Author: admin

“Life is a game; and money is how we keep the score”

There is a very popular ad by MasterCard, wherein a young man’s parents visit him,

The cost of business class tickets is Rs 110,000,

He rents a luxury car, cost is Rs. 8,000,

He takes them to an amusement park, cost Rs 5,600.

And the old couple is on a ride laughing their heart out,the ad says “ watching your parents become children again, ‘Priceless’. ”

If someone told you, “Money can’t buy happiness”. He probably wasn’t entirely speaking the truth. The ad clearly highlighted that the young man had spent Rs.123,600 as cost to have that priceless expression on his parent’s face. The underlying universal truth today is simply this – there are only a very few things that money can’t buy and for everything else, there is money!

One can easily imagine doing many small things that gives happiness but doesn’t cost us like spending quality time with family, watching favorite TV shows, waking up late on Sundays, chilling out with favourite buddies, going for a mountain trek, sitting on a beach on a beautiful evening and so on… True these things do not cost us but can we imagine us doing all these activities in absence of any money? The truth is that we all would fail to see and appreciate life’s small moments and wonders if we don’t have any wealth. We can live a normal, peaceful life absent of any worries only if we feel that we have financial security and well-being. In absence of same, we will see ourselves toiling day and night to earn money to fulfill our basic needs and our life’s primary goals.

We all want financial freedom in our lives to do the things we like most but yet, most of us often spend a life time running a rat race to reach there. And when we reach that state, if at all we do, we would have become old to do any of that.

So what’s the answer?

There is no magic wand, but all we can say is that we need to commit ourselves with all our will to aggressively save and be strict in observing wealth creation and management principles which we have so often iterated.

We need to start with basic money management skill of controlling expenses – a very important need today. We need to realise that spending money will grant satisfaction, it may however not last forever but spending money wisely will grant satisfaction that may last a lifetime. What you do with your money, matters more than how much you have. If you spend on things that give you satisfaction, it is really worth it. But if you spend on things that give you immediate pleasure but lose its lustre after some time, will not give you happiness. The idea is not to compromise on your needs or desires or to not follow your passion. It is about managing your expenses intelligently, so that you have a surplus which you can invest for your future.

It is wise to buy experiences and not articles.

You like cycling, plus its good for your health. Now there are three cycles to choose from, A,B and C, costing Rs 5,000, Rs 25,000 and Rs 100,000 respectively. Cycle A may not be very comfortable, so you might want to choose between B and C. A smart investor would always choose B because; Cycle B would maintain it’s quality and comfort, it would have all features which are required for a comfortable cycling experience. It might not however be a big brand as C, it might have 2 lesser gears than C, Cycle C would be made of carbon, so you can lift the cycle with one finger. But does this really matter? Will it at all impact his cycling? No. So, he would rather buy Cycle B, save Rs. 75,000 and invest the money for his future. And there are hundreds of instances, where we have to make a choice between similar products but with different prices, or between buying or not buying at all. It depends on how wise we are and how effectively we follow money management techniques in each purchase; it will be a significant sum at the end of the year.

This first step is most critical as it will enable you to save money which can then be invested in avenues which help grow your wealth. Remember a rupee saved is a rupee earned. For some even such small savings can give happiness when they believe in their hearts that these savings will bring many smiles in future …

Inflation is the first thing that all of us should know on the subject of wealth management. It is very surprising that most educated and learned persons /investors still do not fully comprehend the term Inflation and it’s impact on us. Ronald Reagan, the 40th US President, once said that “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man”. There are a lot of things that we can learn about Inflation and things related to it. In this piece, we attempt to present a simple FAQ on the subject.

What Is Inflation? 
Inflation in simple terms means general price rise of goods & services. In economics, Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services. In other words, the real purchasing power of currency reduces due to Inflation. As Sam Ewing once said “Inflation is when you pay fifteen dollars for a ten-dollar haircut you used to get for five dollars when you had hair”.

How Is Inflation Measured? 
Inflation is usually measured based on certain indices and broadly, there are two categories of indices for measuring Inflation i.e. Wholesale Prices and Consumer Prices. For measurement, an index number or a single fi gure is arrived at that shows how the related basket of goods & services has changed over time. Thus we have the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) as the two major indicators of Inflation. The Inflation rate is the annualised percentage change in the index over time.

CPI (also retail Inflation) = Measures changes in the price level of a market basket of consumer goods and services purchased by households. It is the Inflation which is borne by us as individuals.

WPI (also headline Inflation) = Measures changes in the price level of a representative basket of wholesale goods which are traded by producers. It is the Inflation at the level of producers and has more meaning to industries & manufacturers. It is measured more quickly than CPI which takes more time to get reflected in the index. Different countries have different methods of measuring Inflation. In India, like many other developing countries, uses the Consumer Price Index (CPI) as it’s central measure of Inflation. Previously India used Wholesale Price Index (WPI) as the measure for Inflation but since year 2014, the new CPI (combined) is the new standard.

What Are The Reasons For Inflation?
There are several factors that affect Inflation in an economy and it is not easy to identify the exact relationship between different factors and it’s impact on Inflation. For the sake of simplicity, we will broadly take a look at the primary factors for Inflation here…

Demand factors: It happens when the aggregate demand exceeds the aggregate supply. It is a situation where too much money chases few goods. Increased money supply due to loose monetary policy and low interest rates results in Inflation. Fiscal deficit financing by government by way of printing more money also results in Inflation.

Supply factors: It happens when the aggregate supply is not able to meet the aggregate demand. It is a cause of Inflation in an agrarian country like India where food is a major component of CPI. Further, because of rising wages & cost of capital also impacts the production cost of goods & services leading to rise in prices.

Domestic factors: In addition to demand & supply, the quantum of spending by government in the economy directly a ffects Inflation. Further, higher employment levels, taxation rates, etc. also add to Inflation. Issues like hoarding, blockages, etc. also positively impact Inflation.

External factors: There are external factors like currency exchange rates, trade barriers, etc. which a ffect the price of imported goods. Commodity prices in international markets like crude oil, gold, etc. also has impact on domestic Inflation.

How Does It Affect Us?
Inflation affects us directly and indirectly and has both positive and negative impact on us. While we may not list every type of impact, here are a few ways in which we may get affected as investors.

Purchasing power: Inflation hurts our buying power since we will have to pay more for same goods & services. Thus, with an Inflation of say 8%, your 1 lakh rupee today will be worth only R46,319/- in ten years time.

Cost of living: The cost of living is not equal to Inflation but is an aggregate impact of Inflation in our day-to-day lives. With Inflation, our general cost of living will increase and unless we are o set by rising income by the same rate, we will have increased expenditure and reduced savings. It will mean that one financial goal today will be worth lot more in future. For eg., when planning for retirement after say 25 years, your 50,000 worth of monthly expenses would rise to over 3.42 lakh rupees at an Inflation of 8%.

Wealth Creation: If your investments are not earning you more than Inflation then you are not actually growing or creating wealth. To create wealth you need to generate more of ‘real returns’ which we will talk later.

Interest rates: In case of sustained periods of high Inflation, the government is likely to keep interest rates higher meaning that loans will be at higher rates while rates of deposits will be also kept higher to absorb money. There will be less of government spending in general. In periods of low Inflation, interest rates will subsequently fall and this may also lead to a fall in interest rates offered by small savings /deposits making it a challenge in retirement planning.

Housing & stocks: In general, if you have already have investments in housing /stocks/equity mutual funds before Inflation, you will be in position to benefit from Inflation when prices rise. However, if not, you will find them expensive to buy later.

What Are Real Returns?
As investors, we should always look at returns not as notional returns but as real returns. Notional or stated returns is what you receive but real returns is what you are getting in real terms – after removing Inflation. For eg., if a bank account is giving you 8% pre-tax returns yearly – even with conservative retail (CPI) Inflation of say 7%, you are only getting 1% returns. If you consider post-tax (30% slab) returns of 5.6%, then your real returns are a negative of 1.4% meaning that you are loosing money by investing in such an avenue.

Next time whenever you are evaluating investment decisions, please remember real returns. Going a step further, it will be great if we calculate post-tax, real returns between investment avenues /products for our investment horizon.

How To Get Protection Against Inflation?
First, be aware of the Inflation figures and their impact in future costs. But merely knowing Inflation and real returns is not enough and we must also act to get protection against Inflation. Here are a few things that we should do in order to get protection…

Do Goal planning: Inflation is at the heart of financial planning. You must get to know your future financial needs to fulfill your life goals/dreams with the ‘right’ Inflation figure. The right Inflation rate is critical since CPI cannot be applied in general to all financial goals. For eg., Inflation for education and medical treatments is observed to be over 10%.

Save & invest aggressively: Merely planning is not enough and you also would need to aggressively save money and invest money. This means reducing expenses and controlling your budget.

Get Real Returns: Investments have to be made in asset classes /products giving you the maximum post-tax “real returns” as per your risk profile. The case is strongly in favour of equity asset class which has no long term capital gains (over 1 year) and where long term returns (at least 5 years) potential is the highest (average 12-15% expected) among all asset classes. This means that even at 12% nominal returns you are getting 5% of real returns vs. 1.4% of negative returns in fixed income instruments with 8% pre-tax returns.

Conclusion: 
As Milton Friedman once said, “in¬flation is taxation without legislation”. And there is no escaping it and no magic wand to keep it tamed and friendly for you. Infl¬ation impacts our financial lives more than anything else and we have to understand how infl¬ation would impact our future finances and financial goals. Understanding though is only the first step and protection is the next step where we must learn to interpret figures in terms of real returns and aim to maximum same. Unless we do not start doing that, we will keep eroding and loosing the our wealth without even knowing.

Your starting point is the one where you are standing today. You know your destination but you do not know the route. You have to look for someone who can guide you so that you reach your ultimate goal. The guide is your financial advisor, who will help you define a road which you shall follow in order to achieve your target. The end of the pathway is your ultimate target, which in most cases is a happy retirement life. Your financial advisor will devise the road for you according to your goals, your demographics, your income, assets and liabilities. He will give you solutions for various hindrances that you might face while steering on the path, and he will also guide you on crossing the periodical laps i.e the points where you will achieve your short term and long term goals.

One the road to success, you’ll confront a number of challenges and opportunities, your journey cas be characterised as:

• The road is long: The road of your life in very long. Keep calm and carry on. Your ultimate destination i.e your biggest life goal is yet too far, so you have to be energetic and follow the path because there is a lot lying ahead. At any point, you must not give up and stop following the investment path because it is the only way you can achieve your mission.
• The road will have pits: The investment path is simple, but not easy. There will be bad times and your investments might not fare well, at this point you must not panic, you must have the courage and confidence on the road that you have chosen. The strength of your portfolio will take you out of the pit to help you move on.
• There will be laps: The laps are the points of actualization of your short and long term goals. Your investment plan will comprise specific investments for each of these laps. These laps are predefined, you know the first lap of buying a car will come after three years, the next lap of buying a house will come after another three years. So, whenever you are near a lap, let’s say buying a car, so your SIP for 5 years would be there to fund the car purchase.
• The road will have bumps: While there are certain goals to be achieved, there are uncertain emergencies as well. A solid investment plan will provide for theses bumps also. A sudden job loss can cause a lot of financial disturbance, yet a preplanned provision for contingency will help you from falling, though there will be a little mental instability, but your investments will take care of your expenses till your next job. Though the bumps might disturb the stability of your investments, yet you’ll cross it because of the strength of your portfolio and your willpower.
• You’ll see shortcuts: On the path of investments, you’ll come across various diversions and shortcuts, which might promise to help you achieve your target quickly, but you must not pay heed to such shortcuts and keep moving on the set path. You might come across a flyer which says invest Rs 1 Lac and double your money in six months. Don’t fall prey to such claims, because the shortcut might have a dead end ahead.
• A bend in the road is not the end of the road: The investment path that you chose, might require you to now take a turn. This may happen if it is best to modify your portfolio in order to meet your present needs, or if the present market offers some new and better investment opportunity than what you already have. So, you shall move as the road suggests to.
• The finish line: This is your ultimate goal, a happy retirement.

The bottomline is there will be steep turns and tolls where you have to stop by to achieve your short and long term goals. There will be diversions as well, but you do not have to deviate from your set plan, since these diversions are the temptations to take a short cut which will ultimately mislead and prevent you from achieving your life goals. You have to overcome and exploit them wisely.

Your investment plan is the road that you will travel on, your determination is the fuel which will keep you going, your hard work is your engine, and when you are on the hot seat, feel the thrill and be ready for the best.

The most awaited festival of the year, ‘Diwali’ is just round the corner. Each year the festival is looked forward to and celebrated with enthusiasm & with the hope of lightening our lives. It’s the time to exchange gifts, meet friends and family and celebrate happiness. The festival celebrates triumph of Lord Rama over Ravana, Good over Evil, Faith over Fear and Knowledge over Ignorance.

On this day, Hindus worship Goddess Lakshmi, who is a symbol of wealth and prosperity. It is a belief that Goddess Lakshmi visits our homes and showers blessings of wealth on us.

Following are some key points which we can learn from the festival, and bring prosperity into our lives by incorporating them into our saving and spending pattern:

Cleanliness: We start cleaning our houses weeks before Diwali, and we eagerly wait for the day when the Goddess will come and bless us. It is said that the deity visits and disburses wealth in neat and clean homes only. You must have seen the Swachh Bharat Ad featuring Kangana Ranaut as Goddess Lakshmi, who disappears from photo frames kept in places of worship, of people who litter. We believe that the deity will visit our homes only if we keep it clean.

Just like we clean the house for Goddess Lakshmi to grace our dwelling with her auspicious steps, we must review and clean our Portfolios for Goddess Lakshmi to come & grace our Portfolio and multiply our long term wealth. So, as they say, Diwali is the victory of good over evil. So you must carefully review your portfolio, clean it; remove the evil, i.e the products which are non performers and are not expected to perform in the future and keep the good ones.

Mahurat: According to the Hindu mythology, Diwali time is a good mahurat, i.e. the time when the stars are on our side and anything initiated during this time, will be a grand success. So, if you haven’t started investing yet, start now. It is the time when the stars are on your side, you must start investing to build your long term wealth. And if you are an experienced investor, it’s time you must review your portfolio, set newer goals and make new investments. This Mahurat time is exploited by people by trying their luck in lotteries, gambling, card games and other speculative activities. A special ‘Mahurat Trading’ session is conducted on major Indian stock exchanges on Diwali, and it witnesses humongous participation each year. But you must remember that luck cannot be trusted and hence you should focus on long term wealth creation. Yet if you wish to keep the tradition going, and you decide to take the plunge, play with small amounts so even if you lose, the spirit of the festival is kept intact.

Dhanteras: Dhan = Money and Teras = 13^th day of Kartik month. People purchase gold, silver, electronics and other assets on this day because it is trusted to be lucky and it is believed that wealth will keep coming into the house for the following year, just like this day. Every Dhanteras, we purchase gold jewelery, pay huge making charges, only to dump it in the lockers of our banks and then incur wastage charges, in case we sell the gold subsequently. On this Diwali, let’s go for intelligent gold, go for dematerialised gold if you “insist” in investing in gold. Gold Funds/Gold ETFs are better options as they come with no physical risks, no making charges and it is easier & cheaper to liquidate at any time. So capitalize on the luck of this auspicious day by investing in “non-physical gold”.

E-commerce sale: Diwali brings in happiness, but it is a costly affair. We give gifts, we spend on sweets, crackers, puja, new clothes for everyone in the family, etc., all these factors contribute to loss of money. To make matters worse, the latest addition to Diwali rituals is the online shopping festivals. The e-commerce giants try to lure us with mouth watering offers and discounts, and we end up overspending, buying stuff which we don’t even require and disturbing our budget. So, our advise to the readers is Control your emotions and don’t get carried away by the discounts. You can even cut down on crackers, gifts and other Diwali expenses, and bring the money to more productive use by investing. Remember, ‘A penny saved is a penny earned’

Diwali bonus: Some of us get our annual bonus during Diwali time. This bonus is intended to enable us provide for the extra expenses that we incur for the festival. The amount is generally much more than the extra expenses, and since we have more money, we tend to spend more money. We get this bonus once a year, and this is a reward for our hardwork. The money can be blown in a day or can be saved & invested for your future. It is a better option to save for your future and not waste your hard earned bonus in extra crackers during Diwali. You can use this bonus to repay your old debt, or make fresh investments for your future goals.

So, the bottomline is, this Diwali keep your emotions under control, do not overspend and invest for yourself, for your future. Be safe while playing crackers, remember that such auspicious occasions don’t come everyday, and you must utilize the opportunity by wisely managing your expenses and investments.

Have a Happy and Prosperous Diwali!

You have finalised a challenging target for new SIPs for the quarter. You are all happy and gung-ho for it. But after a while, you stop thinking that it is possible. And at the end of the quarter, the target figures is itself lost somewhere. Sounds familiar? What do you think was the problem here?

Motivation. Perhaps it is one thing that distinguishes winners from followers more than anything else… William James, the father of modern psychology, once said something that we should remind ourselves on a daily basis: “I don’t sing because I’m happy; I’m happy because I sing.” In this very simple line, James seems to have summed up what motivation is all about. In spite of us knowing this universal truth, most of us are not even half as motivated as we can ‘normally’ be.

We all want to be and feel motivated at all times. It is a wonderful feeling, isn’t it? Well the good news is that motivation is something that is 100% in our control. Nothing can take away your motivation if you decide to not let anyone or anything to do so. In fact, we can harness our energies and be motivated longer and more intensely than ever. In this piece, we present you a few tricks that you can follow…

1. Exercise & Refresh 
   Getting up early and working out makes the day very energetic and efficient. Those who exercise daily will swear by it. Further, with better health, fitness and an agile, energetic mind, it is only natural that you feel more motivated and focused to accomplish bigger things. Overcoming physical hurdles of strength, stamina and endurance, encourages us to outperform in our endeavors.
2. Be Positive 
   Negative people, thoughts and conversations often leave us feeling uninspired, critical and with lesser confidence in people and our goals. It is highly recommended that we stay clear of such negative vibes and don’t participate or at least stay neutral in negative conversations. On the other hand, being with positive persons and participating in positive conversation and activities will only brighten our own thoughts and motivate us to think things positively.
3. Seek Motivation
   A very common source of motivation that we seek is the external, source. There are countless books, real life heroes, movies, motivational speeches / training sessions, etc. that we can access to get inspiration and motivation. The external source is a vital resource that we all can easily tap into to reenergise ourselves.
4. Create Necessity 
   Long time ago someone told me to book a much expensive car. Apparently, doing so would keep me on my toes as I would need to maintain that car and that will be my new benchmark of standards in life. The underlying idea was to create a necessity in order to motivate ourselves. While it may not always work with everyone, there are surely those who would work hard, simply as a way to meet their newly adopted necessities.
5. Take Challenges
   Many of us are more motivated when we face challenges. The challenge serves as the target, an opportunity to test yourself and also to emerge victorious. The absence of challenge is like the absence of any spice or motivation for us. So, let us aim for challenges that are tough and worthy of our efforts.
6. Get Rewarded
   Linking rewards to outcomes is also a good trick to motivate ourselves. The rewards can be in the nature of materialistic gifts, things that give us pleasure and joy, and so on linked to desired results at a personal or professional level. Let us tell ourselves, if I accomplish this target by end of the quarter, I will take a holiday break in hills. The picture of the hills on your desk and the advance ticket bookings will be a mighty motivation booster for you.
7. Build Momentum 
   A good momentum is when you are enjoying a continued good performance and you are accomplishing your targets. The reason can be attributed to your own good work or may be to markets or even fate. Whenever we get into this phase, we need to make the most of it by building up the momentum. This will motivate us to rise to ever higher goals.
8. Set Example 
   Name and fame are human needs. We all internally desire to be greatly respected and renowned for our work. We desire that we inspire others and they feel like following us. Well we can start by doing things that will be set examples and inspire those around us, starting with our employees and clients. This habit or a character trait within us can be a source of self motivation within us as we would seek to find ways to inspire and do things that will command respect.
9. Think & Visualise 
   Take at least a 30 minute break every week to think nothing but about yourself, your life, goals and your present situation. A deep soul searching is important in this fast paced life. It will help us stay focused, grounded and close to things that are most dear to us. When you are in difficulties, talk to self and remind how you and others have overcome difficult situations in past. Visualise things to do and the success thereafter. Motivation is just a few thoughts away…
10. Have A Higher Mission
    I am sure that most of us would want to contribute to a higher cause at some point of their lives. We are motivated to do something for others, selflessly. Well we can use our good intent as a motivating factor when we find a higher meaning, a mission in our present work as well. Think of the financial advisory practice as a way to solve people’s problems, protect them and make them happy. Thinking of our business in this perspective, can take away a lot of negativity and tiredness we often may feel and give us satisfaction levels that will run deep.

Food For Thought: 
We now present some good quotes we came across on motivation. Spare a few minutes to think about it…

• “Start by doing what’s necessary; then do what’s possible; and suddenly you are doing the impossible.” – Francis of Assisi
• “Wanting something is not enough. You must hunger for it. Your motivation must be absolutely compelling in order to overcome the obstacles that will invariably come your way.” – Les Brown
• “Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it.” – Steve Jobs
• “Ability is what you’re capable of doing. Motivation determines what you do. Attitude determines how well you do it.” – Lou Holtz
• “There’s always the motivation of wanting to win. Everybody has that. But a champion needs, in his attitude, a motivation above and beyond winning.” – Pat Riley
• “Motivation will almost always beat mere talent.” – Norman Ralph Augustine
• “Motivation is what gets you started. Habit is what keeps you going.” – Jim Ryun
• “Once something is a passion, the motivation is there.” – Michael Schumacher

Young adults are perhaps the richest among all of us. They have something more – “time”, an age when the possibilities are unlimited. In case you are a young adult in 20s or 30s or a parent / guardian with children approaching or are in their 20s, this article is for you. The article guides us to do a few things which perhaps no one has ever told us to do. These things will introduce you to the world of finance and when taken, will be your first steps to the world of finance…

Why Take These Steps?
There is one common thing which most people after the age of 35 regret. That common regret is about not knowing about investments and saving at a young age. To be financially successful, being skilled and knowledgeable is not enough. You need to have the right wealth management skills to be rich. It can amplify or magnify your income many times over. Hence, while you should focus on learning and pursuing your career dreams, you should also focus on increasing your ‘wealth quotient’. The earlier you take the jump, the chances of becoming wealthier soon, increases.

Being in your teens or in your 20’s is the best time to take the steps listed here…

The First Steps:

1. Learn about Personal Finance & Investing
   Knowledge about personal finance topics and investing at an early age is a great asset. Young adults must know about different asset classes, investment products, insurance, loans & credit, time value of money, inflation, savings, taxation, financial planning, etc. Such knowledge, especially during early years of career can really help someone take great decisions for future. If you are a guardian, be sure to involve the young adults in your own investment decisions. There are many ways in which young adults can gain financial knowledge. Some of them are…
   • Read books, finance magazines and watch TV shows on investments
   • Interact with financial advisors, accountants, experienced family members
   • Attend investment seminars/camps by regulators, participants in financial services industry
   • Enroll for any certification from the many offered by NSE/BSE on the subject matter
2. Get Engaged
   Your parents must already be investing and interacting with their accountants and financial advisors. We encourage you too to participate in learning and understanding the decisions, your parents are making. You may ask them about what financial savings are being done for your future. You may also enquire about insurance coverages, etc. taken for all family members and whether those are accurate. As savvy Internet users, you may also share your feedback and suggestions to your parents in their wealth management activities. We are confident that with the kind of access to information you have, you can
3. Control your spendings
   Young adults are perhaps the most valued consumers hunted by every big brand ranging from cars to shoes to laptops to even holiday packages. With the newly gained earning power and lack of big responsibilities, it is natural that spendings on entertainment, gadgets, accessories, hanging out / parties, etc. form a big chunk of the spendings. Surely it is the time to enjoy life but young adults are advised to control their urge to splurge and not make impulsive decisions. It would be great if one can budget such spendings and avoid taking big decisions like buying motorbikes, cars, laptops, etc. without adequate thinking and research.
4. Start investing immediately:
   We have often spoken on this topic. The benefit of saving early can never be under estimated. Even if the savings is mall, with the power of compounding, the wealth created by you can be enormous, as seen from the following matrix.
   In the above e.g., Mr. Delay would have to invest thrice the amount, or R 30,000 monthly, saved by Mr. Smart if he wants to match the wealth created by him at age 35.
5. Get PAN & start filing tax returns:
   PAN card can be issued to any person, irrespective of whether there is any earning or not. And, if you have started earning, it is best to start preparing & filing income tax returns (ITR), unless exempted. Filling of ITR has many advantages as it is considered as a standard income proof globally and can help you while applying for loans, visa applications for jobs abroad, requesting tax refunds, etc. The PAN issued by IT authority is a prerequisite for filing ITR and is also mandatory for all financial transactions. So it makes sense to get yourself one, even if you don’t have much income.
6. Get health & life cover
   Getting adequate protection at a young age, where people tend to be more adventurous, is highly advised, even if there aren’t any dependents on you. Buying health or life cover at a younger age is also considerably cheaper than buying the same later. Such protection can really help one, in case there is any unforeseen emergency and financial burden on parents will be avoided.
7. Start thinking about home
   The average age of home & car buyers has decreased dramatically in the last 20 years. Powered by easy availability of loans, fat pay packages & growing aspirations, the first time home buyer today is often around the age of 30. The first time car buyers are even younger. It would thus be best advised that young adults keep these goals in mind and start saving as much as possible for home & car goals, if any, from now onwards. It would really benefit you a lot when the time comes for purchase in near future. Often young adults delay saving for the goal and end up paying lesser down-payments and taking higher amount of loans which should be avoided. Lastly, even if you have a house of your own, it is advisable to think of buying a house as an investment for future and also enjoy tax benefits on same.

Conclusion:
Having time on your side is a great advantage and never to be missed. It is also the time that you can afford to make mistakes while learning – this is a luxury which most people cannot afford at the later years of their lives. Experience has shown that wise decisions, actions and discipline in these formative years go a long way in securing a better financial future down the line. Simple actions taken today can help you avoid taking tough decisions at times when you have a family to support and lot of responsibilities to be taken care of. So go ahead and make the best of this time.

Scope of financial planning and awareness about personal finance have gone up considerably in last one decade or so with well traveled average Indian and increasing earning/savings capacity.

But the challenge that remains both for clients and planners is that we all prefer to plan something which we can foresee for our future or something which comes out of compulsion like planning for buying a car or house, savings for kid’s higher education and marriage or even planning for a vacation abroad. Distribution of wealth is as important as creating of wealth and that is why despite complexity involved, one can not ignore the most important aspect of ‘Estate Planning’.

Estate Planning is nothing but legal arrangement for transfer/distribution of one’s assets when he/she is not around or simply to protect or preserve assets during their lives. Common misperception among individuals is that estate planning is only for rich people but this is not true. It is a fact that importance increases manifold for rich and successful people, but even for a common individual the need for estate planning can not be ignored. In fact I would like to put it in a way that if large corporate houses like Tatas, Birlas or Mahindras of the world require a well defined estate planning then a common individual who has limited wealth to distribute must have a well defined estate plan in place in order to avoid any conflict among his/her family members. Regardless of the amount of wealth you have generated, it is important to understand and prepare a estate plan in order to make sure that your financial & philanthropic goals are met even when you are not alive.

It is an accepted fact that the need and importance of estate planning depends on life stage and situation of every individual but it is also an accepted fact that this is something which should not be ignored.

The importance of ‘Estate Planning’ has gained momentum among corporates recently after much highlighted legal battle of Ambani brothers after the death of Reliance patriarch Shri Dhirubhai Ambani. Here we will try to understand how individual investor can benefit from estate planning.

Estate Planning For Everyone:
Estate Planning is required for everyone who has estate and who wants this estate to be distributed as per his/her wish rather than simply getting passed as per succession laws. Estate is nothing but the difference between your assets and liabilities, irrespective of its size or value.

The most common idea that comes to our mind when we talk about estate planning matters related to property and preparing a Will. But estate planning in totality is much beyond just making a legal will and matters involved beyond just property. The fact of the matter is, detailed estate planning includes every asset that an individual owns from property, investments, business, jewelery, bank accounts or any other asset that an individual owns.

Mode of Estate Planning:

Writing a Will:
This is the most common way estate planning is done in India. A Will is a legal document in which an individual can mention the way he/she wants his/her estate to be distributed after his/her death. Thus a Will comes into effect only after the death of testator/creator of the Will.

The Indian Succession Act, 1925 defines a will as : A will is a legal declaration of the intention of the testator, with respect to his property which he desires to be carried into effect after his death.

A Will can be made by any person who is above 18 years of age and is of sound mind. Registration of a Will is optional but has to be attested by two or more witnesses, each one of them should have seen the testator signing the Will. However it is always advisable to register the Will. However registration does not affect validity of the Will. Whether registered or not , a Will must be proved as duly and validly executed as required by the Indian Succession Act.

Validity of Will : A Will becomes ‘Void’ , becomes not enforceable in following situation:

• If a person making a Will is of unsound mind or not capable to contract (below 18 years of age)
• A Will, obtained by force, coercion or undue influence is void.
• A Will made under influence of intoxication or in such a state of mind is a void will.

Traditionally creating a Will has been preferred way of estate planning in India. But a Will can be challenged on numerous grounds with more and more cases of Will being challenged in court or family disputes arising on validity/authenticity of Will, creating Trust is more preferred mode of estate planning.

Estate Planning through Trust:
The basic objective of estate planning is to protect interest of family members or beneficiaries. Due to possibility of legal dispute among family members with regard to legality of will and to protect interest of minor family members, creation of trust can prove to be a better and smoother way of estate planning.

Any person who is a major and capable of entering into a contract can create trust. A trust is a contract in which property/estate is managed by one person or persons (trustees) on behalf of beneficiaries. The main objective of estate planning is to take care of interest of spouse, children and objective of philanthropy. This can be taken care of best by creating a private trust.

Advantages of doing Estate Planning by Creating Trust:

• In business there can be huge loss but assets that are put into trust remain safe because Trust is a bankruptcy remote structure.
• The person who creates the Trust can put himself as one of the beneficiaries and hence can enjoy the benefits during his lifetime whereas a will comes into effect only after death of the creator.
• A person can avoid family dispute as trust does not require probate.
• The person can make provisions for philanthropic work or charitable purpose by creating charitable trust.
• Administrator/Protector of the Trust can be appointed which ensures that activities of the trustee are conducted under supervision of administrator/protector.
• The trustee has power and duty as assigned to him under trust deed for which he is accountable to perform his duty, manage Trust property as per the deed. There is a fiduciary relationship between trustees and beneficiaries. Best suited to protect interest of minor children in the family.

Creation of Trust or Will, both have their own advantages and disadvantages. But Trust scores over Will in a sense that Trust does not require probate and an individual can remain in control of his assets even after transferring them to Trust. Estate planning is best controlled and executed through trust because a Will gets executed only after one’s death.

Whether to do estate planning through creation of Will or Trust is an individual’s choice but what is important is to put a plan in order to avoid any kind of family dispute and to protect the interest of your spouse and child/children. Also to be considered is to consult a legal expert who can guide you with legality of creation of Will or Trust.

What do we do with the surplus of income over expenses i.e our savings. We keep some money for meeting our near term emergencies or commitments like paying our kids’ school fee, a weekend getaway, a family function, etc. and we invest the rest. In this article we will focus on the former viz the money we keep with ourselves. Most people keep this money as hard cash in their homes or deposit the money in their savings bank account. In the financial world, it is practically a sin to keep cash at home, because of two reasons. 1. It is risky, can be lost or stolen and 2. It is not giving any return. Those people who are keeping this money in savings account do offer protection to their money but the return that you get is negligible.

Your money should at least cover the rate of inflation, because Rs. 1 Lac today will not be of as much value a year later. So, if you are looking for safety and similar convenience of withdrawal of your cash but with better returns, then Liquid Funds is your best bet.

What is a Liquid Fund?

A Liquid fund is a category of debt mutual funds, which invests in short term debt securities like certificate of deposits, treasury bills, commercial papers, term deposits, etc. having maturity of up to 91 days.

So if you want to park your extra cash and you need the money soon, say in a week or a month or few months , you don’t have to adjust with the low returns offered by your savings bank account, you can stash the cash in Liquid Funds. You can invest in a liquid fund even for one day.

Savings account balances are huge in case of salaried people whose money keep on accumulating with every salary in their saving accounts.

Let’s take an example of Mr. Ram, who is working in Infosys. Mr Ram gets a salary of Rs 100,000 per month and he is saving Rs 40,000 to Rs. 60,000 a month, which is getting accumulated in his saving account. For simplicity sake, lets assume

1. Mr. Ram is saving Rs 50,000 fixed in each month.
2. Mr. Ram withdraws Rs 50,000 on the first day of each month and his saving remains in his account for the entire month.
3. Semi – Annual Compounding, and we are considering a time period of 6 months, therefore compounding effect is ignored.

At the end of 6 months:

Value of Mr Ram’s money in Savings Account @ 4% interest p.a. = Rs. 303,456

If Mr. Ram moves his savings in a Liquid Fund on the first day of each month

Value of Mr Ram’s money in Liquid Fund @ 8% interest p.a. = Rs. 306,829

Just by moving his money from his saving account to a liquid fund, Mr Ram earns Rs 3,372 extra on the same investment.

Why should you invest in a liquid fund?

1. You can easily park your money for short intervals.
2. Money kept at home or in savings account is not growing, the returns are lower than the inflation rate in our country. Liquid funds offer higher returns, so that your money is able to catch up with and outperform inflation.
3. You can withdraw your investment anytime, without accruing any penalty.
4. Since Liquid Funds invest in fixed income securities with short maturities, hence they bear a lower risk.
5. No entry and exit loads, hence Liquid Funds are cost efficient for the investor.
6. If you do not withdraw your money from Liquid fund for over 3 years, you get the benefit of paying tax @ 20% with indexation. Short term returns are taxed as your saving bank returns.

Now you can earn extra income by moving your money from your cupboards, savings or current accounts into liquid funds. You get better returns and you can withdraw whenever you need.

It almost pulled the rug from under the feet of many Indians on the evening on 8th November 2016, when PM Modi announced the demonetisation of Rs 500 & Rs 1,000 notes. All the cash that was stashed in our homes, our wallets would be worthless within the next 4 hours. Then a ray of hope shined through the dark clouds when the government announced that people don’t have to worry and they could withdraw new currency or exchange and deposit their old notes, but with limits on withdrawals. Since then, there are long queues outside the banks and ATMs, people start waiting hours before the banks open, people are collapsing in the queues, some are making friends for life in the queues, some are gratifying their philanthropic spirit by serving tea or water to the subjects of misery standing in the queues, etc. And at the end, they receive a skimpy amount which might not even provide for essentials that can last for a week.

In such a situation what do we do?? Queue up with others Or Play Smart?? Do we really need cash to survive?? The answer is No. Technology will help us survive without cash. The Demonetization move is aimed to eradicate black money and corruption from our country, by transforming us into a cashless economy, and technology is the only means through which this move can be implemented.

In the present day scenario, we are not left with a choice, but to adopt technology. There are various digital tools at your disposal which will effectively handle your cash requirements. Following are a few popular techniques which will help you ‘Go Cashless’:

• Electronic Wallets: You don’t have to go to a mobile shop to get your phone recharged, you don’t have to stand in long queues to pay your electricity bill, water bill, mobile bill, etc. Thanks to the digital wallets. You just have to transfer money from your bank account to your wallet and you are good to go. Book movies, flights, hotels; pay bills; purchase groceries, clothes, medicines, toys; pay to the autowalas, retail stores, coffee shops, etc., with your digital wallets. You get the convenience of doing everyday transactions through these wallets, plus you get discounts, plus you get a Cashback on your purchase, which is a cherry on the cake. Paytm, Mobikwik, Freecharge are the popular Digital Wallets.
• Unified Payments Interface (UPI): UPI App is a GOI initiative, through which you can pay or receive money from and to any bank account through a mobile App. You can transact anytime and from anywhere, simple and quick. You don’t have to enter ifsc code, transaction passwords and wait for the payment to complete. You just need to enter a PIN to execute the transaction.
• RTGS, NEFT: In UPI, there is a transaction limit of Rs 1 Lakh. In case, the transaction is of a higher amount, then you have the option of RTGS or NEFT.
• Bank Apps: Many banks have their apps to enable their customers go cashless. Like Digital Wallets, you can add money from your bank account and start paying your bills, movie tickets, buy investments, etc. through your mobile.
• *99#: You just have to dial *99# from your mobile phone, and you can transfer funds, check account balance, etc. without internet connectivity. This facility is available in 11 regional languages. This is called USSD based mobile banking and you can transfer an amount as low as Rs 1 to the max Rs 5,000 in a single transaction. The service is available 365*24*7.
• Plastic Money: You can always use your debit and credit cards for payments, be it online payments or through a swipe machine. Most departmental stores and even small retailers have a card machine. You don’t have to carry heaps of cash with you, your wallet becomes lighter, and the risk of theft is also minimised.

Though Demonetization has caused a short term turmoil, but you can escape the clutter through the above tools. In the long term, it is for the benefit of all. Using Digital methods will not only help us in battling against the cash crunch but will also help in boosting economic growth. When we start paying electronically, it will help in avoiding tax evasion as the sellers have to pay tax on all online transactions. This will result in more tax to the government and more development. Less Paper also means more trees, and a healthy environment.

Go Digital, Go Cashless!

The government has banned Rs 500 and Rs 1000 notes, which constitutes 86% of the total currency of our country. The move is aimed to curb black money and wipe out corruption. This bold step has left us perplexed as 14% of the currency alone cannot provide for the earlier 100%. We have been spending in cash, not only for our daily petty expenses but also for bigger expenditure like electronics, vehicles, or even buying a home. Now, we are left with no other option, but accepting the digital platform. We all are hesitant, we feel insecure without cash. We get cold feet when we go to a general store or a salon with nothing but a Debit or a Credit card. It feels like we have to cover a generation gap overnight.

But once you are over the fear, you would realize it is so convenient and easy, and you would wonder why at all, were you ferrying cash from your home to the market, or a city to another, or a country to another, since so many years. Digital Payments are so quick and hassle free. Yes, going Digital is the need of the hour, but like every other coin, it has a flip side too.

Our online accounts are protected, there is strong cyber security, but inspite of the vigorous cyber protection, there have been cases of cyber attacks too. Recently, the Twitter account of Rahul Gandhi was hacked, and inappropriate comments were posted from his account, it took some time before the account could be restored. Considering Gandhi’s prominent position, if it can happen to him, it can happen to you and me as well. So, we have to be vigilant while we dwell in the digital space.

Following are some tips which can help you navigate smartly between the hubbub:

Passwords: The most crucial thing that you have be attentive to is your passwords. Your password should be strong, it shouldn’t be “12345678”. If it is your ATM pin, it shouldn’t be your date of birth. Ideally you should have a combination of letters, numbers and symbols as your password. Having a strong password will make it difficult for the hacker to guess it.

You should change your passwords periodically. And the changed password should not be same as an earlier password.

Never share your passwords with anyone. Even if it is your closest friend, do not give away your password.

Don’t write down your password on a piece of paper and hide it somewhere or in message drafts, because there is always a change of it being leaked. You must always memorize your password.

Credit/Debit Card Swipe Transactions: Whenever you are making a card payment at a store, do not tell your pin to the cashier, because he might not misuse it but the person standing behind you in the queue might.

Digital Wallets: Paying through Digital Wallets like Paytm, Freecharge, etc., are gaining popularity because of the alluring discounts and cashbacks plus they are very easy to operate, you just have to authorize the transaction and you are done. You don’t need to enter any pin or OTP or account details, etc. The number of wallets and cash handling through them is on the increase, standards of security are not as high as banking transactions, therefore they are vulnerable to fraud. Fake accounts can be created, and people’s people can be stolen. Therefore it is advisable to keep limited money in your Digital Wallets.

Online Payments: Be careful while making online payments. Check for the ‘s’ in ‘https’, as that “s” stands for secured, check the URL of the website make sure it is not icicii instead of icici. Be careful while downloading Apps, there can be apps which can skim your personal data, or your passwords from digital payment gateways. Download authorized Apps only from official App Stores.

Terms & Conditions: Whenever you download an App, even Apps like Paytm, they would seek certain permissions, make sure you read and then give the permission, do not go with the flow, because the App may be seeking permission to access your browsing history or your contacts and sms’. Even while you make online payments, some websites may ask you to agree to terms and conditions, or ask for saving your passwords. Make sure you read the T&C’s and take informed decisions, and make sure you do not save your internet banking password on someone else’s computer.

Demonetization’s coolest byproduct is making India go cashless. It is indeed a blessing, you just have to be a little cautious to savor the advantages of thriving in the online era.