Plan for different stages of your life

Individuals could find themselves in any of this age-group and the below mentioned framework should help them take a better understanding of their financial life at their respective stage as each of the four stages have a different set of to-dos.

An individual’s earning life could be separated into four stages until retirement. The first being the age-group of (25-35), which represents growth and accumulation, followed by  a stable income age group of (35-45). The last two age-group consists of (45-55) and (55-65) which are the years of settling down followed by a well-planned retirement respectively. Individuals could find themselves in any on this age-group and the below mentioned framework should help them take a better understanding of their financial life at their respective stage as each of the four stages have a different set of to-dos.

25-35

This is the age when an individual can accumulate at a rapid pace and has a higher risk tolerance ability. People falling in this age group should focus on aligning their credit card debt and amassing savings to buy a home. The savings should be directed majorly towards equity with 80% into equity and rest in debt instruments. An early entry into equities could help add compounding benefits of the money and young age could weather the market fluctuations.

35-45

During these ten years, individuals should concentrate on paying off their mortgage and compare the best interest rates and loan type so as to reap in refinancing benefits. This era marks low interest rate scenario for your loans and hence, is a best time to get rid of the mortgage. The retirement funds should still be directed majorly towards equity portion in between 60 to 80%.

45-55

In this age group, individuals should pay maximum focus on paying all of the debts and shift to a balanced or moderate portfolio. The ideal composition is 50% in equity and 20% to 30% in fixed income instruments and remaining in cash. But, if you already have some investment in real-estate then equity portfolio could be restricted to 35% to 40% of total corpus.

55-65

The age group marks the set in of retirement period, when most of the investment corpus should be transferred to low income yield instruments that are stable and have least risk associated. This is a time to focus on boosting your nest egg through tax friendly ways, but again taking minimal risk. At this time, you might need to adjust your lifestyle to match the retirement corpus collected, in order to last your post-retirement life.

Five steps to achieve financial freedom

Setting financial goals is the primary step of ladder to financial freedom. It is recommended to write down financial goals ranging from short term to long term, like paying of home loan, buying a car or going on a vacation abroad

Each one of us aspire to achieve financial freedom, which can only come by taking more control of one’s finances and strengthening the weaknesses. Financial freedom should not be confused with obsessing for money, but it is all about sitting relaxed and contended that the financial goals have been taken care of. Here are the list of some smart tips to getting that financial freedom.

Start with Financial Goals

Setting financial goals is the primary step of ladder to financial freedom. It is recommended to write down financial goals ranging from short term to long term, like paying of home loan, buying a car or going on a vacation abroad. The goals should specify the time and amount of money so that an appropriate amount of saving could be allocated to these goals.

Track your money

There are various mobile apps as well as online solutions available in India, which record daily expenses and provide an easy snapshot of the money spent. Keeping tab on every day expenses help figure out impulsive spending habits, which in turn greatly influences the way one manages his/her money. Also, tracking will help you to know if you are running on deficit or surplus by the end of month, which again could help straigten out usage of credit cards and other borrowings.

Budgeting

Tracking money for a few months will give a fair idea of spending pattern and it would help a person to prepare a budget on a more accurate basis. Though it sounds boring, but nearly half of the wealthy people cling to their budgeting habits, it simply saves from unnecessary cash outflow.

Emergency Fund

In India, people seldom give thought to having an emergency fund and even if some do have provisioning then it falls short of an ideal emergency corpus. Times are uncertain and there are higher chances that a person could face certain emergencies in day-to-day life, like a car repair or a huge credit card bill, owing to some surprise purchases, and, an emergency fund could just relieve you from a drag down on your monthly budget. Financial advisors recommend an individual to keep a minimum corpus of three to four months of expenses as emergency corpus, which should be easily accessible.

In company of others

People tend to get inspired by others surrounding them more easily then by following some set principles or someone who is preaching from far off. Thus, it is prudent to be in the company of those who are financially more settled and free. Financial abilities are often reflected in the everyday activities of financially sound people, and its never too late to learn.

V BALAKRISHNA

IRDA registered Life Insurance Advisor,

www.licbalakrishna.com,

www.facebook.com/licbalakrishna,

Cell: 919885832381.

Mantras to control spending and start saving

One of the biggest challenges for young investors is their inability to control spending. Here are eight ways that can transform a spender into a saver.

Save precious time tracking your investmentsYou are in a good job, earn a fat salary and have a bright future. Yet, none of this is evident when you look at your savings. This is because young people often find it difficult to save in the initial years of their careers. Studies reveal that discretionary spending can be as high as 18-20% of the income for young people. A 2011 study by Assocham revealed that almost 35% of the urban youth spend up to Rs 5,000 a month on clothing alone. This is one of the reasons most young people have such low savings."Gen Y focuses on their EMIs, but ignores their SIPs. They want to splurge on the latest smartphones and the newest cars but not save for their future," says Sudipto Roy, business head, Principal Retirement Advisors.Discipline and self-regulation are the cornerstones of a successful investment plan. We know it is difficult to salt away money when everyone around you is spending as if there is no tomorrow. There is tremendous peer pressure and even the most level-headed youngsters can stumble. Our cover story this week looks at 8 secret mantras that can help transform a spendthrift into a saver.

MANTRA 1: SAVE BEFORE YOU SPENDMany people are not able to save enough because they don't have anything left after all their expenses. Their financial equation is: Income - Expenses = Savings. Legendary investor Warren Buffett offers a simple solution. He says the equation should be changed to Income - Savings = Expenses. Instead of saving what is left after expenses, you should spend what is left after you are done with your savings for the month.

We know controlling expenses is easier said than done. However hard you may try, there will be some expense that will gobble up the surplus and prevent you from saving. The solution lies in automating your savings.

If you give an ECS mandate to your bank for an SIP, the money will automatically flow into your mutual fund even before you can withdraw it. Ideally, the savings should flow into an investment option that does not allow easy withdrawals. This is one of the reasons that make the Provident Fund such an effective tool for long-term savings. Every month, the employee's contribution is deducted from the salary and deposited into his PF account. The money keeps growing till the person retires. He can access the corpus before retirement only in certain circumstances.MANTRA 2: WAIT BEFORE YOU SPLURGE

The urge to buy something you like can be overwhelming. Easy financing options and plastic money prevent an individual from distinguishing his wants from his needs. Whenever you want to buy something expensive but not essential, follow the 30-day rule. Just postpone the purchase by 30 days.

During that period, think hard whether you really want the item. At the end of the month, if you still want to buy it, go ahead and purchase it. However, if the item was not really essential, you will get over the urge to buy and will probably junk the idea.

This simple rule works very effectively in case of gadgets, apparel, footwear and accessories. It's also not very difficult to follow because you don't actually deny yourself the item. You merely postpone the purchase by a month. As a fringe benefit, you also get to research the item over the next 30 days.

There is another guideline that can help you know the difference between wants and needs. The 30-minute rule says that if you are unlikely to use an item for a least 30 minutes a day on average, you should not buy it. The fancy coffee maker is really no use if you take it out once a month. Of course, this rule is only for gadgets and appliances and should not apply to other essential household items.

MANTRA 3: AVOID USING PLASTIC MONEY

Credit and debit cards are essential because an increasing number of our financial transactions take place online. However, plastic can be dangerous in the hands of a reckless spender. Studies show that even normal people tend to overspend if they use a credit card for a purchase. If they have to make the payment in cash, they will feel the pinch more. Since the credit card user only signs on the slip, the full impact of the purchase is not felt.

To suppress the shopaholic inside you, leave your debit and credit cards behind when you go to the mall. Take cash instead. Mumbai-based IT professional Vaibhav Pandya has followed this simple rule for the past 6-7 years and seen his savings shoot up. He says paying cash makes him think twice before he makes a purchase.

Experts recommend some extreme measures for serious shopping addicts. Some say you should just note down the card details and then cut the card into pieces so that you can't use it anymore. Others suggest you keep the card in a paper sleeve and stick pictures of your kids or spouse on it. You will be reminded of the other goals you may be jeopardising when you swipe the card for an unnecessary purchase.

"Keep in mind that every craving sets you back when it comes to reaching your long-term goals," says P V Subramanyam, financial trainer, Iris. One bizarre idea is to literally freeze your card inside a block of ice. It won't damage the card, but the user will have to wait for the ice to melt before he can access it. However, we believe the average spender won't have to resort to such extreme measures. Just keeping the card in a safe place instead of carrying it around in the wallet is good enough.

MANTRA 4: START SMALL TO SAVE BIG

At the beginning of your career, your income is not very high. In many cases, there is a very small investible surplus after the expenses. Still, this does not hold you back from saving. Delhi-based Sanjay Koul was not able to save much in his initial years of earning because his income was low and there were too many financial responsibilities.

Yet, he managed to put away a small amount every month. For a young investor, the low quantum of investment is more than made up by the long period available for the money to grow. The magic of compounding ensures that even a small sum grows into a gargantuan amount over the long term. The investment can be scaled up as the income grows in the coming years.

However, it is difficult for the average investor to maintain the discipline required for this approach over a long period of time. Mutual fund investors start SIPs but don't enhance the amount every year. Ulip investors pay the same premium year after year without any top-ups. Investors in recurring deposits and fixed deposit don't even have the option to increase their investment in the same account.MANTRA 5: DON'T BE PRESSURED TO SPEND

Everybody's financial situation is different. Just because your colleague has bought a new car or booked a flat in a fancy location does not mean you should follow suit. Bangalore-based Rajesh Prasad learnt this early in his career. "When I started working, there was a lot of peer pressure to go out and splurge. However, my father and senior colleagues advised me against blowing away my entire income," he says.

When it comes to big-ticket items like cars and houses, do the math carefully before committing expenses. For instance, the total cost of ownership of a car is much higher than the price quoted by the dealer. You also have to include the cost of fuel, insurance, servicing, spares and repair. There are a few rules for buying a car. The price of the car should not be more than 60% of your annual household income. The EMI should not be more than 15% of your monthly income or 30% of your investible surplus after expenses.

Besides, a new car should be used for at least 8 years for complete return on investment. Similarly, assess how much you really need the new smartphone before upgrading.

MANTRA 6: LEVY LUXURY TAX ON YOURSELF

The intention of this article is not to make you deny yourself the very luxuries that you have worked hard to attain. Every now and then, you need to treat yourself to some as well.

Pune-based Vikas Mathur has found a novel way to boost his savings everytime he spends. No, we are not talking about credit card reward points here. Every time Mathur indulges in some discretionary spending, he socks away an equal amount for his savings. If a dinner and movie with the family costs him Rs 2,000, another Rs 2,000 is put into savings.

There is another advantage of this rule. The luxury tax that Mathur levies on himself helps him get over the guilt of spending on discretionary items.

MANTRA 7: DON'T SPEND TO DE-STRESS

For many people, spending can be therapeutic. It is a way to unwind after a stressful day and gives the person a sense of control. However, the aftermath of this de-stressing can be even more stressful if it burn a big hole in your wallet. Worse, if the bills you pile up remain unpaid, it will hurt your credit score.

"Use your credit card wisely. If you use more than 30% of your total available credit card limit, it will affect your credit score adversely," says Nitin Vyakaranam, Founder & CEO, ArthaYantra.com.

Do you also frequently head to the mall and pick up stuff to fight depression and anxiety? Get a grip on the situation and look for healthier (and less costlier) alternatives to unwinding. When you feel overwhelmed by the urge to go on a shopping spree, go for a stroll in the park or do some light exercise. This will act as a distraction and ease the urge to spend.

MANTRA 8: FIX A BUDGET AND STICK TO IT

This should have been the first mantra, but has been deliberately brought up at the end because Gen Y is put off by the B word. The fact is that setting up a budget is the first step towards prudent financial planning, and it's not too difficult. Just set a limit for how much you can spend on clothes, travel and movies in a month and stick to your budget. Budgeting also helps you keep tabs on the itsy-bitsy expenses, such as casual shopping for clothes, eating out, gifting, and entertainment.

Most of the time, these smaller items go unnoticed even though they take up a large portion of the total monthly expenditure. In the good old days, financial planners advocated the 'envelope' method, where the outlay for each head was put in separate envelopes.

Now you can sign up with a money management portal. These websites aggregate all your finances, from savings bank accounts and credit cards to loan payments and mutual fund SIPs. They help you keep track of your money, alerting you when a payment is due or when you have overspent under a certain head.

V BALAKRISHNA

IRDA registered Life Insurance Advisor,

www.licbalakrishna.com,

www.facebook.com/licbalakrishna,

Cell: 919885832381.

Vital documents that must accompany your income tax return!

Aarush Velaga recently completed one year at his first job. Unlike his colleagues, he is new at filing Income Tax Returns. He is aware that every tax payer in India is required to declare, to the Income Tax Department, at the end of every financial year, in a form that is prescribed by the Government of India, a detailed summary of all the incomes that he/she has earned during the year ended on 31st March

Aarush Velaga recently completed one year at his first job. Unlike his colleagues, he is new at filing Income Tax Returns. He is aware that every tax payer in India is required to declare, to the Income Tax Department, at the end of every financial year, in a form that is prescribed by the Government of India, a detailed summary of all the incomes that he/she has earned during the year ended on 31st March

The Government of India collects the statement of a taxpayer’s income in the form of a Tax Return Statement that exists in a prescribed format. Such a statement that is duly signed, furnished and affirmed by an individual as the statement being a complete and true statement of his/her income from the last financial year is known as the Income Tax Return.

Recently this year, the Income Tax authorities in India introduced some new guidelines for filing income tax returns. For example, they have made it obligatory for the businesses to file their income tax returns through the e-form. They had also earlier made it compulsory for taxpayers with annual incomes of above INR 10,00,000 to take the online approach as well. In 2013, the Income Tax authorities decreased the lower income limit for filing e-forms and made e-filing compulsory if the taxable income is over Rs. 5 Lakh per year.

Here’s a list of documents that Aarush needs to be ready with, before he files his returns.

1. Permanent Account Number:

Knowing your PAN number is the first step towards filing your return. You must cross check your PAN number online with the Income Tax Department before you begin to fill in your Income Tax Return on their website.

2. Form-16:

The Form-16 is a form/statement issued by the employer carrying the details of your salary, the amount of taxable salary calculated after extra allowances, the Tax Deduction at Source deducted, the income tax deductions that you claim and the net tax due. Via TDS, the employer must have already deducted and deposited a part of your salary to the Income Tax Department.

3. Balance Confirmation Statements:

You must declare all the incomes sourcing from interests earned on bank savings deposits, fixed deposits and debentures in the last financial year in the Income Tax Returns.

4. Certificate of Tax Deducted at Source:

After verifying whether TDS has been duly deducted, you must furnish the TDS entries in the Tax Return to decrease the tax liability.

5. Form 26AS:

The Form 26AS is a statement of all of your income tax received by the IT Department. It is a statement of tax credit showing voluntary tax payments, in addition to the TDS.

6. Proof of Exempted Investments

The investments made under LIC, PPF, children’s tuition fee are eligible for tax deductions.
The payment as the principal amount of a housing loan also qualifies for the same with an upper limit of INR 1,00,000. However, if you reside in a house you are paying EMIs for, the EMI amount could be  claimed for deduction with an upper cap of INR 1,50,000.
Donations certified to be in the name of charity can be declared for tax deductions as well. The PAN  number of the charitable institution is required too.

Other Proofs of Investment:

The interest you have paid on an education loan for higher studies can be claimed for IT deduction and so can the medical insurance payments for your family and your parents, capital gain on stocks (A Stock Trading Statement is required and has to be tallied with the Brokerage Account) and capital gain on the sale of owned property.

These are the documents and proofs, for claiming Tax Returns with the IT Department in India that are absolutely essential and help ease the process of filing a return.

V BALAKRISHNA

IRDA registered Life Insurance Advisor,

www.licbalakrishna.com,

www.facebook.com/licbalakrishna,

Cell: 919885832381.

NOW is the time to start tax planning!

       Now is as good a time as any to start your tax planning. The trick is to start early and take the necessary actions step by step. Tax planning is, at all times, a process, and not an occasional, sporadic exercise. This month’s column examines some of the finer points related to tax deductions — these nuances are less commonly known and it is hoped that an understanding of the same, will help the reader optimise his or her tax planning, not only in terms of paying lesser tax but also making it error-free.

     The Income Tax Act, 1960 has provided Section 80C benefit to encourage long term savings and investments. One can choose a combination of Fixed income, Life Insurance and market-linked investments like ELSS depending on one’s financial goals and investment horizon. The minimum lock-in period for section 80C investments is 3-years (for ELSS).

Available Tax Saving Instruments:

1)      Public Provident Fund – PPF is one of the most traditional tax saving instrument having a lock in period of 15 years which can be extended for 3 blocks of 5 years each. Risk Averse investors having a long term horizon may invest into PPF. The minimum contribution is as low as Rs. 500 per year

Instrument	Interest Rate	Lock in period	Tax Rebate
PPF	8.7%	15 years	u/s 80C upto Rs. 1 lakh

2)     Bank Fixed Deposits – For conservative investors with a medium term investment horizon, bank FD’s are most suitable

Instrument	Interest Rate	Lock in period	Tax Rebate
Fixed Deposit	Approx. 9-9.5% (varies from bank to bank)	5 years	u/s 80C upto Rs. 1 lakh

3)     National Savings Certificate – 

Instrument	Interest Rate	Lock in period	Tax Rebate
NSC	8.5%	5 years	u/s 80C upto Rs. 1 lakh

4)     Equity Linked Savings Scheme – ELSS comes with the shortest lock in period of 3 years. Although ELSS carries the same risk an equity mutual fund, it may also provide better returns . A lumpsum or a SIP route may be considered for the investment into ELSS depending on the need and goal of the investor.

Instrument	Interest Rate	Lock in period	Tax Rebate
ELSS	Market Linked	3 years	u/s 80C upto Rs. 1 lakh

5)     In addition to the above, premiums paid for ULIPs (3 years) , life insurance policies and pension plans also account for a tax exemption to a limit of Rs. 1 lakh u/s 80C

From the above mentioned instruments, FD’s, ELSS & ULIPs look more attractive given their lock in period and returns. While it is important to capture the benefit of these instruments, it is equally important to invest today keeping in mind the long term objective of the investor.

       Tax  Slabs applicable for FY’ 2013-14

Slab	Tax Rate Applicable
0 to Rs.2,00,000	No Tax
Rs.2,00,001 to 5,00,000	10%
Rs.5,00,001 to 10,00,000	20%
Above Rs.10,00000	30%

Why ELSS over other tax saving options under Section 80C

 Main advantage of ELSS is its short lock-in period. Maturity period of NSC is 6 years and PPF is 15 years.

 Since it is an equity linked scheme earning potential is high.

 Investor can opt for dividend option and get some gains during the lock-in period

 Investor can opt for Systematic Investment Plan

 Disadvantages of ELSS

Risk factor relatively high compared to NSC and PPF

Illustration: 

Sr. No.	Particulars	Without ELSS/80C Tax Saving Investment	With ELSS/80C Tax Saving Investment
A	Gross Total Income	Rs.7,50,000	7,50,000
B	Exemption Under Section 80C	Nil	1,00,000
C	(A-B) Total Income	Rs.7,50,000	Rs.6,50,000
D	Tax on Total Income (as per applicable slabs)	Rs.80,000	Rs.60,000
E	Tax saved on Investment	Nil	Rs.20,000

V BALAKRISHNA

IRDA registered Life Insurance Advisor,

www.licbalakrishna.com,

www.facebook.com/licbalakrishna,

Cell: 919885832381

Secure your loved ones with an Insurance plan

As the head of your family, you need to fulfil your responsibilities towards your loved ones and provide for the comforts they need. However, life is full of uncertainties and it is the need of every individual to sustain the same lifestyle for his/her family — even in his/her absence. While there may be many ways to protect your family against life’s uncertainties, none has the charm of Insurance products. They are the best ways to mitigate risk and secure your loved ones’ future. For those who would have taken a pledge to protect and secure their family’s well-being, even in their absence, it boils down to two main questions: First, what is the exact coverage that one requires? Second, is this product really for you?

Pure protection plans are an inexpensive way to protect your family from any financial burden in your absence. These products help them sustain the same lifestyle. Unfortunately, there is very little consumer awareness about the multiple benefits that one can avail of by securing themselves. We have illustrated a few pointers that will help you make the sound choice.

How much insurance do I need?

While the rule of thumb states that one should look at life cover of 12 times your annual income minus your investment assets plus any liabilities, there are also some other aspects that one should consider. The amount of cover required also depends on individual needs, along with current/expected circumstances. This would include whether one is single/married, has children, financial obligations such as personal loans, mortgage, school fees, current income, assets, life expenses, and not to mention, your lifestyle. While most of these may pertain to our family, one needs to account for expenses that will immediately precede or follow one’s death. These include medical bills, credit card bills or taxes.

Ideal tenure of the policy

The ideal tenure of your policy would be your retirement age minus your present age. This means that if you are 35 today and you wish to retire at 60, then the Insurance of the policy should be 60 minus 35, which is 25 years.

Do check the claims performance record of the insurance brand

Claims performance is an important yardstick to measure the performance of an insurance company. Hence, it should play a major role in the decision-making process before committing to an insurance policy. There is sufficient regulatory governance around the claims-handling process and there are defined guidelines for companies to follow. This makes it very easy for the customers to access this information and make informed choices.

Enhance the policy with riders, if required

Most companies also provide enhanced insurance with appropriate rider options at nominal extra cost. Insurance riders aim to provide additional benefits to customers, should they wish to add value to their existing policy. Riders provide customers the flexibility and ease in providing protection against additional unforeseen expenses, at a nominal cost. The cost is relatively less compared to that involved in taking a separate insurance policy to cover the same requirements.

Disclose everything before buying a policy

It is important on the part of the customers to make all the rightful disclosures. It is in their own interests to avoid any inconvenience at the time of making a claim. While excellent claims performance record is an important criterion, the claims repudiation ratio of an insurance company should also be looked at. One must select companies that have lower repudiation ratios. Most insurance companies today are trying to bring down the repudiation ratio by increasing awareness about the ill effects of concealment of facts at the proposal stage, which could result in denial of the claim.

Don’t hesitate to go for companies that are asking for medical tests

It is in the best interest of the consumers to go for medical tests, as this will reduce any chances of the claims being denied, especially since you have disclosed all facts. It is better to pay additional premium for a small health condition (for e.g., obesity) rather than the family facing problems while claiming the insurance amount.

Do factor in inflation effects

The premium you pay per month for life insurance today will be the same in rupee Insurances, but will be less money 10 years from now due to inflation. For example, anything that could be purchased for Rs. 10 lakhs in 2011 would cost approximately Rs. 45 lakhs in 2031 at an inflation rate of 8%. An Increasing Insurance policy may provide the flexibility to increase the ‘sum assured’ (the cash amount that you receive upon your death) by 5%–10% each year, to reflect the rate of inflation. This will provide a hedge against the rising cost of living, with an option of increasing the sum assured. It brings adequate financial protection at an affordable cost.

While the above points should be considered before buying an Insurance plan, there are no straightforward answers. Hence, certain guidelines mixed with some serious math and some help from a professional financial planner will come handy, to buy an ideal Insurance plan. 

V Balakrishna

Insurance & Finance Advisor

www.licbalakrishna.com

www.facebook.com/licbalakrishna

email: licbalakrishnav@gmail.com

Mobile: 9885832381

Build your wealth in simple steps!

Building wealth is a topic often spoken about by many, but followed by very few. The reason for this is that wealth creation involves time and a lot of effort. Although the process of building wealth is not complex, it is difficult to implement, simply because of the discipline it requires. Here are a few simple steps which will help you build your wealth:

The Earlier, the Better:

It is often said that the earlier one starts investing, the better it is to grow your money. As with anything else in life, investing also benefits with an early start. The principle of compound interest works magic on building money.

When you begin your career it is understandable that the initial salary will be low. However, even small amounts of savings in good investments will help in slowly and steadily building your wealth.

For example, let us look at the case of Raj and Shyam. Raj who is 25 years old needs to invest Rs. 1,500 per month for the next 35 years to build a corpus of Rs. 57.4 lakhs at the return rate of 10% pa. Now Shyam who is 30 years old will need to invest close to Rs. 2525 per month at the same return to accumulate the same corpus after 30 years, assuming both retire when they are 60 years old. A difference of 5 years in investing results in a difference in savings needs of over Rs. 1000 per month over the entire tenure of investment. Hence remember to understand the power of compounding and start your investment plan early in life.

SIPs:

Another mantra to build your wealth is regularity and discipline in investing. Often, a break in investing plans disrupts your goals and hampers the growth of money. The best way to make sure you are not irregular in saving is by starting Systematic Investment Plans in good quality mutual funds. Try and automate this so that you do not forget your monthly investments. Also, if at any point, you happen to miss investing in a particular month, make it up for this in the subsequent month by investing double the amount. You must also look at upping your investment amount gradually, as your income increases.

Long Term Investing:

Often, people complain that despite being regular in investing, they do not see a growth in wealth. This is because they withdraw the money invested frequently, not giving it a chance to grow. Remember that the longer you leave money invested in a good investment option, the higher it will grow due to the compounding effect.

Review Regularly:

Having said that, remember to regularly review your investments to assess its performance. If you find a particular investment giving you very poor returns, you must immediately withdraw your money from such an investment and invest in better performing assets. Also remember to track your investments regularly and modify your asset allocation pattern depending on your age and risk profile.

Keep Yourself Updated:

Another important thing to be remembered is make sure you have the required knowledge in an investment class before investing in it. For example, Priya had heard a lot about derivatives and how investing in derivative instruments gives handsome returns. However, she did not have any knowledge about this. Nevertheless, she blindly went ahead and invested a sizeable amount of her savings in various derivative instruments.

The global recession saw a crash in stock markets, and as a result she lost almost all of her investment. Hence you must always have knowledge of both the pros and cons of any investment, and must invest in learning and upgrading your skills for the same. However, remember to always do your research before investing and not blindly follow advice.

Understanding the Ratios:

Track all your income and expenses regularly to understand your cash flow positions. If you are left with a surplus cash flow month after month, it means you should start investing more in order to grow your wealth. On the other hand, a constant deficit in your cash flows spells trouble and it means you must watch out for your expenses or look at ways of boosting your income.

Insurance is an often neglected aspect of building wealth. Although it does not result in direct building of wealth, it helps in times of emergency by providing the necessary risk cover. These simple steps will help you grow your money steadily and systematically. Building wealth requires a dedicated effort from your end, as there is no short cut to achieving wealth

V Balakrishna

IRDA registered Life Insurance Advisor

website: www.licbalakrishna.com

email:licbalakrishnav@gmail.com

Mobile: +919885832381

www.facebook.com/licbalakrishna