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Wealth creation is not easy. But neither it is difficult for wise and disciplined investors. One product that can really help investors in wealth creation is a mutual fund Systematic Investment Plan (SIP).

The SIP is a simple and time honored investment strategy for accumulation of wealth in a disciplined manner over long term period. This article takes a closer look at this very important and ideal tool for wealth creation for investors.

What is SIP?
The SIP is not a type of a mutual fund (MF) scheme. It is a way of investing in a mutual fund scheme. One can invest in a scheme by paying a Lump-sum amount or by making a Switch from an existing scheme or by doing a SIP, if available.

SIP is a very popular and an ideal way to invest as it leads to disciplined and regular investment for investors. It is just like a recurring deposit. Under a SIP, a specific amount, called as SIP Amount, is invested at regular interval of time, continuously for a certain period. Thus, for example, an investor may choose do an SIP of Rs.1,000/- every month for the next 5 years in a particular mutual fund scheme. Most of the schemes even offer the multiple choices of SIP date in a month to the investor.

Benefits of SIP:

Automatic Timing & Lower average cost of units:
One of very important benefits of SIP is that it does automatic timing of the markets. Under an SIP you will be investing a fixed amount every period, irrespective of whether the market is high or low. Thus, when markets are high, you would automatically buy lower number of scheme units and similarly when markets are low, you will be purchasing more number of scheme units. Thus, the SIP investors do not need to regularly track or worry about market movements. Further still, the average cost of one unit tends to be lower over time. benefit is also commonly known as “Rupee Cost Averaging’.

Illustration – Rupee Cost Averaging:
Say you have opted for an SIP in a diversified equity MF Scheme, investing Rs. 1000 every month from March 2010 to Feb 2011. Now if we check the average purchase cost per unit of your investments. It would be lower than the average NAV of your investment over 12 months.

Date Amount (Rs.) NAV (Rs.) Units (nos.) 1 10/3/2010 1,000 100 10.00 2 10/4/2010 1,000 115 8.70 3 10/5/2010 1,000 125 8.00 4 10/6/2010 1,000 130 7.69 5 10/7/2010 1,000 132 7.58 6 10/8/2010 1,000 145 6.90 7 10/9/2010 1,000 150 6.67 8 10/10/2010 1,000 139 7.19 9 10/11/2010 1,000 165 6.06 10 10/12/2010 1,000 172 5.81 11 10/1/2011 1,000 182 5.49 12 10/2/2011 1,000 175 5.71 12,000 1,730 85.80

Note: The table considers a hypothetical NAV trend to explain the concept of Rupee Cost Averaging. The NAV do not in any manner indicate the past or future NAVs of any scheme.

Average Cost = Total Cash Outflow / Total Number of units = Rs. 12000/ 85.80 = Rs.139.85
Average Price = Sum of all NAVs at which you have invested/ Number of months of investment = Rs. 1730/12 = Rs.144.17
Average Cost of Units < Average Price

Disciplined Savings:
Disciplined investing is an important characteristic to create wealth over a longer period of time. Often, investors plan to save in lump sum in some product and many are times such investments are delayed or do not materialize. SIP, with its disciplined way of investing, makes sure that you are saving money at regular intervals. Even small money, invested regularly, for a long period can go very long way in creating wealth. Think of each SIP payment as laying a brick. One by one, you will see them transform into a building.

Power of Compounding:
The famous scientist Albert Einstein called the “Power of Compounding” as the Eighth Wonder of the World. In simply means that the longer you invest, the returns will increase at a greater pace. Thus, the longer the SIP, the better the power of compounding will work for you and hence better chances for creation of significant wealth. Historically, SIPs have delivered good returns. The average returns for diversified equity MF scheme SIP and the power of compounding can be very clearly seen from the following table:

SIP Amount: Rs.10,000* (Starting February month) Period completed – January 2011 3 years 5 years 7 years 10 years 12 years Average Returns every year of BSE Sensex 15.99% 10.84% 15.81% 19.62% 17.28% Average Returns every year of Diversified Equity MF Schemes 19.72% 13.33% 17.91% 25.58% 23.31% Actual Amount Invested 360,000 600,000 840,000 12,00,000 14,40,000 Average Current Wealth / Investment Value for MF SIP 480,143 840,601 16,00,189 47,83,429 68,53,177 MF Scheme universe 37 33 16 8 7

Actual data as on 31st January, 2011. Source: Internal. Past Performance may or may not be repeated in future. Returns are market dependent and are not guaranteed.

Planning for Financial Goals:
Due to its benefits of disciplined savings and attractive returns potential in long term, SIP can be very effectively used for planning your life and financial goals. Think of starting a SIP for your son’s education or daughter’s marriage or retirement. Your financial goals in life can become realistic if proper planning and use of SIP is done for same. The idea is to match the SIP period with that of the years remaining for any goal. Doing this can really help one plan out for financial goals smartly, even with small amounts of regular investment. This can be seen from the following example:

SIP Period > 5 10 15 20 25 30 Yearly Return End Value for a monthly SIP of Rs. 500/- 10% 38,586 100,729 200,811 361,993 621,580 1,039,646 12% 40,552 112,018 237,966 459,929 851,103 1,540,487 15% 43,671 131,509 308,183 663,537 1,378,280 2,815,885 20% 49,352 172,156 477,730 1,238,097 3,130,133 7,838,126 Investment 30,000 60,000 90,000 120,000 150,000 180,000 Yearly Return End Value for a monthly SIP of Rs. 1,000/- 10% 77,172 201,458 401,621 723,987 1,243,160 2,079,293 12% 81,104 224,036 475,931 919,857 1,702,207 3,080,973 15% 87,342 263,018 616,366 1,327,0737 2,756,561 5,631,770 20% 98,704 344,311 955,460 2,476,194 6,260,267 15,676,252 Investment 60,000 120,000 180,000 240,000 300,000 360,000

Table is for illustration purposes only. Past Performance may or may not be repeated in future. Returns are market dependent and are not guaranteed.

Convenience:
SIP can be operated by simply providing post dated cheques or with ECS. The cheques can be banked on the specified dates and the units credited into the investor’s account. The SIP facility is available in almost all of Equity, Balance & MIP schemes. Further, SIP can be started with amounts as low as Rs.500/, depending on the scheme. These conveniences also make SIP a very ideal investment vehicle for small & retail investors.

Thus, with the above benefits, it is no doubt that SIP is a true friend for investors in creating wealth. An investor should however know that the market is unpredictable and returns cannot be guaranteed. However, if one is investing wisely for a longer duration of time, it definitely will help the investor in reducing the risk of the market and making significant wealth. The tool is there. It is how you use it that really makes a difference for you.

In the past 5-10 years, debt has become very easy to acquire and people are tempted by large number of banks would extend good offers to the borrowers.

Combine this with rising incomes and aspirations and we have a huge population of young generation that would have at least 2 loans – home and car on their balance sheet. Further, with the explosion of credit cards and change in life style, especially dining, shopping, movies, travel, etc., we are today taking much more debt than we ever did in past. And the only ones who is laughing are the lenders of these credit to you…

With rising interest rates, people who have bought loans few years back now find that the loan EMIs are now a bigger burden, especially with the inflation also running high in recent past. A average household’s budget is severely impact and there would be a large population which would be suffering under the burden of loans today. People are now realizing the importance of moving to a debt free life. However, one needs to understand why it is a better idea to get rid of the debt sooner than later and ways to do so. Excessive debt can lead to many problems, such as:

• Falling short of spending power
• Not being able to deal with unexpected costs
• Restricting your ability to take part in social activities
• Causing stress and depression
• And many more…

Reducing Expenses:
Reducing expenditure in today scenario is perhaps not an idea but something that all of us are practicing today. While most of would be wise to know how costs can be controlled, there are a few pointer which one may would be better-off considering.

Prepare a budget/plan and stick to it: This is the best way to keep expenses in check, be it business or monthly household expenditure. If at the initial stage you plan a budget for yourself, you will not go ;overboard and hence avoid any new loans.

Get frugal If you can cut down on unnecessary expenses, you will save more and be self sufficient to meet your expenses. Also, think twice before buying whether you really need the product or is it an impulsive buying. For commuting to office & back, you can pool office collegues to travel together.

Spend wisely: There are many ways to spend wisely. Fix / plan maximum number of outings for movies / dinners / small trips / vacations, etc. for month. Use public transportation or pool with colleagues on way to work. Stock more of things you need when you get very attractive discounts. Plan buying in advance for heavy sale discounts seasons. Use public transport for long distance travels.

Save and Invest – Save for the rainy day and invest whatever amount you can. It can be extremely useful at any point in future. Even small amounts are

Pay all your bills on time – It is an important practice to pay off the bills on time. Delaying the process would add on the amount to be repaid later and also, the penalty and interest costs get added on.

Ways to reduce your debt:

Behavioural change: Understanding that you have a debt issue and changing your behaviour and life style accordingly is the first step to reducing your debt.

Stop Adding to Debt: Not taking additional burden of loan is a very basic idea. One may just begin by limiting use Credit cards and instead use Debit cards.

Consolidation of Debt: Consolidating debt is another idea which may not reduce debt but would make in easier to manage same. It can help consolidating payment period, EMI and also interest rate for all the different debt that you have. You may negotiate for better deal with your bank manager and rework the repayment schedule for such consolidated loan.

Repayment of Debt: Repayment of loans is the obvious way to reduce debt. Often, there are limitations of repayment in terms of the extent of repayment and period after which is repayment is done. Repayment of debt can begin by prioritising the loans on basis of the most expensive loans and/or loans with higher duration which can be paid of first. Addtional payments can be made as and when you get some additional funds or by accumulating small sums of money for few months and then making the repayments. Credit card loans, if any, are generally the most expensive loans, followed by personal and car loans. Home are probably the least expensive of the loans and also offer tax advantages and hence can be paid at least prority.

Restructuring of Debt: Another idea is reworking out the loan, in terms of interest rates & repayment period. There is no absolutely no harm negotiating with your creditors or bankers for a better rate or deal. If you make a persistent effort and have good terms with them, a small change will also make a big difference overall.

Last Resorts: As last resort to reducing the burden of team, you may take personal loans from amongst your family & friends and repay the expensive loans. Another alternative is the liquidate your existing investments and repay the loans. Typically we can begin with the investments that have the lowest rates of returns, like debt which would probably have lower interest accruals that the interest rates payments on loan. One should however avoid diluting long term savings that may yield good returns, especially equities. Remember that this option is less than ideal because you are essentially stealing from your future.

Understanding the importance is the first step, acting upon it the foundation and following it diligently, a habit. It needs lot of discipline and hard work but one who can practice this will not only have a debt free life, but a care free life.

One of the major global challenges facing every single person in this world is about climate change. It is challenge that puts to question the way we live our lives.

The subject of climate change came into limelight largely because of Nobel Peace Prize (2007) being awarded jointly to Intergovernmental Panel on Climate Change (IPCC) and Al Gore (a former US Vice President) for their efforts on study and campaign for the cause of climate change. In recent times the political landscape has changed a lot especially in terms of the concern at the highest echelons of power. The past few weeks has seen hectic negotiations for the upcoming yearly meet in December in Denmark. Perhaps, we thought it would be appropriate to brief you up on this important issue at this time by giving you a broad overview on the subject.

Global warming: What is it?
Global warming is the phenomenon of warming predicted to occur as a result of the increased emissions of greenhouse gases like carbon dioxide. The gases get trapped in the earth’s atmosphere and increase the temperature by blocking some of the sun’s radiation within the atmosphere which otherwise would have been reflected out from earth’s surface.

Global warming is largely caused by the human activities, especially by the burning of fossil fuels like oil, coal, etc. and the biggest contributors of greenhouse emissions are the industrialized countries. US itself is estimated to have contributed to 25% of all the greenhouse emissions in the industrial era. In recent years, large developing countries like India & China have also emerged as the large contributors. The contribution is not just limited to the manufacturing sector but also extends to households where a significant increase in energy consumption has taken place in the last 2-3 decades. In fact, every time we burn some wood or drive our car or switch on the AC, we too are unknowingly contributing to global warming.

Impact of Climate Change:
Many experts around the world has put forward various possibilities for global warming in the coming decades. Though nobody can exactly say how things would unfold and in what time frame, virtually all experts agree that the following consequences are more likely to happen if we to not take adequate & timely measures…

• The climate will continue to get warmer putting pressure on food & water resources, including mountain glaciers
• Change in weather patterns of regions with stronger rainfalls, floods and droughts occurring more frequently
• Sea levels to rise by few meters submerging coastlines
• Pressure on ecosystems where plants, animals, marine life will face the challenge to migrate & to survive in changed climate

There are also some voices that speak of benefits of global warming, especially in cold countries. Although there may be some who benefit, the global list of negative impacts is much longer and ignoring the implications of the same is like taking a big risk and it cannot be done. The Intergovernmental Panel on Climate Change (IPCC) has strongly recommended that “dangerous human interference” with climate should be avoided and to do that, the global emissions of green-house gases have to be kept steady. As per IPCC, nearly 70-80 percent of current levels of greenhouse gas emissions must be reduced by 2040-2050.

Global annual average temperature and Carbon Dioxide concentration trend (1880-2007) Source: World Development Report 2010, World Bank

Efforts:
The challenge of global warming demands a concrete international response & consensus with defined framework for action. Fortunately, over the past decade, the momentum for enabling international cooperation is built up and many countries and regions are taking appropriate measures today.

The first step towards an international response was forging of the United Nations Framework Convention on Climate Change (UNFCCC or FCCC), an international environmental treaty made in June 1992. The objective of the treaty is to stabilize greenhouse gases at a level that would prevent dangerous interference with the climate system. The treaty being non-mandatory provides for updates (called “protocols”) that would set mandatory emission limits. The famous principal update is the Kyoto Protocol (enforced in 2005) that sets binding targets for 37 industrialized countries and the European community for reducing emissions to an average of five per cent against 1990 levels over the five-year period 2008-2012.

The protocol recognises that the developed countries are principally responsible for the current high levels of emissions as a result of over 150 years of industrial activity and thus places a heavier burden on developed nations under the principle of “common but differentiated responsibilities.” Further, since the developing world would still like to develop, the developed world has to make substantial emissions reductions. Till date about 184 parties have ratified the same. However, the only country that has no intention of ratifying the Kyoto Protocol is the US.

There is also a scientific body established in 1988 by UN called as the Intergovernmental Panel on Climate Change which is tasked to evaluate the risk of climate change caused by human activity. The IPCC reports are widely referred and cited in almost all debates on climate change. The panel as considered authoritative by national, international and scientific communities.

India & Climate Change:
Much of India’s population today lives in rural areas where dependence on agriculture as occupation and nature as resource is huge. Further, a large part of India is also is dependent on the river systems that originate from the glacial mountains, in addition to the large coastlines. All this makes India, a developing country with its huge population, vulnerable to the effects of global warming.

India thus must and is in fact playing an active role in constructive global climate talks. Back home, a National Action Plan on Climate Change is put in place which has defined eight missions, two of which, the Solar Mission and the Mission for Enhanced Energy Efficiency, has already been approved. The Ministry of Environment & Forests also recently unveiled 20 initiatives as part of their action plan for climate change.

As far as the Kyoto protocol goes, there are no obligations defined for India, China & other developing countries, since they were not the main contributors to emissions in the industrialisation period. However, India, being a signatory is committed to share the common responsibility of all countries to reduce emissions. India today stands by the Kyoto Protocol seeking deeper cuts from developed countries.

India, now entering a phase of high economic growth, has to make key decisions on the issue of energy and the climate policy. The only acceptable and practical approach for India’s participation in global efforts would be the one that aligns with it’s core interests of economic development and energy security. The direction to follow is for commitment to long term goals of emission reductions but not at the cost of the core interests.

The future:
The future of climate change is largely dependent on the actions that we take in the near future. R. K. Pachauri, the head of IPCC believes that the world has less than a decade left to impose drastic and effective reduction measures. While the number of years can be debated, there is no doubt that urgent international cooperation & consensus on the issue is most critical.

The Kyoto Protocol commitment period expires in 2012 and currently efforts are on for a new agreement to be set in place for the period from 2012. The last negotiating session concluded just recently and now the big event in December 2009 is awaited, where world leaders are meeting in Copenhagen (Denmark) in an effort to seal a successful climate deal.

Topping the list of agenda for talks are the positions of India, China and the US. There is US insistence that India and China, now among the largest emitters of greenhouse gases, accept binding caps on the emissions and an equally strong demand from developing nations, especially India & China, that US accepts the protocol obligations first. There is a lot at stake for each of these large countries and achieving the breakthrough will be more than welcome.

Today the need for international agreement that covers all essential elements of a fair and effective deal with a clear action plan is stronger than ever. Emergence of such a consensus could prove to be turning point in our fight against global warming. It is something that our future generations need and expects from us today.

What does it mean to be financially responsible? This may seem to be difficult question to answer by most of us. One must have heard of the saying “to live within your means”.

Though this may be at heart of being financially responsible, it hardly is enough in today’s world. Being financialy responsible today is probably much more than this. This article gives an insight as to what would constitute a hoslistic financial responsibility for any person.

Managing debt prudently:
Though taking credit or debt today is no longer considered a taboo, one should make sure that it is only for basic necessities and not for luxury and convenience items. Merely being able to pay your EMIs and credit card bills doesn’t give you the licence to go out and spend heavily. Remember that for every loan that you take, think that paying interest means that you are spending more for that item than the purchase price and as such, avoiding paying interest on anything should be a major objective. Of course, when it comes to the cost of housing and car, avoiding interest is almost impossible for most of us. In such situations, minimizing the amount to borrow and the interest payable is the most responsible action. Typically for housing loans, it shouldn’t cost more than 2 or 2.5 times of your annual income. Another estimate of housing loan affordability is that it should not cost more than 30% of your monthly take-home pay. But in case you have already borrowed more than your comfort level and now feeling the pressure, it’s time to spend much more responsibly and reduce your debt by paying off the high interest rate loans earlier.

Use of credit cards is good, as long as one is not encouraged to spend more freely. Credit cards are handy because they eliminate the need to carry cash, defer your payment for a while and are helpfull in times in an emergency.

Insuring for future:
Financial responsibility means being prepared for the unexpected. It means that you and your family are ready, financially, for any eventuality, in case of any temporary or permanent loss of income and large sudden and/or prolonged medical or other expenditure. But having insurance is not enough and one must have adequate insurance cover given his/her standard of living and background. Insurance is a broad term and includes life, health, property & valuables, car, etc. For life cover, as per the human life value concept, it must be the multiple of your annual income and years to retirement. Thus, if your aged 30, earning Rs.4 Lacs p.a. And retiring at age 55, your life cover should be Rs.1 crore (Rs.400,000 x 25 years). This amount can be further adjusted for existing investments, liabilities, lifestage and family background, etc. For health insurance, looking at the present medical costs, one may roughly estimate it to be between 3-5 lacs per person. To be responsible means to buy both health and life insurance as early as possible in your life for a longer duration. This way you are assured of better coverage, cheaper premiums and more choice. For other insurance covers, its better to think first and judge later.

Investing for goals:
Spending without investing for future goals is something that every prudent man will do. Ideally every household must invest at least 10-20% of their income subject to the kind of goals and existing investments you have. The more you invest, the better it is. A point here to note is that saving is different from investing. While saving is mere “not spending”, investing is more about “generating returns” on your savings. Any savings or investment avenue that gives you less than your inflation rate after tax effect is no real savings at all. To be responsible is to be practical and invest in avenues that give you positive post tax real returns, matching your risk appetite and desired objectives.

Investing can be goal oriented or otherwise. In case it is goal oriented, it is always driven by required amount and required rates for a defined periods. Independent of goals, you can also follow asset allocation method for choosing the right mix of assets & products in your portfolio. If you are investing for long, say above 5 year, equity related investments would be good option. You may even start a SIP or Systematic Investment Plan in these mutual fund schemes an ideal way to invest in equities.

Among the goals that one invests for, one of the most critical is that you save for yourself – Retirement. Saving for child education and marriage has probably decreased a bit in intensity with educational loans abounding and children being independent and earning decently even in starting years of their careers. Saving for retirement though has become more critical with longer life spans, higher medical costs coupled with greater probability of new age diseases and nuclear families. Being responsible is investing rightly for your and your family’s future goals.

Paying Taxes wisely:
Paying taxes is an obligation and evading taxes is a crime. But reducing tax liability smartly by using the benefits offered, is perfectly justified. Managing tax payment and tax returns is a non-pleasant but an important activity for every earning member. Being prudent in saving taxes means that you have chosen that right investing products and time to maximise tax breaks and that you have made appropriate use of the perquisites, allowances, deductions offered. Typically different types investments offer different tax breaks while investing, withdrawing and on returns / interest earned. Being responsible means that you pay all your legal dues and file returns on time.

Planning and Budgeting:
Having a comprehensive Financial Plan prepared by your advisor is the most important financially responsible step that you will take. Having that plan in your hand will give you the answers to the critical questions in your financial life. Often people ignore this, but its surely is worth it, even if you have to pay for it. Be sure that you disclose all your material details properly, else the financial plan will be meaningless. Further, having plan is just not enough, its just the beginning. Follow your qualified advisor’s advice in structuring your finances and planning for your objectives in life followed by regular review of the plan and its progress.

At a personal level you can also manage your finances in a much better way by having your budget defined before-hand. Contrary to belief, budgeting is very simple and very less time consuming. The only part difficult is being prudent and sticking to it. Observing your expenses for a couple of months can throw up great surprises for most of us. You should know where your money is going. Business owners know the importance of understanding their cash flows and balance sheets; as a result, no successful business exists without a budget. Neither should you.

Conclusion:
Financial responsibly means doing what you have to do to take care of your needs and the needs of your family. To make this happen, your focus should be only on yourself. A prudent being would never compare self to neighbours, friends or relatives and let them set the bar for spending habits or standard of living. Its better to be modest and safe than be flamboyant and sorry. Being financially responsible doesn’t really mean that you have to scrimp and save, unless if thats the only way out. Every family has to enjoy life within own means. Likewise its also important to no get carried away by great offers, quick-money schemes, hot tips and rising markets. Ultimately, financial responsibility means living within your means, regardless of the level of those means. Only this way can we ensure a peaceful, worry-free future for ourselves and our family.

There is a famous saying on shopping by Bo Derek that “whoever said money can’t buy happiness simply didn’t know where to go shopping”. This pretty much sums up the change in the shopping mindset in the last

decade or so. Most of us have seen a dramatic change in the spending behaviour and today most of us are buying a lot on impulse and desire rather than a rational, planned shopping. Well, this article takes about smart shopping and better still, on how to control the urge to spend. We are sure that you would enjoy reading this article (though not as much as you love shopping) and try to adopt some of the ideas shared here the next time you shop…

How have our spending habits changed?
The young earning generation today would easily remember that shopping for clothes & accessories was limited and often carried only at times of festivals when they were children. The things we bought were also limited in variety as compared to what we are buying today. Add to this the growing number of branded retail shops and shopping malls lined up at every few kilometers. Armed with the Credit Cards in our hands, it is now really out of fashion to think about bank balances and pre-plan shopping in advance. Even those in their 40s and 50s have been shopping much more for themselves and their children than what their parents shopped. The mantra today is that if you feel it, get it ! There are also many of of us who believe that they will feel better if they shop! This is what we can call as impulse or emotional buying which forms a major part of our spending today. On the extreme side, this has given rise to a new type of addiction and disease called as “compulsive shopping” where people suffer from ‘shopoholism’” and they literally shop till they drop or run out of Credit Card balances.

Techniques to control spendings:
Well, no rewards for guessing why we need to control our spendings. There is a popular saying that ‘A money saved is a money earned’.

Many times we get excited looking at new products and offers and make instant buying decisions only to later find that the purchase was really useless. Controlling emotions may be tough but you can easily do it if you genuinely desire to control your spending. There are many techniques which can help curb emotional spendings by you. I am listing a few here…

• Avoid spending time, get-together, meetings or dining at shopping malls. Stay away & stay rich!
• Make it a rule to pay for all impulse buying using cash and by debit card, if you are buying online.
• Avoid going shopping with people who are wealthier than you. You might often end up buying more stuffs which are expensive and not needed by you as the tendency to compete / show off comes into picture.
• Be strict with kids and make planned list of items that you feel are important for them and also mention the purchase month /week & budget. Communicate this to your kids and make sure that your kids understand & agree to it.
• Prepare a list of items that you feel are required & desired and decide a budget for same. Avoid going beyond this list in any of your shopping trips.
• Before buying things that others (like relatives, neighbours, friends) have and you don’t, think of all the things that they don’t have and you currently have or will have once you save for future.
• Keep a limited monthly budget for impulse spending only as shopping can be a stress reliever. Decide the limits as a fraction, say 1/3rd, of the estimated impulse spendings done in last 6-12 months.

Steps for smart buying:

Step 1: Check need: Before buying anything, define what you looking for and amount you are willing to spend. In case of any unplanned spending, think or consult others, like relatives, friends, etc. if you really need the item before you make the purchase decision. In case you are sure, you may move to the next step.

Step 2: Delay a while: Don’t buy on same day when you have finalised the items in any store. Postpone the action for at least couple of days or a week, depending on what you intend to buy. In case of sale offers, it is better to go shopping at least 2/3 days before the offer ends.

Step 3: Research online: Always do an online search for the desired item in case you have just finalised but not yet purchased the item. There are many sites today that offer information & reviews for products/offers from insurance policies to shoes to laptops and holiday packages. Look for additional information or negative feedbacks / reviews to really make up your final decision to purchase. You may also better check out similar products or offers and compare that best suits your needs.

Step 4: Best deals: Check for offers / discounts from retail stores or online shops before buying. Ask for upcoming sales offers from your local stores and wait for same, if possible. You may also check for any interest free payment options through instalments.

Step 5: Bills & Warranty: Always ensure that you have the proper bill and warranty card dated & stamped. Keep these documents safe as you are like to need it some day. Try to get extended warranties for items, if on offer.

Step 6: Return/Replace Policy: Try to always buy with shops offering return &/or replace policy, even if they are a bit costly. Do not remove / destroy the packaging/ labels, etc. after you bring the items home. That way if you do not like the product, you always have the chance to return same and request refund or replace the item.

Strictly Not for Impulse Buying:
There are some things that must ‘never’ be bought on impulse or emotions. Decisions in such cases must only be made after careful thought and study. Decisions on home, property, car, insurance or health policy, home renovations, etc. made on impulse can cost you dearly in long run.

Not Spending = Savings = Greater Wealth:
You can easily save 5-15% of one’s total monthly / yearly expenses if you stop spending on impulses and follow the tips given above. Thus, you can invest such savings for future. You will be surely guaranteed greater wealth & better financial health. A spending cut of just Rs.500 monthly when put in mutual fund SIP can potentially give you Rs.1.31 lacs in 10 years @ 15% returns. Savings made from foregone impulse purchases can also be directed to more fruitful / required spendings like better food habits, children study, quality holidays, etc.

Spending on impulse is very common in modern age, especially among the younger generation, including young parents. Controlling this urge to spend can help you save quality money which could be put to better use.

Spending on impulse is very common in modern age, especially among the younger generation, including young parents. Controlling this urge to spend can help you save quality money which could be put to better use.

It was cold, windy evening of January 2012. Mr. & Mrs Arora (retired couple, both senior citizens) were enjoying winter evening & having a cup of hot coffee in their 3 BHK luxurious apartment in South Delhi when they received a phone call. Next 15 days were one of the worst period they experienced in their lives. Their son, Mr. Akash Arora in his late 20’s met with a severe accident while driving a car on his way back to Delhi from Chandigarh due to intense fog. He incurred multiple fractures and was in hospital for 15 days. Fortunately he survived and recovered fully after 15 days of hospitalization, but the total medical bill made Aroras poorer by Rs.7 lakhs. Unfortunately Akash had medical cover of only Rs.3 lakhs assuming this would be sufficient for him at a young age of 27.

As Aroras belong to higher income group and have created wealth over the years, additional Rs.4 lakhs which they had to pay from their own pockets did not pinch them much but not all of us belong to that category. Can such type of incidence happen to any of us ? Are we in a position of bear cost of high hospitalization/medical bills on our own ?

You may argue that this can be an exceptional event and may not happen in everyone’s life. But can we predict which family will suffer this trauma and which one will escape ? Another point worth highlighting here is lifestyle related health problems. In today’s fast paced life when every one of us is a part of the ‘rat race’ and all of us want to win that race, we are leaving healthy living habits behind. Eating junk food, irregularity in eating habits, high pressured work culture resulting in incidences like heart attack at a young age or diabetics or blood pressure problems. These have become very common in India now.

Unfortunately in India we mostly realize importance of medical insurance only when something of this sort happen either to us or to our near & dear ones. Why to leave things to destiny when you can cover the risk through medical insurance, popularly known as mediclaim.

Understanding the Basic Traits of Health Insurance:
Health insurance is a contract between insurance company (insurer) and insuree who takes insurance coverage against any medical emergency by paying a specified price (called premium) depending on multiple factors. Health insurance is nothing but passing risk of bearing medical cost to insurance company against the premium paid.

So medical insurance is nothing but passing risk/cost of medical treatment to insurance company by paying premium. So in event of any medical treatment, your insurance company will pay you to the extent of insurance cover against the premium paid by you.

No one can predict equity market. Right? But the other side of the coin is that no one can create wealth by ignoring equity market. Equity market becomes more predictable with the increase in investment horizon, and we have discussed and proved this on many occasions. The fact of the matter is that equity is best suited to help investor meet financial goals in life with the potential of generating inflation beating return, but another equally important fact is the inherent volatility of equity, specially in a short term of less than 5 years.

Financial goal based investing is at the core of any investment exercise., After all we all save and invest to achieve a specific goal or need in life, which can be to provide good education to our kids or to spend on their marriage or simply to have peaceful, worry free retirement. With the right advice of your financial advisor, you invest in the right asset class, generate return as expected or even exceed that, and reach the desired corpus required to meet a specific goal, but imagine a situation when equity market crashes just few months before you actually need that money, or a bank/company goes bankrupt in which you had put fixed deposit. Remember co-operative banks and many companies going bust in late 90s or recent crash of equity market in 2008.

Lets imagine Mr. Shah, who had been investing in diversified equity funds through SIP for last 10 years to save for his son’s higher education, which was due in 2009 for which he required to pay fees in March/April 2009. He was a happy man in September 2007, as he had not only built the required corpus, but in fact had exceeded due to strong market rally and super performance of equity funds in which he had invested. His joy multiplied manifold in January 2008 with the increasing value of his portfolio. This strong rally of equity market tempted him to continue out of sheer greed to earn more. But come March 2009, his portfolio was down by more than 50% and he had to arrange for his son’s fee from other sources.

Time Horizon and Risk Factor
These two are inversely proportionate to each other in case of equity investment. As investment horizon increases, risk reduces, and vice versa. Equity investment can prove highly risky with anything less than 3 years of investment period, but becomes more predictable with reasonable period of above 3 years. A common mistake that investors make is, they try to chase equity return in short term and lock long term money in fixed income product like PPF for 15 years. Ideally it should have been the reverse.

As can be seen from the below graph, if someone invests Rs. 50000 every year in both PPF and equity fund, over a period of 20 years, then equity fund clearly outperforms PPF. At the end of 20 years, an investor makes Rs. 24.71 lakhs in PPF while the same amount grows to Rs. 58.9 lakhs in equity fund.

Let us try to understand by putting numbers in the above example of Mr. Shah. Lets assume that he started SIP in 1999 and he wanted Rs. 7 lakhs for his son’s education, when he reaches 17 years of age in 2009 (in approx 10 years time). His monthly SIP need was Rs. 2868 so he started with Rs. 3000 of SIP (assuming modest return of 13% per annum).

Eventually he got return of 20% during period of 1999 to 2008 and reached the figure of Rs. 7 lakh in the beginning of 2008. (when SENSEX was touching 20000 for the first time). Greed overtook rationality, and Mr. Shah wanted to cash in market rally and continued with his equity investment. We all know what happened to equity market between January 2008 and March 2009, when he actually wanted the money. SENSEX was down by around 50% and so was his portfolio.

Isn’t this a very practical example? Many times we come across this kind of situation, when we find equity market at a low level, specially when we have need of the saving. What to do in this kind of a situation?

Conventional wisdom says that one should start shifting money from equity to debt as one reaches near his/her financial goal. Considering the inherent volatile nature of equity, it is always prudent to shift corpus from equity to debt, and ideally the entire amount should be in debt for at least 1 to 2 years prior to the actual need. This can ideally be done in two ways:

Opt for Systematic Transfer Plan (STP)
This is the facility available in mutual funds under which an investor can give standing instructions to transfer money from one fund to another. As one approaches the goal, STP instructions can be given to start switching funds from equity to short term/liquid funds to protect any potential downside from equity.

Shifting: As discussed, switching of invested money should ideally start around 1-1.5 year prior to the actual goal. As the objective here would be to protect any downside and not return optimization, short term/money manager funds can be an ideal option or one can also look at 1 year fixed maturity plans (FMP).

The idea here is to protect the funds created over the years. When you start investing, focus on equity, take maximum advantage of power of compounding and invest through SIP over the years. Switching to liquid/short term funds should start either as soon as investor reaches the desired amount or at least 1.5 to 2 years prior to the actual goal.

E.g. With our example of Mr. Shah, he could have started switching funds from equity to short term money market funds in the later part of 2007, as he reached his desired amount of Rs. 7 lakhs or could have simply put that money in 1 year FMP product. This would have not allowed him to participate in future rally but at least his money would have been secured and even during that 1 – 1.5 year period money would have generated inflation beating return.

Ideally, it is advisable to shift the amount required for a specific goal to liquid/short term funds at least one year or year and half ahead of actual requirement to protect any downside or it can be done as soon as required amount is reached, irrespective of the time horizon. Whatever path you take, prudent investment approach suggests to realign your portfolio in favour of debt to protect the amount you have built to meet your specific goal.

With the beginning of tax season once again we are scrambling to invest money in tax saving schemes to avail maximum deduction possible for us, especially the salaried individuals. There is a catch though; as the time runs short we are prone to make decisions that may be dangerous or not so beneficial from the long term perspective.

Saving or spending to save taxes can be a tricky job due to reasons provided below:

1. Investment may require you to hold on to it for a certain period of time to make the exemption permanent.
2. Requires a huge outflow or a decision of a lifetime

In the normal times all the taxpayers should plan in advance, but just in case if you have not or are falling short this article shall provide much needed assistance in making the right choice. This article is dedicated to all such individuals and advisors who are looking forward to invest for

1. For the maximum tax exemption possible and
2. The best possible long term solution

In our decision making process for the choice of best investment options for saving tax, we will be looking at the following factors:

1. Return on Investment
2. Flexibility of Investments
3. Taxability of Dividends/Capital Gains &
4. Liquidity

Available Deductions
First of all let us look at the available limits of deductions that can be claimed from gross total income for the current assessment year. With the increase of deductions limits for Assessment Year 2015-16 following deductions are applicable for individual taxpayers:

Deductions from Gross Total Income: Following deductions can be claimed against the Gross taxable income for the Assessment Year 2015-16:

Section Common Deductions: Nature of Transaction Maximum Deduction (Rs.) 80C Investment/Expenses 1,50,000 80D Medical Insurance 15,000 80TTA Saving A/C interest 10,000 Special Deductions 80DDB Medical Treatment 40,000 80E Education Loan Up to the Interest Paid 80G Donations/Charity 100% or 50% of Donated amt. Rare Deductions 80DD Disabled Dependent Expense 50,000/75,000 80GG Rent Paid 24,000 80EE Interest on Home Loan

Table 1: Deductions from Gross Income

Additional Deductions can be claimed under the following sections:

Section Nature of Transaction Maximum Deduction 24(b) Self Occupied Property Home loan Interest 200,000 24(b) Let out Property Home loan Interest No Limit

Table 2: Deduction Available to Homeowners

Making the Most of the Deductions u/s 80C

Deductible Investments & Expenses
Deductions Under section 80C amount to a total of Rs. 150,000 and include specified investments and expenses that can be made to claim this deduction in current assessment year. The choice of instrument for a person may vary depending on the needs of the family as we will see in the table 3 below.

The investments can be classified in multiple ways, for example:

• Debt investments or fixed income products,
• Market Linked Investments or Equity Products and
• Expenditures incurred

From the point of view of ease of choice another classification can be as follows:

• Retirement Products
• Fixed income investments
• Equity Products
• Life Insurance plans & Expenditures

Investments Fixed Income Products Nature of Investment Provident fund (EPF/VPF) Retirement Public Provident Fund (PPF) Retirement/Long Term Fixed income National Saving Certificate (NSC) Long Term Fixed Income Tax Saving 5 years FD from Banks Long Term Debt 5 years Post Office Time Deposit (POTD) Long Term Debt Senior Citizen Saving Scheme(SCSS) Long Term Debt NHB Suvriddhi Long Term Debt Market Linked Products Life Insurance Premium (Participating Endowment Plans) Life Insurance + Investment New Pension Scheme (NPS) Retirement Plan Tax Saving Mutual Funds (ELSS) Equity Mutual Fund Pension Plans from Insurance Companies Retirement Annuity Unit linked Insurance Plan (ULIP) Life Insurance + Investment Expenditures Tuition fee for 2 children Full time Education cost Stamp duty and registration cost of the House Only at the time of purchase of house Home loan Principal Payment Purchase of house on loan

Table 3: Investments & other venues for Deduction u/s 80C

Period of Holding for Investments
For the deposits and investments made for 80C deductions it is necessary to follow the minimum holding period rule in order to avail the deduction without having to reverse it in the following years. Provided below are the time limits that applies to investments u/s 80C:

Investments Minimum Holding Period Unit Linked Insurance Plan 5 years Life Insurance Plan 2 years Repayment of Home Loan Principal/ Cost of purchase or construction of residential house 5 years Deposit in Senior Citizen Saving Scheme 5 years Time Deposit in Post Office/Bank 5 years Equity Linked Savings Scheme (ELSS) 3 years

Table 4: Minimum Holding Period for Various Instruments u/s 80C

The result of not adhering to the time limits can be of reversal of deductions, which will be assumed as income of the year in which asset is terminated. Therefore, before selecting the avenue make sure that you are ready lock in the money for the minimum holding period.

Other than these limits which are required for the purpose of taxation there are other instruments, which lock in the money for long periods of time, such as:

• Public Provident Fund (PPF)
• New Pension Scheme (NPS)

These schemes have been popular and are an excellent venue for saving for retirement, but that also means that the money is locked up for a long time. For example: PPF allows a loan till five years and a 25% of balance as withdrawal from 6th year, whereas NPS Tier I account (which is currently the only available option) holds on to the investments till the investor reaches 60, only other instances of withdrawal being critical illness and death.

Return on Investments
Returns are an important consideration when it comes to investments especially while you are young and have potential for high risk. For long period of holding equity schemes certainly perform better than fixed income instruments. Given below is a comparison of returns on various instruments over time:

Scheme Average Return (5 yrs.)* Score ELSS 21.5 % 5 ULIPs 10.0% 3 Tax Saving FDs 9.5% – 9.75% 3 Sr. Citizen Saving Scheme 9.2% 3 NPS 7.0% – 11.0% 3 PPF 8.7%** 3 NSCs/Bank FDs 7.82% – 8.55% 2 Life Insurance Policies 5.0% – 7.0% 1 Pension Plans 7.0% – 10.0% 3 EPF/VPF 8.5% 3

Table 5: Post tax Returns on Various Investment options

* Post tax returns
** Linked to secondary debt market yield

Apart from the required minimum holding period for different investments to avoid reversal of deduction, holding period also plays an important role when it comes to enjoying the returns from these instruments. For example:

ELSS being an equity scheme may require a longer holding period even after initial three years to generate good returns going up to five years or more, whereas, ULIP may take more than 10 years to come to terms with other similar investments.

Another factor that produces a dampening effect on your return is the cost of investment. Especially when you are looking for equity related investments; i.e. NPS, ELSS, ULIPs and some debt based investments like Pension Plans. The table below summarizes the cost effectiveness of the various investments discussed above:

Scheme Expenses Score PPF No Effect 5 EPF/VPF Born by Employers 5 Fixed Deposits No Effect 5 NPS Govt. 0.0102% & Non-Govt. 0.25% 4 ELSS 2.5% average 3 ULIP 9.5% to 2.5% 1 Pension Plans 2.1% to 3.0% 2 Life Insurance Policies Not Applicable 4

Table 6: Expense Ratios on Various Investments

It turns out that the NPS comes out as the least expensive of them all and ranks highest when we look at the portfolio and exposure to equity investments. Also the Employer’s contribution to this scheme is not taxable when it is made.

Further exemptions in many investments especially the retirement schemes for salaried taxpayers such as NPS and EPF contribution will be limited to a percentage of salary only; i.e. NPS allows tax exempt contributions up to 10% of the salary whereas in EPF it can go up to 20% of salary.

Deductible Expenses
Apart from all the investment options there for claiming the exemption of Rs. 150,000 there are certain common expenses as well allowed as deduction under section 80C. Especially for taxpayers with school going children, tuition expenses on their education can be claimed under 80C for expenses.

The principal repayments on home loans also qualify for deduction u/s 80C, and mostly can capture a large chunk of the deduction if home loan is in the final years when principal repayment actually exceeds the interest paid throughout the year.

Claiming Medical Expenditure (Sec 80D, 80DD & 80DDB)
Income tax code in our country also provides for any medical expenditure incurred for precautionary or treatment purpose, including medical insurance premiums. Easiest and best of them are the deduction allowed for medical insurance premium paid in the P.Y. 2014-15:

Insured Deduction Amt. (Rs.) Age Below 60 yrs. Age Above 60 yrs. Self, Spouse and Children 15,000 20,000 Parents 15,000 20,000 Add: Preventive Healthcare 5,000 5,000 Max Deduction 35,000 45,000

Table 7: Medical Deduction u/s 80D

Therefore, while purchasing health insurance policy it is advisable that you purchase adequate amount of health cover, not just for your family but if required for parents as well. That should not just keep your parents’ healthcare costs down but also provide individual taxpayer additional exemption of up to Rs. 50,000 (Below 60 family and senior citizen parents).

Maximum Deduction
Further additional money spend on healthcare of a dependent family member for any of the specified deceases can be exempt up to Rs. 40,000 for members who are below 65 yrs. of age and Rs. 60,000 if above 65 yrs.

Expenditure on treatment and rehabilitation of a dependent family member who is suffering from a disability allows for Rs. 50,000 in deductions irrespective of actual expenditure. In case of severe disability it becomes Rs. 100,000.

Therefore, for a taxpayer maintaining dependent senior citizen parents and a disabled dependent relative the exemption can go up to Rs. 2,10,000 including medical insurance premiums.

Homebuyers’ Delight (Sec 80C, 80EE & Sec 24)
Well it seems in our tax system homebuyers are favored subjects for deductions and exemptions. Homebuyers and owners purchasing property on loan can claim interest and principal repayments in deductions. While principal repayments are deductible u/s 80C up to Rs. 150,000 for current assessment year (2015-16), interest repaid can be claimed u/s 80EE and Sec. 24(b).

Deduction of Interest u/s 24(b)
Section 24(b) allows for deduction of interest repaid on loans for:

1. Purchase or
2. Construction of residential property

The maximum amount exempt will depend on whether the house so purchased or constructed is:

1. Self-Occupied [or]
2. Let out for rental income

If the house is self-occupied as in the case of most ‘first time buyers’ the maximum deduction available is limited to Rs. 200,000 on interest repaid in the Previous Year 2014-15. In case of let out property this can be unlimited, and is calculated under the head ‘Income from house property’.

How do you benefit in case of let out property is that, interest paid reduces your income from the property. If interest paid is more than taxable rent received, taxpayer ends up incurring a ‘loss on house property’ which is adjustable with any other income heads.

For example:
Rajat a salaried taxpayer has the following incomes:

Income (Rs.) Taxable Salary Income 14,50,000 Taxable Rental Income 2,40,000 Taxable Interest income 40,000

He is also repaying a loan on the purchase of this property under which he paid Rs. 381,140 as interest and Rs. 63,541 as principal on this loan in the previous year. His income from house property calculation can be as follows:

Let out Property:

Particulars Amount (Rs.) Taxable rental income 2,40,000 Deductions u/s 24: Standard Deduction @ 30% 72,000 Interest Paid (no limit) 3,81,140 Income from House Property (2,13,140) Taxable salary income 14,50,000 Taxable Interest Income 40,000 Gross Taxable income 12,76,860

If the property is let out it, it has reduced the Rajat’s total income and brought it down to a great extent and gives him a tax saving of approximately Rs. 63,000.

If property is self-occupied:

Particulars Amount (Rs.) Taxable rental income Nil Deductions u/s 24: Standard Deduction @ 30% Nil Interest Paid up to Rs. 2,00,000 2,00,000 Income (Loss) from House Property (200,000) Taxable salary income 14,50,000 Taxable Interest Income 40,000 Gross Taxable income 12,90,000

Even when the property is self-occupied tax saved is in tune of Rs. 60,000 as Rajat falls into the 30% tax bracket. Also this will be further reduced as principal repaid will also be deducted from his gross income.

Deduction of Interest u/s 80(EE)
It is one of the rarest of the rare exemptions as it is available only for A.Y. 2014-15 and 2015-16, provides for additional deductions for first time home buyers. There are few conditions for investment to qualify for deduction under this section:

1. The property value shall not be more than Rs. 40 lakh
2. The Loan amount is Rs. 25 lakh or less
3. The house is the first house purchased by taxpayer
4. Loan is from a Financial Institution (i.e. Banks etc.) or Housing Finance Company
5. The taxpayer does not own any other house property

A total of Rs. 100,000 is provided as deduction, which can be spread over the two assessment years mentioned above. Therefore, if you have claimed any deduction in A.Y. 2014-15 under this section you may claim only the remaining balance as deduction in the current A.Y.

Deducting the Interest Paid on Education Loan (80E)
Interest paid on an education loan taken to fund a full time higher education is allowed for exemption in the year in which it is paid. Loan can be taken for:

• Self & Spouse
• Children or
• Student under legal guardianship of taxpayer

Provided the loan is from a recognized charitable institution or financial institutions, and the interest is paid out of taxable income. Meaning it can only be applied up to the amount of taxable income.

Conclusion
For most of us 80C remains the area of concern as decisions may be required to be taken almost every year. For this reason getting back to the ranking of available investment options u/s 80C under the parameters decided in the beginning will be a good idea:

Scheme Returns Flexibility Liquidity Profitable Tenure Taxability (Inv./Int./Maturity) Total Score ELSS 5 5 4 2 5 21 ULIPs 3 5 2 1 5 16 Tax Saving FDs 3 1 1 2 2 9 Sr. Citizen Saving Scheme 3 1 1 2 2 9 NPS 3 4 2 1 4 14 PPF 3 5 3 1 5 17 NSCs/Bank FDs 2 1 2 2 2 9 Life Insurance Policies 1 3 2 1 5 12 Pension Plans 3 4 2 3 4 16 EPF/VPF 3 3 3 4 5 18

Table 8: Investment avenues ranked for different features on a scale of 1 to 5 (5 being the best)

The rankings have been done for the average taxpayer who is not a senior citizen or past the retirement age. Crossing the threshold of 60 may change the preferences and risk appetite to allow choice of equity linked products, thus it is advisable that for your individual preference and best choice contact your wealth manager/financial planner.

Note: Products are ranked on the basis of their relative performance under the head in the years so far and past performance does not guarantee the future performance of the products.

Marriage, in financial context, sounds heavy, especially in case of young Turks just starting on their career paths and not yet considering themselves stable in their line of profession. More so, in the context of our country, where lavish marriages are a trend, involving expenses beyond the personal capacities of the individuals getting married.
Personal financial situations may vary a lot from one individual to another. Yet, regardless of our financial situation, the steps to achieving a smooth financial life and a happy marriage can be generalized for everyone, beginning with the commutation of household environment.
First, we begin with the differences marriage can bring to your financial environment and importance of stability in financial condition. The issues that you must pay heed to after marriage to adjust to the new environment are as follows:

Parent’s Indulgence
Before marriage, many of us whether men or women, involve our family members, especially parents, in our own financial matters, mostly for old age wisdom and to minimize our own headache of managing money ourselves.
Post marriage, you will find that this habit of your spouse (where both of you are earning) a bit baffling. Remember though that it goes both ways, and first thing to do for you is to discuss with your spouse as well (even if only one is earning), even when you want to continue consulting your parents about your money management.

One is Two or Two is One
Before marriage, our financial decisions are sometimes reckless, as there is no one to questions it and there’s no responsibility (esp. if there’s no responsibility). New influx of money and financial freedom is exciting enough to make everyday a celebration, and even if account balance goes to zero before the end of the month we don’t feel stressed about it, after all payday is just a couple of days ahead.
Post marriage, this scenario will require rethinking, as it may play a spoilsport with your plans and relationship (esp. for men). Post marriage, one must shun the old solo run habits and focus on life from the two point of views, this may slow you down a bit but ultimately will be paying off in the way of a peaceful and happy married life.

I am the Expert
Some of us by experience and by knowledge, or even simply by interest, start to seriously indulge in our financial matters early on. Before marriage, that may seem like a perfect life and a series of robust decision making spree. This will build lot of confidence in you regarding your financial matters.
Post marriage, this confident can be deadly if your spouse is earning and looking for financial control. In such scenario there is generally one choice left, you both say, ‘I am the expert,’ and start managing your finances separately, but this can be upsetting, not just for you but for the kids (if your marriage lasts long enough), and for all future financial decisions, as the issue of who handles what will arise each time. So the experts must file for consensus on financial matters and manage everything jointly instead of keeping a curtain in between.

Utility or Fun
Under current environment, singles are less willing to spend time and money on utilities like – washing, cooking and other household chores. It’s almost like returning to bed after a party; i.e. you don’t want to but you must, and therefore, priority to such needs is low in this phase, but changes dramatically after marriage.
Post marriage, utility takes the center-stage, while fun activities must also remain important consideration. A comfortable household is a position which should be a priority post marriage for both you and your spouse. Providing for all may not be possible at all times but, if some time is devoted towards planning fun activities along with fulfilling initial family expenditures, it is easy to overcome this hurdle, while keeping the enthusiasm up and running.

Planning for emergencies
Our risk taking capacity is high while running solo and perhaps some of us have already tasted success or failure in risky ventures before getting married. Before marriage, only emergency planning required is for self, additionally parents are also there for support. At maximum you require a Personal Accident Policy, a Health Insurance and some amount as your emergency fund.
After marriage, with the addition of another individual in your life, requirement of such emergency measures and more reaches a new zenith. If the other partner is not working this responsibility falls completely on the earning member, and proper emergency planning is essential for a stable financial future.

Planning for Future
This is something which should start even before you start to plan for marriage, as money is going to be your constant partner, savior and friend whether you marry sooner or later. Only difference is, before marriage our concern is mostly with our own needs and we may not worry much about our long term goal. Though, some of the goals must be acted on early, while marriage will add some more whenever it happens.
Initial liquidity needs are important, and must be taken care of while saving for the long term goals. Even financing marriage expenses can be a goal for single individuals. After marriage, goals merge for the couple and that’s where the challenge will be for newlyweds.

Motivations for Prioritizing Personal Finances
I understand that in order to undertake any venture you need to find right motivation to accompany you on the way, and thus given below are few reasons why setting your personal financial priorities after marriage could be important:

• If you are the sole earning member:

• 1. Financial Stability will take some time, your professional growth is important
  2. Remember that you must plan for yourself and your spouse
  3. Well prioritized finances will allow you space to pursue your profession without worries of financial stress
  4. Keep the mental stress away, which may build quickly in current work environments
  5. Finally keep your family safe from financial worries in case of emergencies and untoward incidences
  6. In case of your disability spouse will know how to take care of financial matters

• If both of you are earning:

• 1. Making decisions together will save the family from blame game, as financial loss of one can affect the other as well.
  2. Savings is easy but combining your money can be even more rewarding
  3. Planning together can be fun.
  4. Iron out differences of opinions and de-stress over future financial goals
  5. Involving your spouse in your financial planning will make both of you feel more inclined towards family’s future.
  6. It’s easier to plan for increasing the family too.
  7. In case of emergency your spouse will know what to do to pull additional resources

Personal Finance Priorities for Newlyweds
Now that we are rightly motivated and clear about what we want out of such exercise, let us have a look at what all should we account for while setting up family finances in place? Discussed below is a comprehensive list that you may consider for your new family:

1. Talking Money Matters
   Money talks are as important for newly married couples as the talks for expensive vacations and getaways; after all it’s the money which will provide for all of it in the end. The least expensive and most productive ways to spend your weekend together is by putting your finances in place, deciding on future course of action and building credibility and sense of responsibility between the partners over money.
   Benefits of monetary transparency are enormous between couples, for example: it instills a sense of relief in the other that their partner trusts them, and in return they will feel open to undertake responsible position in case of money matters.
   If your spouse is working, it is more important to open up about financial matters especially for the one earning more. The simple reason being, the higher earning spouse will consider himself to be more capable of handling financial matters. This sense of superiority leads to the temptation of hijacking the process and dictate terms to the lower income partner. This may lead to discord, and it is advisable for a smooth sailing marriage that equal representation is given to both the partners.
   Discussing them over your free time will allow you to experience free flowing of creative ideas to finance not just your goals but your aspirations while strengthening your relationship further.
2. To Become One or Remain Two
   This is one of the most contentious of issues between partners, especially when both of them are earning. Usually when parents are involved with both spouses in their personal money management, their suggestion is to keep the finances separate, but as partners in life you are expected to handle your lives together, and so the financial matters.
   If not complete some level of transparency pays in not just keeping your finances in place but also ensuring peaceful and healthy environment in the house.
   For single income couples the earning member must strive to make arrangements for his/her spouse to become financially independent in future, it benefits in two ways:
   1. Increase income and tax savings within the family
   2. Be financially safe under emergencies

   For double income couple as well, saving taxes can be a great advantage of joining their finances together, and planning for their combined financial future.

3. Update Financial Documents
   Financial documents are most important piece of records, holding the key to access most of your resources. After marriage it becomes the foremost responsibility of the couple to update their new status in their financial records, for smooth functioning of financial transactions.
   These records include:
   • Bank Accounts
   • Provident Fund Accounts
   • Insurance Policies
   • Mutual Funds holdings
   • De-mat Account etc.

   Especially for women it is imperative that they update their information in all such places to avoid any hassles in receiving or making payments due to change in their name. Also remember that for some financial instrument spouse takes precedence in nomination over all other relatives, i.e. EPF, health policies, life insurance policies etc.

4. Deciding on Lifestyle Expenses
   Planning does not mean you should live an ascetic life devoid of enjoyment, instead both of you should be able to enjoy your money together as well, this brings us to the lifestyle expenses. Cutting on lifestyle for future goals is advisable only when there is practically no other option. Though, it is advisable that you remain within your pockets, you should work on maintaining a lifestyle which is healthy, both from physical as well as financial point of view.
   Typically in the initial years it is difficult to hold on to the line, but slowly with some efforts discipline must be inculcated in financial matters within the family to increase savings. Once again, this step will involve both husband and wife whether both are earning or any one of them.
5. Gear up for Emergencies
   Financial emergency preparation involves following two aspects:
   1. Insurance Policies
   2. Emergency Funds

   While insurance policies are easier to purchase, one should be careful with the benefits available in Health Insurance, Personal Accident and other policies. For example, checking whether your health insurer will only provide ‘cashless hospitalization benefits’ or also ‘reimburse your doctor visits or regular health checkup bills’ can be a good point to start with.
   For life policies ensure they cost less and the claim procedure is simple. A qualified financial advisor or wealth planner can be engaged to decide the correct amount of insurance cover required. Inadequate insurance may make financial life of your spouse difficult after you in case you are the sole earning member.
   For emergency funds, it is advisable to take expert help, but to start with you can target at least ‘three months’ of total household expenses. This pool comes in handy and keeps your financial worries at bay in situations of job loss or disability.

6. Planning for Goals
   Imagining your future financial goals may not be a difficult task, but structuring them into attainable and scientifically defined objectives may require more than casual imagination. It is advisable that you involve a professional wealth manager / financial planner to plan all your goals along with your emergency planning. Here is a list of some common goals which hold their importance for almost every family, especially the ones just starting:
   • Self-Education
   • Household appliances, Furniture etc.
   • Vacation
   • Retirement
   • Home Purchase
   • Car/Vehicle purchase

   Before you start to plan for kids, these are the foremost goals you should pay attention to. In brief planning for these goals will require you to define the following for each of them:

   1. Time to achieve the goal
   2. Amount required to provide for the goal
   3. Amount you can invest now to attain the amount in point ‘B’

   Defining some of the goals may be tricky, for example the retirement goal where it will be difficult to imagine an amount that will be able to provide for your post retirement expenses. The trick is to start with something, and go for expert assistance as soon as possible.

7. Budgeting the Household Expenses
   The old but effective method of disciplining your expenses is by budgeting them in advance. Though detailed budget preparation may not be possible for everyone, a simpler method can be followed by dividing the expenses in two parts:
   1. Fixed expenses
   2. Variable expenses

   Fixed expenses are those outflows which are least controllable, for example: House rent, car / home loan EMIs, etc. While variable expenses are those which are mostly in your control, for example: weekend splurge, clothing, furnishing, and other lifestyle expenses. This should provide you ample scope for modification and creatively adjusting those expenses which are somewhat in your hands, by either postponing them or reducing them. A budget in the end provides a direction and framework for your money to flow and not simply be lost in the daily commotion.

8. Saving and Investing
   In the final stage, when you have the amounts available for your expenses and the amount required for goals, your task is to start putting your money through your plan. There is sometimes a gap between what you plan to save and what you can, given the amount of income and expenses. In such situation it is important that some compromise is reached between savings and expenditures, simple reason being – “time will increase money, the penny invested now will become much bigger over time than the money invested in the later years.”
9. Review Your Plan
   Planning so meticulously done can be quite relieving in itself. Though, it doesn’t permit us to abandon it completely for the future. We must return to it on regular basis to account for the changes and monitor the progress. Beware of panic or overconfidence though, when we have plenty of aspirations, a little money can make us dream bigger and lose patience. Remember, “Time will increase the money”.
10. Ask for Help
    It pays to get a professional advice and plan to improve your financial position. If it is already good, then you can strive for greatness in it, if it is great then strive for sustainability of this great financial position. A qualified wealth manger / financial planner can be very effective add on to your planning process, and really add value to your already detailed plan.

More often than not any surplus money left in savings bank account either gets spent on discretionary expenses or may be because of tiny amount, we do not give much attention to utilizing that surplus, left in savings bank account in a more efficient manner. As experts say, it is equally important for money to work for us as hard as we work to earn it. But investors have very little clue about finding an alternative to savings bank account to deploy that surplus.

Financial planners also emphasize on the importance of maintaining emergency funds. Securing your insurance portfolio and creating contingency fund are the two basic pillars of financial planning process. As any contingency fund is created for any unknown emergency, which we do not know when and how will strike, we can not commit that fund to any long term investment purpose. Leaving that money idle in savings bank account also does not serve any purpose.

So what exactly is the alternative to savings bank account, which can be as liquid and safe as bank account and yet prove more financially prudent ? The answer is liquid funds.

As the name suggests, this is the category of mutual funds, which offers highest level of safety and liquidity. The basic objective of liquid fund is to provide highest level of liquidity to investors so that entry and exit from this fund do not cost anything to investors.

Lets Try to Understand the Concept of Liquid Funds:
As individual investors we come across two scenarios at the end of every month. Either we end up having surplus money lying idle in bank account, which is left from monthly income after providing for all expenses, which is unintentional excess money or we consciously attempt to put aside or save some money to create contingency fund. In both the cases, if we leave this amount in bank account invariably we end up spending that amount on any discretionary expense or if we keep large amount idle in bank account that may not sound prudent financial decision. Sometimes you get lumpsum amount or unexpected largesse like winning a contest or selling any real estate or any other asset or receiving large sum of money in inheritance. It invariably takes few weeks to decide on how to deploy this large amount. Liquid funds can play an important role here. Liquid funds can work as an alternative to your bank account in all such cases.

Liquid funds invest in corporate deposits, inter bank call money market or any other debt instrument with less than 91 days maturity period. As it invests in very short term debt instruments, there is no interest rate risk involved.

Ease of Investing:

• As the name suggests, this category of funds are the most liquid in nature.
• Investors can enter or exit without any charges, as there is no entry and exit load.
• Redemption gets processed in 24 hours time.
• Better tax efficient returns.

Ease of Transactions:
As the basic objective of investing in this category of fund is parking additional savings, which may be required in any emergency. So ease of operation/transaction is another important factor for investors. With NJ Demat account platform you can hold units in demat format and transact online using multiple platforms of online transactions, investing through debit card as well as opt for call and transact facility. This allows investors error free, quick transactions where both investment and redemption can be done at the click of a button.

Liquid Funds/Money Market funds help you utilize your savings in a better way. With changing times it’s time to look beyond traditional products as modern times require acceptance of new solutions to your old needs.