Have you started planning for your retirement?

Most people usually go blank when asked about retirement planning. Some are not sure when to start planning for a corpus for the golden years or many feel it is too early to start. While people invest in stocks and fixed income instruments to take care of their goals like marriage, property purchase, child education, retirement planning figures at the bottom of the list. Why it should be one of the significant goals in an individual's life, read on in the link below :

http://www.moneyihub.com/start-planning-for-a-financially-stress-free-retired-life/

Virtues required to become a successful equity investor

With the stock markets plummeting day by day, I am reminded of the  concept of buying at maximum pessimism. It has has been immortalised in Templeton’s own words:

 “Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.
 The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.”

Here is the link of my latest article on qualities required as an investor to make good money in the stock markets

http://www.moneyihub.com/how-to-become-a-successful-equity-investor/

Create more income earning assets in your early working years:

Today’s younger generation is desperate, impatient and wants to make a quick buck. No doubt, they are intelligent, street-smart and opportunistic. They are not only capable of making a fast buck but also spend it quickly and impulsively. The latest gadgets – i-phone, i-pod, mp3 player, laptop, LCD – they have it all.  I have observed people buying a car on loan as soon as they start working. First EMI from first monthly salary! Does it sound exciting or scary to you? This is in stark contrast to the fiscal attitude of our older generation. They used to think 10 times before taking a loan and if possible would postpone some of their purchases to accumulate the money rather than borrowing.

So is consumerism bad? Not at all. In fact, the younger generation is fortunate enough to have ample options in terms of anything and everything. My point is inculcating a fiscal discipline right from day one of your working. Adopt an attitude of earn-invest-spend rather than earn-spend-invest.  Even if you adopt this approach stringently in the first 10 working years of your life, the easier it will become to achieve goals at later stages. By investing on a monthly basis, you will be creating a liquid asset kitty and these will be making money for you.

Suppose you invest a certain amount monthly from your salary income from the age of 23 for the next 10 years. As you progress in your career and achieve stability, the amount invested can be higher. For keeping things simple, let us assume an average monthly investment of Rs.8,000 in an equity mutual fund. Suppose, it will yield a conservative 10 per cent return compounded annually for 10 years. So by the age of 33, you would have accumulated a corpus of Rs.39 lakh. The amount can grow to Rs.47 lakh if the investment yields 12 per cent return and to Rs.64 lakh if the return is 15 per cent. That is a lot of money amassed in your early 30s.

I have observed some double-income neutral families who have accumulated a huge income earning asset kitty in their early working years. Many were able to make a big down payment for property purchase and took minimal loan as possible. Buying a car came second on their list and that too by paying the full amount in cash. No personal loans, no car loans and no credit card loans. In stark contrast to this, I have observed many families who have a big house, a car and many such assets which improve their standard of living but do not earn additional income for them. They are neck deep in debt and are not able to save at all even for investing. There is a good chance that their networth may turn negative as liabilities exceed the assets. The situation can become more troublesome if there is a medical emergency situation in a debt-laden family.

Creating more income bearing assets in the early working years thus helps one to comfortably take care of the life goals and gradually also improve the standard of living. So start investing early and let the power of compounding take care of the rest.  Einstein described it as the eighth wonder of the world!

Do you have a personal accident Insurance policy?

Personal accident insurance policies are the cheapest ones but also the most ignored. The importance of a personal accident cover cannot be undermined. Why this is a definite must-have, especially for the young and working, find out  more in the article below written by me.

http://www.moneyihub.com/definition-and-benefits-of-a-personal-accident-insurance-cover/

Do you have your independent health insurance cover?

Everyone faces problems in life, be it a small worry or a crisis. Some are under our control and can be solved and some are not in our hands. I believe the two biggest crisis in life an individual can face is financial and health problems. The lack of financial resources could cause mental stress and affect health and likewise lack of good health can result in high medical expenses and cause financial stress.

The cost of medical treatment is increasing exponentially. Having a good health insurance plan with adequate cover can to a great extent lessen our financial outgo in terms of hospitalisation, diagnosis and medicine expenses.  When I ask my friends and relatives about medical insurance cover, the usual reply I get is I am covered under my company’s health insurance scheme. So they do not bother to buy a separate medical cover. However, there are some risks here.

Firstly, the medical cover provided by employer is going to last only till your work tenure in the organisation. If you resign or retire from the company, the medical cover is going to lapse. I remember one unfortunate incident of a friend’s father. He had resigned from his company in Mumbai and was going to shift to Pune to join a new employer. During the transition period in shifting to Pune, he suffered a heart attack. His medical cover with the earlier employer in Mumbai had lapsed and he was not having a separate insurance cover of his own.  Although he recovered from the attack by God’s grace, the financial burden he suffered was tremendous. It had repercussions for many years because all the long term savings were exhausted in his treatment.

Secondly,   there is a waiting period of 1 to 2 years on pre-existing diseases in health insurance plans. This means one cannot claim compensation in the event of some medical emergency up to two years. If your medical cover lapses, a fresh policy under a new employer will again have a waiting period on pre-existing conditions. Additionally, premium rates will be high as the age of the policy-holder would have increased then.

Thirdly, your parents might be left out from the insurance coverage although many employers offer group insurance covers which include the employee’s family members. Many group policies have age restrictions which do not cover people above the age of 60. They are also standard in nature and do not offer flexibility to the employee in terms of cover and other features. Thus, the cover might not be good enough to cover the number of dependants due to age limit and also in terms of sum assured given the high cost of medical treatment.  

To summarise, while a medical cover from an employer is a good back-up, it is advisable to buy an independent health cover directly from the insurance company. Buying a comprehensive insurance cover which suits your whole family as per their medical condition makes more sense.