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Health insurance provides risk coverage against expenditure caused by any unforeseen medical emergencies. In current times of high medical inflation rates, failing to hold adequate amount of health insurance cover can prove to be a major personal finance disaster. This could lead to either poor health care because of non-affordability or spiral an individual into financial distress due to high medical bills.
There are two common mistakes when it comes to buying life insurance and health insurance.

  • People don’t act at the right time, and
  • when they realize that they have made a mistake they try to over-compensate by buying too much insurance.

There is a popular saying about health insurance:

“Buy health insurance when you don’t want it, because you may not get it when you want it.”

The following points signify the importance of personal health Insurance cover:

1. Insurance cover provided by your current health insurance plan:

Most of the organizations provide a basic health insurance cover. The basic health insurance might cover individuals from minor ailments and provide a decent amount of coverage. However, this amount might often be insufficient in case of a major emergency. It is important that individuals prepare themselves for such major contingencies and make a provision through adequate health insurance cover.

2. Validity of your health insurance provided by your organization:

The validity of the health insurance cover provided by the organization is connected with the time span of your association with the organization. Such health insurance policies lapse once you leave the organization. A potential job change, job loss and retirement are situations when an individual faces a no health insurance condition.

Individuals would then liquidate their savings or assets to meet any medical contingencies. This might affect their budgeting and financial plans they hold for achieving their goals. A personal health Insurance cover is valid as long as the payments are made.

3. Start early: Benefits of buying health insurance young:

Buying a personal health insurance policy is cost-efficient while one is young and free from medical complications. The premium is lower and the policy offers comprehensive coverage in comparison to a policy purchased at an older age.

As an individual grows older, the cost of the cover increases and if one develops health issues, the health insurance company tends to exclude pre-existing conditions which defeat the whole purpose of buying a health insurance.

Most health insurance companies have an upper age limit for the policies, which means one would have limited options after retirement. One can enjoy the benefits of cumulative bonus in the form of no claim benefit if they renew the policy without any claims.

4. Tax benefit:

The icing on the cake by opting for a personal health insurance policy is the tax benefit. Payments made towards health insurance premiums are eligible for tax deductions under section 80D of the Indian Income Tax Act. 

However, it should not be the driving force behind making the decision of taking a personal health insurance policy. The need to improve risk management should be the driving force behind opting for a personal health insurance policy. One should scientifically calculate the amount of health insurance required with the help of a proficient financial advisor and make sure that they are adequately covered.

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India First Free Online Financial Advisory, India First Free On-call Financial Advisory, Best Free Financial Advisory

Looking for ways to create wealth? Start with admitting that neither wealth creation can happen overnight nor money left idle can grow on its own. ‘Investment’ is the only way to make your money grow. In this blog, you will read about Systematic Investment Plan (SIP) and know about its wealth creation potential.

SIP is not a product, it is a concept. Basically, it is a route to investment in mutual funds at a disciplined and regular manner. Through SIP route, you are allowed to invest a pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.).  The process of execution is like recurring deposits, but SIP makes you invest in mutual funds.

There are various advantages of taking up the SIP route. Primarily, it makes you a disciplined investor and inculcates in you the habit of regular saving and investing.

Systematic Investment Plan (SIP): No Need To Time The Market

There are various investors, who understand that although risk-oriented but equity mutual funds have high wealth creation potential. So there are many who wish to invest in Equity but they hesitate to go ahead because they think equity investments require timing the market.

For all such investors, SIP is the best route because, with the systematic investment plan, it is not important what time you enter the market, rather it is important how much time you are in the market. In other words, you need not to time the market if you are investing in mutual funds through the SIP route.

SIP: The process is simple!

Step 1: First, you got to select the funds offered by various Asset Management Companies (AMCs), based on the performance of the funds. To know the same, you can take professional help or can visit fund’s rating websites. It is always advisable to select multiple funds.

For example: You are investing Rs. 5000, then instead of investing the whole amount in one fund. It is better to invest to Rs. 2500 in two different funds.

Step 2: Second, you need to pre-determine the amount you want to invest.

Step 3: Third, you need to pre-set the interval on which you will be investing. The majority of people invest on a monthly basis. The investment happens through ECS auto-debit.

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“Balancing your money is the key to having enough.”

 Elizabeth Warren

Teaching you near adult about saving money tips and money management is not as simple as telling a kid why money is important. You may have to seek an audience with a teenager locked in his or her room, or do a PR job to get his or her attention away from friends, loud music, and other superficial needs. But it can be easier than you’d expect.

Teenagers are likely to be more receptive when you talk in terms of their needs. In fact, before you start imparting to them the value of money and run the risk of nagging more than teaching understand first where they spend money.

To help you out, we culled the Internet and selected what we believe are six excellent pieces of advice.

Invest not spend:

This article has a great advice on teaching your teenager the real value of money: it’s not for spending, but for creating more money. Instilling in them the long-term value of investment is one lesson they’ll thank you as they will realize soon salaries are hardly able to create wealth for them.

As a parent, you can illustrate the importance of investment by pointing out how your teenager enjoys everyday necessities.

Example: How much you’re paying for the house today and its net worth by the time your kid inherits it. A simple math can also help show your kid that investing 10% of his or her income at a 10% return, his or her nest egg can be bigger than the annual salary.

Teach them the art of budgeting

Good money management starts with a budget. To help your teenagers get off on the right foot, the authors advises to give them a monthly budget. A predictable inflow and outflow of cash will help kids get a sense of budget, that the higher the spending, the lower the treasury is and vice-versa. This strategy is better than handing out bills to them when they need it.

Allowing them to forecast the money in their wallet and the period of time needed to buy something also trains them to watch out for spending more than what they earn. Teenagers have a knack around the Internet. Use this skill to find promo rates or best-value prices for you and them.

Paying Bills

You would think that paying bills is a “common sense” lesson, something that people automatically know how to do when they become adults, but that’s not the case. It’s important to assign a bill to your teenager, whether it’s their cellphone bill or their car insurance bill. Send them a payment reminder email or, better yet, just tell them the date their payment is due. If their payment is late, they get charged a late fee or they lose a privilege, like not being able to go out with their friends.

It’s important for teenagers to realize that when they don’t meet their financial deadlines, there are penalties. It’s much better for them to learn the lesson young, under their parents’ roof, than for them to learn the hard way by incurring high interest charges and late fees from credit cards after forgetting to pay their bill.

Know About Credits:

Learn about credits – good credit and bad credit. Understand the importance of a good credit profile by paying off the full credit balance every month. Get a clear understanding of the difference between debit card and credit card. Analyze each one’s benefits, security issues, percentage rates, liability, and security. Be aware of the impact of credit score on financial planning.

Set Clear Goals:

Set clear goals to effectively save money. Your goal could be as simple as buying a music instrument or a hard disk. Accumulate amount, gradually, until you have enough to meet your goal. Thus, you get habituated to saving towards a goal, without distraction. In the long run, you can set crucial financial goals in life and achieve them with ease.

In conclusion, teens are to be more involved in money management to get acquainted with finances. If you feel that you need more advice on money management, approach financial advisory like ArthaYantra. Learn the key financial terms, ways to earn, goal setting and money saving. Thereby you are not just learning to save, but are helping yourself to get rich in life.

Create Saving Plan:

Have a clear cut saving plan to get your job half done. To begin with, take three containers and label them as ‘gifts and charities’, ‘spendable amount’, ‘savings’. Calculate your expenses and leftovers. Fill in the containers accordingly. It is amazing the see those containers filling. Once filled, deal with each container differently, meaning use the money in each container only for the dedicated purpose.

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What is child education policy?

The child education policy is a life insurance product specially designed as a savings tool to provide an amount of money when your child reaches the age for entry into college (18 years and above). The funds can be used to pay for your child’s higher education expenses. Under this policy, the child is the life assured, while the parent/legal guardian is the policy owner. 

When Policy should you purchase?

The policy you purchase depends on your objectives and your risk tolerance. Before you buy a policy, ensure that your agent carries out a fact-finding evaluation process so that the policy recommended is based on your needs and financial capacity. 

It would be useful to choose a policy that will allow you access to the funds when needed, i.e. the policy matures when your child starts higher education, or the policy allows you to receive part of the insurance benefits prior to maturity, if necessary.

Why child education policy Is important?

Your Child’s Education:

You need to provide quality education for your child. Education being expensive, children education planning is a must.

Your Child’s Marriage:

Marriage today costs lakhs of rupees. Children Education Planning, helps you to save for this expense.

Rider Benefits:

You must avail waiver of premium rider to ensure your child gets a good education, even if you are not around.

Tax Benefits:

You get tax deductions on the premium you pay for the child plan. The amount you get on maturity of the plan is tax free.

Factors influencing child education policy:

Look for a policy that waives premium payment in the event the parent/legal guardian can no longer pay for the policy, arising from events such as untimely death, diagnosis of a critical illness or total and permanent disability. By opting for the payor benefit rider, your child’s education fund will be taken care of should anything happen to you as the parent/legal guardian.

Monitor the funds:

After you buy a policy, you need to monitor it to ensure that you are on your way to reaching your goals. Actual returns declared by the insurance company may differ from initial illustrations (particularly for participating policy and investment-linked policy) due to changes in financial markets. You may also find that the actual cost of higher education may differ as the course chosen by your child is different from the one initially planned, or currency exchange rates may rise and fall if an overseas education is preferred. If there is a shortfall in the funds required, some policies do provide an additional benefit of a study loan.

Check whether the policy qualifies for tax incentive:

One of the benefits of using life insurance as a savings tool for a child’s education policy is the tax advantage. Insurance proceeds are tax-free and you can also obtain an annual tax relief of up to RM3,000 for the payment of premiums for education insurance, subject to approval by the Inland Revenue Board.

Do not add unnecessary coverage:

Many education policies also offer the ability to add insurance coverage like hospital and surgical medical insurance, or critical illness coverage.

Be careful about adding too much insurance coverage as the costs will affect the amount of savings. Furthermore, bear in mind that you are insuring the life of your child, and certain coverage like critical illness may not be essential as the chances for such illness in children may be minimal.

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Healthy Portfolio:

High fund management costs can eat into returns. ET Wealth lists six cost-effective alternatives that can help create a healthy investment portfolio.

  • National Pension System (NPS)

NPS offers a low cost retirement savings vehicle with a flexible investment pattern. Further investing in NPS makes you eligible for tax deduction up to 10% of salary (basic + DA) under Section 80 CCD (1) within the overall ceiling of Rs 1.5 lakh under Sec 80CCE. Besides you can also avail an ddditional deduction of Rs 50,000 under Section 80CCD (1B) a year.

How much do you pay?
Lowest fund management fee (0.01%), apart from other charges.

  • ETFS/Index Funds

ETFs are freely tradable like shares while index funds are not. These are passively managed mutual funds with underlying portfolio mirroring the components of a broader market index. They aim to mirror the performance of the benchmark index.

How much do you pay?
Cost is a fraction of actively managed funds. For Index funds it is as low as 0.11% per year while for ETFs it is 0.05% per year.

  • Online Discount Brokers

Online discount brokers is a purely online-based brokerage service providers offer no-frills trading facilities. They leverage technology to deliver services at fraction of cost of traditional brokers.

How much do you pay?
As low as ZERO on delivery based trades, flat Rs 9-Rs 20 per transaction on intra-day/futures & options trades.

  • Online ULIPS

Online ULIPS can help you save on agents’ commission, which are passed on to policyholders in the form of nil or lower premium allocation and other charges. There are limited charges apart from fund management fee which means almost entire premium gets invested unlike in traditional Ulips. How much do you pay?
Lowest cost of 1.35% plus mortality charges. In some cases, additional premium allocation charge and policy administration charge apply (lower than offline Ulips).

  • Gold Bonds

Gold bonds fetch periodical interest income on the principal amount and are completely exempted from capital gains tax if held till maturity. Government issues these bonds denominated in grams of gold, with returns linked to gold price.

How much do you pay?
No exit load or fund management cost. Demat account charges (if bought and sold in secondary market) as applicable.

  • Direct Plans

Direct plans allow investors to bypass the intermediary and buy directly from the fund company and thus save on commission expense. Over time, direct plans yield better return as costs are lower. NAV of the direct plan is different from the regular plan, as latter’s NAV is calculated after including commission expense in expense ratio.

How much do you pay?
Up to 2% less than regular plans.

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Investors need to have the correct information for a fair understanding of investing in MFs.

5 Common Myths About Mutual Funds Busted

  1. Large sum required to invest
  2. SIPs mean you will never lose money
  3. You need to be an expert
  4. MFs invest only in equities
  5. You can’t go wrong with five-star rated funds

1. Large sum required to invest:

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No, you can start by investing as little as Rs 500 per month through systematic investment plans (SIPs) and gradually increase your investment as your income rises. You can build a huge corpus over time with a disciplined approach and regular investing.

2. SIPs mean you will never lose money:

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Systematic investment plans are the best way to invest in equity funds because they reduce the risk and average out the investment costs. But this does not mean that SIP investors cannot lose money. So make a realistic assessment of the risk you are willing to take before putting money in equity funds-whether a lump sum or through SIPs.

3.  You need to be an expert: 

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It is a fallacy that you need to be an expert to invest in MFs. In fact, they are the best options for those who don’t understand investments. The investment is managed by a professional, i.e., a fund manager or adviser, who does all the research and analysis to help you choose the best possible scheme.

4. MFs Invest only in Equities:

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Investors who do not know much about MFs often assume that funds invest only in equities. Well, if you want higher returns and better tax treatment than fixed deposits, but aren’t comfortable with the risk that comes with equity MFs, you can look at investing in debt funds. There are also balanced funds that invest in both equity and debt, and funds that invest in gold.

5. You can’t go wrong with five-star rated Funds:

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Even though past performance is no guarantee of future returns, the star ratings of funds by MF trackers like Morningstar and Value Research provide some idea to investors. However, do keep in mind that these ratings keep changing and need to be paired alongside performance to get a suitable idea about a fund’s prospects.

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It’s actually pretty simple: investing means putting your money to work for you. Essentially, it’s a different way to think about how to make money. Growing up, most of us were taught that you can earn an income only by getting a job and working. And that’s exactly what most of us do.

There’s one big problem with this: if you want more money, you have to work more hours. However, there is a limit to how many hours a day we can work, not to mention the fact that having a bunch of money is no fun if we don’t have the leisure time to enjoy it

There are many different ways you can go about making an investment. This includes putting money into stocks, bonds, mutual funds, or real estate (among many other things), or starting your own business. Sometimes people refer to these options as “investment vehicles,” which is just another way of saying “a way to invest.”

Each of these vehicles has positives and negatives, which we’ll discuss in a later section of this tutorial. The point is that it doesn’t matter which method you choose for investing your money, the goal is always to put your money to work so it earns you an additional profit. Even though this is a simple idea, it’s the most important concept for you to understand.

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What is car loan?

A car loan is a personal loan that allows the potential buyer to pay the vehicle off in monthly payments instead of having to pay the full price all at once. This means that a lending servicer or bank will pay off the car in full, while in return the borrower pays off the debt in monthly payments with an interest fee included as well.

Types of car loan:

  • Simple Interest Loans:

Simple Interest Loans are the most common type of auto financing available. The interest rate is based on the outstanding balance of the loan. Borrowers can save on interest costs by paying more than their standard monthly payment.

  • Pre-Computed Loans:

Pre-Computed Loans refer to financing where all interest and principal payments are pre-calculated before the borrower and lender agree and sign the paperwork. Although this loan was widely used in the past, most people don’t opt for this restrictive method of financing because it doesn’t allow for early repayment of the loan.

Why should i take car loan?

  • Flexible
  • Flexible contract terms, or length are available (ranging from 2-10 years)
  • Reducing instalments
  • A residual can be applied to the loan, reducing the monthly instalments
  • Easy Interest rates
  • Borrowers have a choice of fixed or variable interest rates
  • Tax Benefits:
  • A tax deduction may be applicable if the vehicle is to be used for business purposes
  • High Security:
  • Lower interest rates are available as the loan is secured against the car

What About Leasing?

As car costs have risen, leasing has become a popular alternative to buying. In recent years, leases have comprised more than 30% of new vehicle transactions.

On the surface, leasing and buying with a loan may look similar. Both involve payments over time, but what you are buying is different.

With a car loan, you eventually will pay off the loan and own the car. Your payments end and you have the option of keeping the car as long as you like — or as long as you can keep it running – or selling it.

With a lease, you likely will have a lower down payment, lower monthly payments and lower maintenance costs compared to taking out an auto loan. This is part of the appeal of a lease.

Eligibility criteria for car loan:

  • Minimum 21 years of age
  • Maximum 70 years of age at maturity (conditions apply)
  • Minimum Net Annual Salary of Rs. 2,40,000 p.a. for all approved car models
  • Income eligibility based on latest salary slip and Form 16
  • Minimum of 1 year continuous employment.

Keep your documents ready

The following documents are required

  • Age proof
  • ID proof
  • Application form
  • Photograph
  • Residence proof
  • Income proof
  • Bank statement
  • Signature verification proof
  • Pro-forma Invoice or Rate List

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What is business loan?

Businesses require an adequate amount of capital to fund start-up expenses or pay for expansions. As such, companies take out business loans to gain the financial assistance they need. A business loan is debt that the company is obligated to repay according to the loan’s terms and conditions.

Banks give you money to run your business, which you have to repay with interest, called a business loan.

Your business loan can be secured (you give a collateral) such as your Company inventory, land or machinery and avail your loan at a lower rate of interest.

Your business loan can be unsecured (you do not need to give a collateral).You are charged a higher rate of interest.

Why Business loan:

Flexibility 
Owners may avail different types of loans depending on their fund requirements. Companies may choose term loans to meet the fund requirements in the short to long term. Alternatively, they may opt for working capital loans to meet the operational expenses of the business.

Convenient Repayment Options 
The promoters are offered different repayment options as per their convenience. They may work out a repayment plan as per the business cash flows to avoid facing financial difficulties while servicing the loan.

Affordable Costs 
Contrary to popular belief, the business loan rates are not exorbitant. These are determined based on several criteria, such as tenure, the financial situation of the business, market dynamics and the borrowers’ credentials.

Easy to Avail 
Several leading institutions like Tata Capital offer loans to businesses without a guarantor or collateral. This makes it easier for small business owners to access funds to meet their cash flow requirements and sustain their ventures.

Sustain and Grow Business 
Companies are able to meet the funding needs to efficiently manage their operations as per the business cycle. Moreover, businesses in the expansion mode are able to use the borrowed amount in different ways to move up in the value chain.

Documents Required for business loan in India: 

All the relevant information related to documents required for business loans.

  1. ID Proof: Papers as proof of identity like Passport, Pan card, Voters ID Card and Driving License.
  2. Address Proof
  3. Proof of Continuity Of Business
  4. Bank Statement 6 Months
  5. Board Resolution (If pvt ltd co. is co-borrower/Partnership Authorization Letter {if partnership firm is co-borrower}
  6. ITR & Statement Of Computation of Income – for last 2 Years
  7. CA Certified or Audited P/L Acc Statement and for >40 Lacs cases Audit report along with schedules of P&L and Balance Sheet – for last 2 years
  8. Latest ITR of Co-Applicants – For last 2 Years
  9. Ownership Proof of Residence or Office

Eligiibility:

Self Employed (Private Ltd. Co. and Partnership Firms)

 include Private Companies and Partnership firms in the Business of Manufacturing, Trading or Services.

Eligibility Criteria:

  • Minimum Turnover of Rs. 40 Lakhs.
  • Years in business: Minimum of 3 years in current business and 5 years total business experience
  • Business must be profit making for the last 2 years
  • Minimum Annual Income (ITR): Rs. 1.5 Lakhs p.a.

Documents required:

  • PAN Card
  • Address Proof (Ration card Tel/ Electricity Bill/ Lease agreement/ Passport/Trade license /Sales Tax certificate)
  • Bank Statement (latest 6 months bank)
  • Last 2 Years ITRs (computation of income) Balance Sheet and Profit & Loss a/c. Audited or Certified by a CA
  • Proof of continuation (ITR/ Trade license /Establishment /Sales Tax certificate)
  • Sole Proprietor Declaration or Certified Copy of Partnership Deed, Certified true copy of Memorandum & Articles of Association & Board resolution (Original)

Self Employed (Individuals).

 include – Sole proprietors, Partners & Directors

Eligibility Criteria

  • Minimum age of Applicant: 21 years
  • Maximum age of Applicant at loan maturity: 65 years
  • Years in business: Minimum of 3 years in current business and 5 years total business experience
  • Minimum Annual Income (ITR): Rs. 1.5 Lakhs p.a.

Documents required:

  • Proof of Identity (Passport / Voters ID card/ Driving License/PAN Card)
  • Address Proof (Ration card Tel/elect. Bill/ Lease agreement/ Passport/ Trade license /Sales Tax certificate)
  • Bank Statement (latest 6 months)
  • Latest ITR along with computation of income, Balance Sheet & Profit & Loss a/c for the last 2 yrs. Audited or Certified by a CA
  • Proof of continuation (ITR/Trade license /Establishment /Sales Tax certificate)
  • Other Mandatory Documents (Sole Prop. Declaration Or Certified Copy of Partnership Deed, Certified true copy of Memorandum & Articles of Association (certified by Director) & Board resolution (Original)

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What is money market mutual fund?

A money market mutual fund is a kind of mutual fund that invests in ultra-safe or low risk securities. The purpose of the fund is to conserve the capital of the fund and it is unusual to see the NAV of a money market mutual fund go below one. The NAV can go below one if the securities do badly but it is quite rare to happen.

A Money Market Mutual fund is meant for people who wish to maintain their capital and park their short-term cash into a safety that gives – stable but low returns. It is also used by citizens who want to balance their portfolio and build in some security. If you have a lot of stocks in your portfolio then money market funds can balance your overall portfolio by providing capital safety.

Types of Money Market Mutual Funds

  • Institutional Money Market Mutual Funds:

These funds are held by governments, institutional investors and businesses etc. Huge sum of money is parked in institutional money funds.

  • Retail Money Market Mutual Funds

Retail money market funds are used for parking money temporarily. The investment portfolio of money market funds comprises of treasury bills, short term debts, tax free bonds etc.

  • Special Features of Money Market Mutual Funds

Money market mutual funds are one of the safest instruments of investment for the retail low income investor. The assets in a money market fund are invested in safe and stable instruments of investment issued by governments, banks and corporations etc.

Generally, money market instruments require huge amount of investments and it is beyond the capacity of an ordinary retail investor to invest such large sums. Indian Money market funds allow retail investors the opportunity of investing in money market instrument and benefit from the price advantage.

Why Money Market Mutual Funds:

 💡 A Great Place to Park Money:

When the stock market is extremely volatile and investors aren’t sure where to invest their money, the money market can be a terrific safe haven. Why? As stated above, money market accounts and funds are often considered to have less risk than their stock and bond counterparts.

💡 Liquidity Isn’t Usually an Issue:

Money market funds don’t generally invest in securities that trade minuscule volumes or that tend to have little following. Rather, they generally trade in entities and/or securities that are in fairly high demand (such as T-bills). This means that they tend to be more liquid, and that investors can buy into them and sell them with comparative ease.

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