Financial Planning – 5 Must-Do For Beginners

Mon, 01 Feb 2021 07:46:43 +0000

Even before your salary gets credited to your account, you have a long to-do list ready when you start earning. After all, it’s your money, and you will spend as you please. But at the same time, it is very important to save and invest your saving to reap the benefit in future years of life.

Here are 5 must-do for better financial planning when you start out in life and career.

Early start – The earlier you start better, you will be. The twenties are the foundation year of just not your independent life but also for your financial plans. If you don’t get started with your financial plan in your twenties, then the chances are that your thirties will be spent rectifying what you didn’t do in twenties. All of us know what happens when a train is delayed at its starting point; it will reach late to its destination.
Power of Compounding- An early start is also important to get you the benefit of compounding. Compounding is the process where your principal earns interest and then next interest is paid on the principal and the earned interest. Thus you earn interest on interest and this cycle goes on. If you start early, you will have more years in hand and thus earning you interest for more years.
Insurance- Do not buy insurance as an investment product. Insurance is for protection and does not earn any return. There are many insurance products which promise you a return but be watchful of what you buy. Insurance should be treated like a safety net that you buy for your family or financial dependents if you meet an untimely death. If you have financial dependents, then term insurance is the only and a must-have cover. Insurance is also taken for saving tax. But this is also a wrong attitude. Don’t buy insurance for saving tax but buy it for handling the unforeseen situation.
Start Investments – Don’t let your money lie in your bank account. Invest your saving in a product that will give you return on your investments. There are many financial assets in the market wherein you don’t hold a physical asset like land or gold but rather hold them in digital forms like equity mutual funds and gold ETFs. A fixed monthly contribution towards these financial assets can build a good corpus for an individual over the years.
Track your investments– Always track the performance of your investment. Don’t invest and forget but keep an eye on their performance and return. If you feel the certain investment is not doing well don’t be afraid of switching your investment avenue. Do not abandon your investment but look after them and nurture them.

Hope these five habits will help you in starting a solid financial plan as early as possible.

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Women Should Take their Financial Planning in their Own Hands – Top Investment Options

Wed, 14 Oct 2020 05:37:29 +0000

By Shweta Khanna Bhandral

Investment is as essential for women as it is for men. Working or a homemaker, every woman should invest their savings for themselves. There are multiple reasons why women should take charge of their investment. Indra Nooyi, the former CEO of PepsiCo, said, “in a women’s life two clocks run opposite to each other always. One is the biological clock and other the career clock.” Hence, married women usually take more job breaks, and they should be financially ready. Managing money is not only essential to deal with unforeseen circumstances that the family might get into like a loss of job or business but also personal reasons or loss.

Let us look at the top investment options for women:

Retirement planning is one of the most important goals for every investor. It is also a goal for which one must accumulate a large corpus. Therefore, women must start investing in this critical goal early to benefit from the power of compounding. It is equally important to choose the right asset class to stay ahead of inflation. Also, this would require spreading your investment in various asset classes.

Personal Provident Fund is one investment tool which, as of today, is giving most promising returns in debt investment category. The current interest rate on PPF is 7.1% compounded annually. Since the government backs the PPF, the risk involved is minimal. It falls under EEE status, which means that the amount invested, interest earned, and maturity amount received are all tax-free.

Many investors opt for pension plans and ULIPs for their retirement goal. But equity and equity-oriented funds (including retirement funds) have the potential to deliver higher returns. Stereotypes in society and our minds might say otherwise but several pieces of research done over the last few years prove that women make better investors than men. A STEM connector report found that women earn 12% higher returns than men when it came to individual investments. An integrated approach also drives women to more meaningful financial goals. Women also tend to see the big picture, which is an essential pre-requisite for investment.

Another survey conducted by an investment platform Grow where 26 thousand women participated found out that 82% of women prefer Mutual funds and stocks for investments. Personal finance expert, Hemant Rustagi also advocates investment in Mutual funds as a retirement plan. He says, “The key is to choose options that have the potential to deliver higher returns during the accumulation stage and generate tax-efficient regular income during the disbursal stage. Opting for Systematic Withdrawal Plan (SWP) is one of the most tax-efficient strategies to generate regular income from mutual funds. Now that dividend from mutual funds is taxed in the hands of investors, women in higher tax slabs will end up paying higher taxes if they opt for this option.”

Direct investment in the Stock Market is also a good idea if you have the appetite for it. A portfolio created with thorough research can give you good returns in the long term than most of the asset classes.

One of the asset classes that has a place in everyone’s portfolio is Real Estate, especially a house for personal use. With an increasing number of Indian women, both married and single, contributing significantly to the decision-making process, the number of women house owners is increasing. Though in a lot of cases, the house is registered on a women’s name to enjoy the benefit of lower registration cost. It is undoubtedly an excellent idea to own a personal space married or unmarried as provides stability and security. However, before committing to such a large investment, one must ensure that other essential goals like retirement planning, medical insurance etc. are in place.

Personal finance expert Hemant Rustagi says, “buying a property from an investment point of view is not a great idea as one has to compromise on liquidity. Besides, equity as an asset class has the potential to deliver higher returns over the longer term.”

Gold is another asset class considered suitable for women in India. Traditionally in most of our region’s girls are given gold in marriage, so that they have some asset of their own in the new house. Gold ornaments are worn, used, and when there is need can be mortgaged or sold. It is considered among the top investment options for a women and a good asset class for the long term.

If an investment is needed for short-term goals like house repair, child’s education or even buying a car, women can invest in some small saving schemes. For such requirements, one can opt for Post office Time deposit Scheme and the National Saving Certificate (available at the post office). Both these are time-bound. While in the Post office time deposit Scheme one can invest for anytime between 1 year to 5 years and the interest is calculated accordingly, in NSC your investment gets blocked for five years at 6.8% of interest compounded yearly. Though the interest rates on fixed deposits are lowest in the last ten years, an RD or an FD is also an option for short-term requirements.

With more women working and earning even in smaller cities and villages, they must know how to manage their finances and become part of the financial system. It will not only help them but also help the economic growth of the country.

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Financial Planning – 5 Must-Do For Beginners

Women Should Take their Financial Planning in their Own Hands – Top Investment Options