5 myths of Investing in Mutual Funds

5 myths of Investing in Mutual Funds

Being popular comes with its own set of disadvantages. While celebrities have to face rumours, mutual funds have to face misconceptions. :P So let’s get to the chase.

Below, we bust some of the myths associated with mutual funds.

1. Investing in mutual funds is the same as investing in direct equity

Investing in mutual funds is way too different from investing in direct equity. You need expertise as well as time to research when you invest in the stock market as the market movements keep changing. Whereas, if you lack the skill set to invest in the securities market you can invest in Mutual Funds. Here, the fund manager takes decisions on behalf of you and manages the fund’s portfolio.

Second benefit of investing in mutual funds is Diversification! When you invest in Mutual Funds you get exposure to many stocks under various sectors and market capitalisations whereas when you invest in direct equity you might not have the bandwidth to diversify your portfolio in such a manner. However, it is advisable to invest in approx 5 Mutual Fund Scheme - if you invest across many schemes - you may di-worse-ify your portfolio. Also, not all mutual fund schemes invest in the share market - if your risk appetite is low you can opt for debt mutual fund schemes that invest in instruments such as Treasury Bills, Commercial Papers, Certificate of Deposit, etc.

2. One needs a large amount of money to invest in mutual funds

This is the most common myth that one needs to stop worrying about. You can invest in Mutual Fund with an amount as small as INR 100 - you need not have huge savings for it. We advise you to set your SIPs today and start your investment journey as soon as possible.

3. Buying a top-rated mutual fund scheme ensures better returns.

Do you go to a mall and buy the best shoe in the store or do you buy the one that fits you perfectly? Of course the second option, right? Similarly, when you invest in Mutual Funds, you need not invest in the top-rated scheme but the one that fits your risk profile and helps you to achieve your financial goals.

To know more about it - Read Here

How are investors buying mutual funds - looking at the best-performing ones?

4. Mutual fund scheme with lower NAV is better

Does low NAV means that the scheme you got is cheap? Or does Higher NAV means that the scheme has reached its peak? Both the statement mentioned are wrong! NAV should not be a deciding factor when buying a Mutual Fund Scheme. A high NAV does not mean the fund is expensive nor does it mean the scheme has reached its peak. In fact, at times, a high NAV indicates the good performance of the scheme over the years. Also, if the Fund Manager feels that a particular stock has peaked, they can choose to sell it.

5. Mutual fund investment has a lock-in period

Liquidity is one of the main advantages of investing in mutual funds, which means you can buy and sell them at your convenience. The only exception is ELSS with a lock-in period of three years and closed-ended mutual funds with a lock-in period of 3-5 years. However, exit load might be applicable on premature withdrawal for some schemes based on the type and period of your investment. Even though there is no lock-in period do not withdraw your investments anytime as per your convenience - when you invest in a scheme you need to have a withdrawal plan at that stage itself and stick to it. Be disciplined while investing.

6. Buying more funds every time I save more

Do you invest in a new mutual fund when you have money? If yes, you need to stop it now. We advise you to have only 5 mutual fund schemes. Just like too many cooks spoil the broth - too many Mutual Funds will di-worse-ify your portfolio.

Conclusion:

Stop looking for the best mutual fund scheme and start investing in the one that is right for you. You can check out our article where we have shared a checklist that you need to check while you are looking to invest in a Mutual Fund.

Do You Believe Any of These 5 Health Insurance Myths?

Health insurance can be difficult to understand.

Not only is there an ocean of information and products, but there are also numerous myths and misconceptions floating around. So, don’t let false beliefs prevent you from getting the financial protection you need. To help you understand the ins and outs of health insurance, below are the 5 myths busted!

Insurance is not required for young and healthy

‘The chance of something happening to me is low, also, I have no dependents, so I don’t need health insurance’ is something that we listen from most of our clients for not having insurance. Do you relate to them? This is the biggest myth of health insurance. You have nothing to lose by getting Health Insurance at a young age. In fact, when it comes to insurance premiums, young and healthy = cheaper premium. In other words, you save lots of money! Insurance can be expensive if you have existing health issues, or if you are older. For instance, as you get older - there is a chance to get chronic diseases - because of this you might face difficulty to opt for health insurance or might have to pay higher premiums - therefore to avoid this it is better to have health insurance when you are young and fit.

Benefits of health insurance start from Day 1

All health insurance plans come with an initial waiting period of one month, during which you cannot make any claim. At least 30 days waiting period is required - However, some policies cover accidental hospitalisation from Day 1. Basically, you cannot get diagnosed with something and then get health insurance. However, when you renew your existing health insurance plan - there is no waiting period. There is an additional waiting period of up to 2-4 years for pre-existing diseases. It is advisable to read the policy wording and compare different health insurance policies to decide whether or not the policy is suitable for you.

Employer-contributed health insurance will suffice

“I have a corporate plan for me and my family, I don’t need individual insurance” - do you think the same? No doubt, organisations provide you with corporate health insurance - the best one at times, but it doesn’t mean you should underestimate the importance of personal health coverage. If truth be told, mostly corporate insurance tends to be one-size-fits-all, which is typically not suitable for your specific needs. Also, your corporate policy is valid only till you are an employee of the organisation - once you quit the job, you will no longer be covered under the policy. Furthermore, buying individual health insurance coverage in the later stage of life would be expensive and might not be available for you if you have severe health conditions. This is why having your own insurance plan is critical to prevent any gaps in your coverage for the long term. If cost is a concern, you can start with a basic sum-assured personal health insurance policy and then move on to increasing the amount as your finances improve.

A minimum of 24-hour hospitalisation is mandatory to claim health insurance

Apart from in-patient hospitalisation, health insurance can be claimed in the case of day-care facilities also. There are 20 to 50 daycare facilities including chemotherapy, dialysis, cataract surgery, tonsil surgery, etc. With medical advancements, some medical surgeries and procedures requiring prolonged hospitalisation are completed within 24 hours. Also, many health insurance companies have started providing coverage for OPD expenses as well which includes out-of-the-pocket expenses like doctor's consultation fees, pharmacy expenses, cost of spectacles and contact lenses, etc.

If I disclose everything, insurance will become expensive.

When opting for health insurance, many people worry that they will be hit with higher premiums if they disclose the whole truth about their medical condition and history. This isn’t the case! By disclosing all information about your health and history, you will be in the best possible position to get the right plan for you and your requirements. Also, your insurer can cancel your policy or reject your insurance claim in case they find important facts being hidden or misrepresented at the time of buying the policy. Be very honest about your existing health issues, and your lifestyle habits of alcohol or tobacco consumption, so that any ailment which is even slightly linked to these happens, and the claim of the same is not rejected.

Conclusion:

In case you have your health insurance in place - GREAT JOB! - but just like your investments, you need to revisit your insurance. As you grow old you might need extra health coverage or there might be a better product for you with a cheaper premium - therefore revisit your insurance every year.

Insurance / Investments - 11/05/2022

How to Add Biller for SIP Transactions in Kotak Mahindra Bank?

STEP 1: Log into Your Account & Click on BillPay/Recharge

Log in to your account using your credentials to initiate the bill payment process through net banking. Once you have successfully logged in, navigate to the top of the screen and click on the BillPay/Recharge tab. Refer to the image below where the BillPay/Recharge section is highlighted in yellow.

STEP 2: Click on Add a Biller

Upon clicking on the BillPay/Recharge section, a new screen will appear with a prompt to add a biller. Simply click on the "Click here to add a biller" option to proceed. Refer to the image below where the prompt is highlighted in yellow.

STEP : 3 Add URN & Other Details

After clicking on "Continue," a new screen will appear where you must enter the URN provided. After entering the required information, click on the "Add Biller" button. Refer to the image below where the URN and Add Biller options are highlighted in yellow.

STEP 4: Verify URN Summary & Confirm

This is the second-last step in the process, where you will be prompted to verify the URN details you have entered. If the details are correct, click on "Confirm." If not, you can click on the "Go Back" option and rectify the errors.

Step 5: Final Confirmation

In the final step, you will receive a confirmation message stating that the biller has been added successfully. You can refer to the image below for sample confirmation.

We hope that this article has been informative. If you have any questions or concerns, please do not hesitate to contact us at iplan@wealthcafe.in.

Equity / Income Tax / Investments / Money tips / Mutual Funds / stock market - 11/01/2022

How to Add Biller for SIP Transactions in ICICI Bank?

To add a biller in ICICI Bank for SIP payments, follow these simple steps:

STEP 1: Log in to your ICICI Bank account and select the "Payments & Transfer" tab from the homepage.

STEP 2: Click on "Bill Payments" and then select "Pay New Bills."

STEP 3: Choose the "Mutual Funds" option and select "BSE ISIP#" from the list of billers.

STEP 4 : Enter the URN number and other required details, such as the registration date, full amount for auto-pay, and account number to be debited.

STEP 5: Preview the confirmation and click on "Submit."

STEP 6: Confirm the registration of the biller by entering the URN received on your registered mobile number.

STEP 7: Enter the URN or OTP number received on your mobile number to confirm the biller registration.

STEP 8: Once the biller is confirmed, you will receive a confirmation message.

We hope that this article has been informative. If you have any questions or concerns, please do not hesitate to contact us at iplan@wealthcafe.in.

Investments / Money tips / Mutual Funds / Uncategorized - 10/31/2022

How to Add Biller for SIP Transactions in HDFC Bank?

Step 1: Log in to your account and click on the BillPay & Recharge option

To begin the process of adding a biller for SIP transactions in HDFC Bank, you will first need to log in to your bank account. Once you have successfully logged in, navigate to the top of the screen and click on the BillPay & Recharge tab. This will open a new screen that displays various bill payment options that you can add to your account. To proceed, click on the Continue button at the bottom of the screen.

Step 2: Click on Register New Biller

After clicking on the Continue button, you will be redirected to a new screen. Here, you need to search for the option "Register New Biller" and click on "Click here to add a button" to proceed.

Step 3: Select Mutual Funds & BSE Limited

Once you have clicked on "Click here to add a button," a new screen will appear. Here, you need to select the Mutual Funds option from the list of available options. Once you have selected Mutual Funds, a drop-down menu next to it will become enabled, select the Mutual Fund House in which you are investing.

Step 4: Add the URN & Other Options & Select Continue

After selecting BSE Limited as your biller, you will be taken to a new screen where you need to add your URN. Along with the URN, you will also need to select other options such as AutoPay, Pay Entire Bill Amount, and Payment Mode. Once you have entered all the necessary information, click on the Continue button.

Step 5: Confirmation Page

After clicking on the Continue button, a new screen will appear displaying all the details that you have entered. Review the details carefully and click on the Confirm button to proceed.

Step 6: Final Confirmation

After clicking on the Confirm button, you will receive a confirmation message stating that the biller has been added successfully. Congratulations! You have successfully added a biller for SIP transactions in HDFC Bank.

We hope that this article has been informative. If you have any questions or concerns, please do not hesitate to contact us at iplan@wealthcafe.in.

Equity / Income Tax / Investments / stock market / Uncategorized - 10/31/2022

ELSS vs EPF

ELSS or EPF - is the classic debate. In fact, many people end up investing in both asset classes to save TAXES and also to create wealth. We always say that one should look beyond tax planning when investing. You should always look at all the characteristics and uses, risk and return of a particular asset and then make your investment decision. Lets us understand that in detail here:

What is EPF?

It is a retirement benefits scheme maintained by the Employees’ Provident Fund Organisation (EPFO). Only employees of companies registered under the EPF Act can invest in the EPF. You and your employer contribute to the EPF scheme on a monthly basis in equal proportions of 12% of the basic salary and dearness allowance. Out of the employer’s contribution, 8.33% is directed towards the Employee Pension Scheme. However, you can choose to invest only 1800 of your salary to EPF each month irrespective of 12% of basic being a higher amount.

What is ELSS?

Equity Linked Saving Scheme or ELSS is a type of mutual fund scheme that primarily invests in the stock market or Equity. As they help you save in tax, they are also known as tax-saving funds. ELSS can invest in companies across all market capitalization and hence, categorising their risk can be a bit tricky.

RISK & Return of EPF & ELSS?

EPF: For the current financial year, the interest rate on the EPF account has been fixed at 8.10%. However, the interest earnings are tax-free and hence, the effective post-tax returns are much higher. For someone in the 30% tax bracket, your post-tax returns are _____–. The Risk in EPF is close to NIL. They come with a sovereign guarantee. We know that EPF will come back to us at the end of retirement with great returns and no taxes.
ELSS: As you are investing in Equity indirectly via ELSS, the returns are not fixed. You can make high returns of 18% - 20% to also make a loss in these investments. On average Equity can give good returns of 12% - 15% when invested over a long term of 10+ years. Risk is high as the underlying in Equity.

What is the Holding Period for EPF & ELSS?

EPF: EPF accounts have a lock-in period of 5 years. However, partial early withdrawal from EPF is permitted for a child’s marriage, higher education and making a down payment for a house, subject to conditions. Basically, you cannot withdraw from EPF at your own whims & fancy.
ELSS: You have to stay invested for 3 years into an ELSS fund to continue the benefit of tax savings. However, many people believe that after 3 years you have to sell the ELSS. This is not true. You can stay invested for as long as you prefer based on your goals and market movements. There is no upper limit. In fact, if you want you can sell your ELSS before 3 years as well, you just have to bear the penalty and pay the tax you saved by investing in ELSS in the first place.

What are the tax benefits you get if you invest in EPF & ELSS?

EPF: Your contribution is exempt from tax up to 12% contribution. An employee’s contribution is eligible for tax benefit under Section 80 C of the Income-Tax Act, 1961. EPF is under the EEE norm currently indicating that the money invested, interest earned and the money withdrawn after a specified period (5 years) are all exempted from income tax in the hands of the employee.
ELSS: Amount invested in an ELSS fund is available for a tax deduction to the extent of ₹150,000 for the current financial year under section 80C of the Income Tax Act.

How can you choose between the two?

EPF over ELSS.

EPF is a great investment option for you if you are a salaried employee. Go for that 12% of your basic going towards EPF, increasing year - on- year with tax deductions and high returns. Until your retirement, EPF can be a great contribution for your financial freedom and is TAX FREE (at least your contribution upto 2.5 lakhs per annum). Whereas ELSS (do give great returns on paper) is very risky as the underlying is Equity and hence, can give higher losses as well.

The core difference between EPF and ELSS is that while the returns (post taxes) from the assets can be similar, the risk is very different. EPF gives me post taxes 12% returns fixed without any risk. ELSS can give me higher than 12% with very high risk of Equity.

Wealth Cafe Advice

We always recommend, where cashflow is not an issue, for tax saving purposes, utilise your EPF to the maximum. IF there is any shortfall, then you can opt for ELSS. Also, if your 1.5 lakhs limit for 80C is completely utilised through EPF, then do invest in other Equity Mutual Funds. Do not just invest in ELSS because returns are high. Start your tax planning in advance rather than wait for the last moment. Always remember, Tax Planning is part of your financial planning and it should meet your financial goals - do not have a standalone tax plan.

Investments / Salary - 10/28/2022

This Diwali - financial importance - deep clean your portfolio

Bursting crackers, playing card games, or decorating the house--a lot of customs are associated with the festival of Diwali. Among these typical Diwali rituals, there is one aspect which we may dread or enjoy, but cannot avoid i.e. Deep cleaning our house. Every single drawer, wall or corner, is washed, cleaned and dried.

15 days before Diwali, my mother would stop going anywhere and her sole focus would be to clean everything around our house. My sister & I would find every way to avoid it. As we grew older, I have now started looking forward to this deep cleaning experience :D. Let us tell you why and how it affects you and maybe it can also be applied to your finances!

It helps you to declutter your mind, it just relaxes you the way many 2 therapy sessions would (or not). You just have this dopamine rush of completing some tasks. And also, it's great to be in a house that is dust-free and has more space.

Take stock of everything: It helps you understand what you have and how much. Take a stock of everything you own - clothes, books (I found some great books I got and I haven't read yet, finishing it before the year ends), home decor, candles, and shoes (omg not used them for 2 years now).

Discard all that you don’t need - Simple rule - what you don't use please discard. I am everything but a hoarder and I love my mother for this. If I don't use something, I discard it and then I buy less of things I don't want to use because discarding them is extremely painful. Thus, becoming a smart shopper. I do not decide after shopping, I decide before shopping.

No mindless Diwali/Festive Shopping - Ugh I hate it when people buy things just because it is Diwali. Yes, it was great when you did that only once a year. But now we are shopping literally all the time. We always have Myntra or Amazon tabs open on our phones. Hence just shop what you want or don't shop.

Set budgets - Diwali is all about budgeting guys. Look closely, you will see savings everywhere but Marketing is only showing Spending more. So be careful.

Once your regular expenses and savings are taken care of. Lets understand how you can deep clean your portfolio.

Ways to Deep Clean your Portfolio

Let's put everything together: Collect all the data about all your investments, this is the most time-consuming process if you have not been maintaining it properly. However, if you have maintained your data well it shouldn't take much of your time. You can check Mprofit software to maintain your investment information - it is available for free for up to 50 lakhs portfolio value.

Review your existing investments: Just like your clothes, some of your investments would hold more emotional place than real value in your wardrobe. Therefore, if it does not match your risk profile or your financial needs, it is time to book your profit (or losses) and remove such investments from your portfolio. Things which have gone bad have to go. Investments which are not a good option anymore have to go. Learn to identify the weeds of your portfolio.

Now check your Asset Allocation - You can evaluate your Asset Allocation by knowing your Risk Profile - a basic analysis to understand your risk appetite. Once you calculate your Risk Profile and have identified the investment you do not need - Check how much you have in debt, equity , gold and other asset classes. It’s time to evaluate your portfolio!

Rebalance or reallocate your Investments: Rebalancing, primarily means, buying and selling different asset classes to build your ideal portfolio mix in order to meet your risk tolerance and financial goals (basically your asset allocation). Once you know your ideal asset allocation start rebalancing your portfolio in order to achieve it.

Declutter your Investments - When we are talking about decluttering, remember that one of the first things to do is to stop hoarding on mutual funds, buying every other mutual fund is going to make your portfolio messy, and having too many things of one type is only making your diversification worst. So ensure that you have 5 to 6 mutual funds and not more than that and have 1 fund in each category. Time to declutter your mind, wardrobe, and portfolio.

Read the following article to understand this in more detail - When to exit from a Mutual Fund or a SIP

So remember, let it be cleaning your house or your portfolio, both ways you would be welcoming more Laxmi in your life 🙂

Insurance / Investments / Mutual Funds - 10/21/2022

9 Bad Financial Habits to let go of this Dussehra

Dussehra is the festival that symbolises the victory of Good over Evil. I believe that every festival, every story coming from Mythology has a lesson behind it which helps us bring wisdom and goodness in us to conduct our lives in a better way.

Ravana, who was an extremely wealthy and knowledgeable man, let his demons control his life and mind which lead to the great war and his eventual demise.In the same way, we have our demons that could lead to our destruction if we don’t work on getting rid of them.

One such habit is our life of living in denial about our financial habits. Let's work on some of these habits which are stopping us from enjoying our wealth to the fullest.

1. Having no Savings

“I will start saving only from next month, I can hardly meet my expenses this month”- said every new earner ever.

No matter your age or how much you earn - If you have a source of income, you should have a portion of it saved. Many say that they do not have enough earnings and hence cannot save. We agree it is difficult to do so but you have worked towards it. Otherwise, No savings will lead to No financial future. To avoid being dependent on anyone for money ever, you must SAVE TODAY.

Watch our YT video to understand how you can start saving even with minimal income.

2. Buying things on debt

‘This is a zero-cost EMI, I can buy things today. It is easy to pay EMI’s over the next few months’ - said every person who loves to shop.

Avoid buying things on debt especially when it is a depreciating asset. There are few things like your house. Avoid debt for everyday items and travel. Remember, these small loans today can put you in a huge debt tomorrow. Make sure you pay your credit cards on time and please do not convert it into EMI - Credit cards attract the most interest if not paid on time. Watch our YT video to understand how credit card interest rates are calculated.

3. Having no Insurance

‘I don't need insurance today because nothing will happen to me, I am too young’ - said many overconfident youngsters.

Things change, responsibilities change and nothing can stop from an accident or dangerous thing happening. The only thing you can do is protect yourself and your loved ones from the damage that it can cause. Like eating healthy is important, buying insurance is important. You can run away from these for only so long.

Check out our article to learn about 5 Insurances that you must have. We also have a YT video on it - where we discuss the importance of having insurance.

4. Following social media investor tips

‘The reel by ‘Finance with XYZ’ was so much fun and I even learnt about this complicated product, I am going to invest in it right away’ said every newcomer on social media.

A concept that takes years to master, cannot be understood in 60 seconds. YES, IT CANNOT BE. Yes, you can know about it, you will be introduced to it but you cannot invest your money basis this.

Investing is PERSONAL not SOCIAL. So please be careful of where you put it and do your research. It's just easier to listen to free advice from random people and invest. Do your reading and learn and if you can’t, subscribe to a course and go to an advisor for better advice.

5. Procrastinating

‘Aaj Nahi yaar, I will start from this weekend pakka’ and that weekend never came! This is one of the deadliest demons that we need to kill ASAP. Yes, it is difficult to focus on things we do not like, especially when it is difficult. Baby steps will help you to get started.

Watch this video to get STARTED NOW. Know that Money may not be very important to you, but everything important in your life needs money.

6. Timing the market

‘I will invest when the market corrects !’ ‘Oh market is too expensive, I will start investing only tomorrow when it's cheaper. Said every investor ever who thought they could get the investing right!

There is no right day or time to invest, TODAY is the best day to start investing.

7. Investing Randomly

‘I got some money today ill invest in Equity, REITS also look good, I saw this video, I'll invest in the, read about the company - should buy some stocks of that’ A very common approach to invest randomly.

8. Letting ‘Fomo’ take over you when investing

‘Yaar my friend made so much money in this stock, let me also invest in it’ - said every investor fool who bought stocks/funds after it had already gone up. What works for someone else, need not work for you. It is like not 2 people can rock the same dress, 2 people cannot enjoy the same returns. You have to invest in what works for you. Instead of FOMO, start today and invest regularly.

9. Falling for easy high returns

‘The returns from this fund are so good, I should invest in it right away’ - said every investor who broke his short term needs to chase higher returns.

Remember the rule - High Returns = High Risk. If you come across content stating assured return or stating unrealistic profit - it is a red flag - KNOW YOUR PRODUCT FIRST and ITS RISK AND THEN INVEST IN IT!

10. Not asking for help.

‘I will invest based on what I know, who will consult someone, it's too expensive anyway’ - said every investor who just lost 15,000 or more in wrong investments. There are experts for everything, you are just being stubborn by trying to do it on your own (without knowing all about it that you should know). Ask for help, as you go to a doctor for health, go to a financial advisor for your wealth.

Wealth Cafe Advice:

The way Lord Ram could not kill Ravana by just killing one or 2 heads, you cannot improve your financial life, by just improving one or 2 habits, you must kill it at the nib of things by putting a process to your finances. Trying to improve one thing over another, will soon put you back in one of the traps mentioned above. All of these habits are very emotional, and conditioning driven and can be cured by putting a process to your Investments.

Learn about this through our course - Namaste Money, currently priced at 50% off - check the link here

Debt / Investments / Uncategorized - 10/07/2022

All about Second Instalment of Advance Tax Payment

Advance tax means income tax that should be paid in advance instead of lump sum payment at year-end. It helps the Govt. to receive a constant flow of tax receipts throughout the year so that the Govt can incur its expenses timely rather than receiving all tax payments at the end of the year. This keeps the government rolling

When and how much should you pay the second instalment of Advance Tax?

Who is liable to pay Advance Tax?

The eligibility criteria you will have to fulfil in order to pay advance tax are:

Your tax liability should be INR 10,000 and above.
You should be a salaried or a self-employed individual.
Income received via capital gains on shares.
Interest earned on fixed deposits.
Winnings are earned from a lottery.
Rent or income earned from house property.

Exemption in Advance Tax Payments

Senior citizens aged 60 years and above are exempted from paying the advance tax.
Salaried individuals falling under the TDS net are exempted from paying the advance tax.
However, any earnings from sources such as interest, capital gains, rent, and other non-salary income will attract advance tax.
If TDS deducted is more than the tax payable for the year, then one does not have to pay the advance tax.

Payment of Advance Tax:

You can choose to pay advance tax by any of the following modes:

Offline Mode: You can pay advance tax using Challan 280 just like any other regular tax payment at bank branches authorized by the Income Tax Department.
Online Mode: You can also pay it online through the official website of the Income Tax department.
In case you fail to pay advance tax, you will be liable to pay 3% of the shortfall - if the advance tax is more than 12% of tax).

However, it is important to note that no interest(penalty) is payable if the advance is tax paid on or before 15th September. Also, if the advance tax is less than 12% of the tax due for the year.

WealthCafe Advice

Advance tax is a good means to check your income, evaluate it and understand if you need to pay any taxes. Where you do come under the provisions of advance tax, best to consult the same professional for advice on the same.

Debt / Uncategorized - 09/09/2022

Money Lessons I Wish I Learned in School

In my entire school life, all I ever learnt about money was to write out a cheque with a deposit slip. No financial concepts were taught to us. Managing money is such an important and basic part of our life, yet we hardly learn about it in school.

Listing down the concepts I wish I had learnt in school

1. Relation between Income, Expense and Savings.

Do you remember the expression: Income - Expense = Savings? We learnt this in Class 8 - Economics. We were wired since school that the money left after deducting our expenses from our income is our savings. (in fact, that is also the basis of subtraction right). However, this is just a mathematical expression that we cannot use in our daily life while managing money.

Whenever you receive your income, rather than spending, keep your savings aside and spend the remaining.

REMEMBER: INCOME - SAVINGS = EXPENSES

You can do this by following our Gullacking approach. In this approach, you have 2 bank accounts - One for your income and the other for your investments. Watch our YT video to learn more about it in detail.

2. Plan before you spend

As a child, we usually get what we ask for, therefore we never understood the value of saving. Instant Gratification - a desire to experience pleasure or fulfilment without delay was what gradually built within us. However, we need to understand the importance of working for something before it is too late. So kids, if you wish to go on that trip - start planning and eventually saving for it today! Similarly, if you are someone in your 30’s and planning to have that dream car - start planning for it today, rather than buying it on credit.

3. Borrowing comes with a Fee

Not planning before you spend, mostly leads to borrowing. As a teen, I always thought credit cards to be a way to pay for things when one did not have money. However, how wrong was I? Credit cards are not a means to have extra funds—it is our own money, and it just helps us with an option to pay later. If not paid on time, it can charge us an interest of 3-4% per month, which is 36-48% per annum! This can lead you in a debt trap - So use your credit cards to save smartly and not spend more.

4. You just need 5th std Maths to do Personal Finance
Many people think managing money is complicated and you have to have advanced knowledge of math. This is such a huge myth. You don’t have to be good at Maths to be good at Personal Finance - all you need to know is the basics - addition, subtraction and percentage. It's incredibly simple, but not that easy - it will need practice. The vision of looking at figures in percentages and not in amounts will help you have a good understanding of your gains and losses.

5. Learn to make money work for you

Making money work for us - simply means investing our money and watching it generate profit for us. And this is only possible when you give it time. The Power of Compounding is something that one should know about as early as possible - It will help you grow your wealth exponentially.

6. Always maintain an emergency fund

A job loss, hospital bills or car repairs are all expensive problems that can happen at a moment’s notice. An emergency fund helps you cover these expenses and avoid stress and debt. It is advisable to have an emergency fund of 6 times your monthly expense. To know more about it - Read Here.

7. Ask for help!

Communicating about financial difficulty is meant to be taboo. Won’t you ask for professional help when you fall sick? Or will you just google it and use a DIY remedy?

We are SEBI Registered Investment Advisors. You can approach us at iplan@wealthcafe.in in case of any Financial Advice.

Wealth Cafe Advice:

We need to stop complaining about why finance was not taught to us in school and start working on it. We live in a generation where we have easy access to the internet and have a lot of information on how to manage money. However, we need to differentiate and understand which information is right for us. If you wish to learn more about managing your money you can check out our courses. Use code SAVE20 for 20% off. We also have a Free Email Course where we help you get your finances in place by giving you weekly actions that you need to complete in order to get on track.

Education / Making Money / Money tips - 09/02/2022