest, rental fee, interest on securities, insurance commission, dividends from shares and UTI/Mutual Funds, commission and brokerage

How to PPF Account extension after maturity

A PPF account can be retained after maturity without making any further deposits. The balance will continue to earn interest till it is closed. Public provident fund or PPF remains one of the most popular savings options for the long term despite a gradual decline in interest rates over the years. PPF accounts have a maturity period of 15 years and they can be extended. If there is no fund requirement, financial planners say, PPF account holders should extend the account beyond 15 years. In terms of income tax implications, PPF accounts enjoy the benefit of EEE (exempt-exempt-exempt) status . Under Section 80C, contribution up to Rs 1.5 lakh in a financial year qualifies for income tax deduction. The interest earned and maturity proceeds are also tax free. What are your options when a PPF account matures? 1) A PPF account can be closed after the expiry of 15 financial years from the end of the year in which the account was opened. 2) The subscriber can retain his

Indian Railways Seat Availability and Train Fare Enquiry

Enter the PNR for your train booking to find its status. Your 10 Digit PNR : Are you looking for Indian Railways Seat Availability information for trains between any two Indian Railway stations? Well, here is a detailed guide to find out seat availability and train fare information for journey between any two stations by any train on any chosen journey date. The holiday season is around and Indian all around are busy making Indian Railways Reservation .But before making the reservation, they would like to check berth availability information and here is a detailed step by step guide to check seat availability and train fare. How to check Indian Railways seat availability · 1. Go to the Indian Railways Passenger Reservation Enquiry page to check seat availability by clicking here [link] · 2. Enter the first few characters of the Originating Station against Source Station Name. For eg., if the origination station is chennai, enter "Che" against Sou
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now