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Blog Article 2022 (6)

How can a Queer Couple Manage their finances together?

Financial discussions between a couple are very important, discussing how much you earn, what you should do with your earnings and how to invest eventually becomes very important as you both would be looking to do things together. 

Now, this is no different for queer partners as well. Even though legally, one is not allowed to get married, you may be equally committed to each other and combine everything in your life including your finances.

This blog is to guide you on ways in which you can look at your finances together and put things in place properly from your bank accounts to investments to asset buying.

1. Combining your cash flows - Joint Bank Account 
Opening a joint bank account may help you share your income and expenses with each other and look at your lifestyle as one unit. According to the law by the Reserve Bank of India (RBI), there is no restriction on who can open bank accounts. You can go to any bank and open a bank account with each other as joint holders. 

However, many banks do not permit non-relatives to open joint account holders as they believe that it would lead to more complications when one of them dies and the heir of the person comes to claim the money. The best way to get this done is to have a direct conversation with the banker and request them to help you open a joint bank account. 

In fact, Axis Bank has become one of the first banks to announce new policies and practices for its customers and employees from the LGBTQ community. We have heard people facing some problems around it but you can definitely connect and know more. 

2. Managing Cash Flows together

There is no difference between a heterosexual and a homosexual couple in managing cashflows. You must do it based on whether both of you are earning or one you are earning. The idea is that where both partners are earning, contribute an equal proportion of your income towards expenses and where one of you is earning, you must take care of all the living expenses. 

You can learn more about how to manage your cash flows from here

Where you cannot open a joint account together, you can share logins of 1 account with others, and have an add-on credit card to keep your transactions smooth. 

3. Investing Together - Set your goals

Do not worry, I am not going to recommend pooling your funds in one common bank account and investing through it. Invest from your individual accounts towards the combined and individual goals. Take the time out this weekend and discuss and note down your goals. This would also give you a chance to speak to each other about your goals, and why and how you can work on them. 

No transfer of funds into each other's accounts.

As per the income-tax laws, where one person transfers money to another account (without any service), it is considered as a gift. Gifts to all non-relatives above 50,000 are taxable in the hands of the recipient. We would highly recommend not transferring funds into your partner's account to invest/or otherwise.

Where your goals could be the same (like buying a house or car together), you must invest for it from your respective accounts in respective funds.

4. You can buy assets together

Yes! You can buy a house, a car, and land together. There is no law stopping 2 people from buying things together. So you can go as partners, friends or family and register a house in your name. However, it is preferable that both of you fund such a property so that banks or builders do not raise any concerns on the same.

Practical concern: Because our society is not yet acceptable, brokers and developers may create an issue when we openly tell them that we are a queer couple. However, if you just go and buy a house as partners and no discussion about your personal relationship is done, it will make your life easier as you would be avoiding unnecessary discussions.

5. Leaving your asset to your partner - Inheritance

You must know that both of you want to spend the next good life together and hence are looking to even combine your finances together. The problem is not about getting the asset together but tomorrow, if you decide to go your separate ways then splitting the assets can be difficult.

Also, if your family is not very accepting of the relationship, they have the first legal rights on your share of the assets than your partner. To explain in detail, even where you and your partner buy a house with a 50% co-ownership, the share of your partner will first vet on their family members than you (because the law does not recognise queer couples/partners as legal heirs). 

To avoid any such claim by family members of your share of the assets, the best way is to write a will, leaving your share to your partner (if this is something you want to do). Consulting a lawyer and a financial planner to buy an asset seamlessly would be advisable. 

6. Foolproof method 

You can start a business entity together like an LLP or a private limited company where both of you are partners and you can buy assets and investments in the name of the business. This will not only ensure that you can easily buy the assets but also ensure that the asset is passed on to the surviving member. However, there is an associated running cost of managing a separate business entity and hence, may not be feasible for everyone.

Every individual and every family must take care of their personal finances as money plays a very important role in setting dreams and achieving them. The basics of financial planning and how to set goals would remain the same for you as for any other couple and hence if you are open to learning more about it - you can check our course - Honey & Money

Do share this article with any friend/family who will benefit from this. 

Blog Article 2022 (4)

What are the investing habits of millennials?

One of the largest generations in history is about to move into its prime spending years. Millennials are poised to reshape the economy; their unique experiences will change the ways we buy and sell, forcing companies to examine how they do business for decades to come.

Who are they?

Millennials or Generation Y are people born between 1981 and 1996. Currently, they constitute a third of India’s population, and 46% of the current workforce. For many, this generation is an enigma when it comes to many things. Whether it’s managing relationships, careers or wealth, they’ve presented the world with new ideas and strategies.

How are our millennials investing?

Some financial habits of millennials tend to come across as alarming to the previous generations. Especially Generation X who have worked hard to get themselves out of financial ruts.

These habits include spending more, experimenting with investment products, and enjoying the benefits of Credit Cards. However, the broader view is that millennials, while splurging on interests or passions, are equally aware of the need to build a corpus for a secure future. Moreover, they may be prone to experimenting with new financial products but will choose traditional options too.

Let us have a look at the money-making habits of millennials:

Starting early and diversely!

Trends suggest that millennials believe in starting early, given that on average, most investors are 28 years of age. More than 30 percent of the investors fall between the age of 26-30 years old, with the second most populous category (at 29 percent) belonging to those between 18-25 years. Even when it comes to starting with popular retirement savings options like NPS (National Pension Scheme), the starting age is 32.

When it comes to investing preferences, the young guns prefer mutual funds (64 percent), followed by equity (28 percent), and lastly, gold (8 percent). In fact, gold, traditionally seen as an inflationary hedge, saw a Y-o-Y increase of 59 percent in investors' portfolios.

Mutual Funds top the chart

56% of millennials invest in Mutual Funds. Turns out, our millennials ace financial discipline and regularity in terms of Systematic Investment Plans (SIPs). Turns out, our millennials ace financial discipline and regularity in terms of Systematic Investment Plans (SIPs). On average, the user undertook around 10 lumpsum and 19 SIP transactions, with the average amount invested growing by around 29 percent. Moreover, 76% of users transacted in SIPs, a healthy figure.

Source: Moneycontrol

Day trading, investing in stock markets, IPOs

Lockdowns and work from home have given many millennials enough time to keep a track of stock market developments. Access to easy-to-use mobile apps has made day trading a lucrative side income option for millennials.

Indian millennials are also bullish about IPOs of new-age companies. They are not scared of the stock market risks

Investing, trading in cryptocurrencies

Even as cryptocurrencies are not regulated in India, millennials are the largest force behind the popularity of these new-age digital assets. Easy access to crypto exchanges through mobile apps and the active interest of millennials’ role models like Elon Musk have further pushed millennials towards cryptocurrencies.

Millennials in general are drawn towards a culture of earning passive income on their time and investments. Crypto investments are very popular for this age group, in fact, more than 50% of investors are millennials. They are open to learn this new technology (Blockchain) and explore new opportunities that come with it— Decentralized finance or Defi, staking, liquidity pools, NFTs are such new and trending opportunities

As age progresses, their investment pattern also evolves. So for instance, while people in their teenage and early 20s indulge more in crypto trading, the senior folks consider more evolved forms of investing such as a Fixed Income Plan or a SIP aligned to multiple goals.

Creating value from the gig economy

Multiple online platforms are enabling Millennials to make extra money, apart from the regular job, by making the best use of their skills through freelance gigs.

While millennials need to work on their spending, saving, and long-term investing habits, being more money mindful. One lesson that can be learned from them is leveraging earning opportunities. The gig economy today has enabled the generation to effectively make use of their skills and capabilities and create value.

Automating wealth creation

Millennials are creating a new habit of money-making by automating the process of investing or wealth creation itself!

Currently, they are doing it by setting up auto-debit for their mutual fund investments closer to the date when their salary gets credited. Moving forward, they will be able to set up triggers for automated investing throughout the month based on the transactions in their linked savings account.

Investing in Digital Gold

Digital gold is increasingly becoming the asset of choice among millennials to create and protect wealth. Millennials look for ease of investments and higher returns but also for assets that help them fulfill their aspirational needs and are a good emergency corpus.

Conclusion

Millennials are different when it comes to financial planning. They are willing to take a risk to earn higher returns. This generation is called tech-savvy and gadget-savvy, and it’s time to be investment savvy also!

To learn more about mutual funds enroll in our course- NM 103: Basics of Asset Classes

What is Inflation and how does it affect you?

What is inflation?

Inflation is a key factor that affects your Investments and disrupts your financial plan. While inflation has been relatively contained for the past several decades, it has recently spiked to levels not seen since the early 1980s. 

Simply put, Inflation means an increase in the prices of goods and services produced and consumed in the economy. In another way, it reduced the purchasing power of your money. 

What does it mean for you?

  1. Erodes/reduces your purchasing power. Things you could buy for INR 1000 have reduced over time
  2. It can be bad for some investors who are sitting on cash as it reduces the value of cash but could also give good opportunities to invest as equity markets become volatile & corrections are expected.
  3. Can be good for real estate, commodity, and gold investors as it tends to increase the value of things.

What are the causes for the rise in inflation? 

There are many reasons for the rise in Inflation, majorly because of the increase in the supply of money during COVID and lesser goods/services in front of it. Too much money chasing fewer goods. 

  • We are recovering from 2 years of lockdown, where we want products and services of all kinds. The demands have increased. (demand-pull inflation)
  • For those goods and services, the supply is limited because of supply chain problems in China, everyone has not returned to work (reduced labour), and existing labourers/employees demand higher wages for the increase in the price of goods. (cost-push inflation)
  • This excess demand has led to an increase in the price of goods and services which in turn is also affecting inflation and our demand for higher wages.

What is the government (Central Bank - RBI) doing to control Inflation?

The Reserve Bank of India (RBI) raised its key repo rate by 50 bps to 4.9% during its June meeting, after May's surprise 40 bps off-cycle hike, surprising markets had forecast a 40 bps rate hike, aiming to ensure inflation remains within target going forward while supporting growth. The board decided to revise upwards its inflation forecast to 6.7 per cent for FY 2022-2023 from 5.7 per cent. This should have an impact on reducing the demand-pull inflation. However, it may take a while to get the supply side (cost-push) inflation in check.

Watch our Youtube video to understand what is the impact of inflation on the interest rates.

Graph

The above graph shows that when inflation rises, the interest rate rises and with the fall in inflation, the interest rate also goes down. 

How Inflation affects your Investments?

I. Impact on Equity

  • High inflation reduces the demand for goods and services - impacts the revenue and profits of companies.
  • With High Inflation comes high-interest rates, making loans/funding expensive - companies could push their expansion plans. This would have a bigger impact on companies with more debt.
  • With increased interest rates globally, FII would pull out money from Indian stocks to invest in bonds (safer options)
  • Increased inflation depreciates Indian currency, making Indian stocks less attractive as compared to foreign stocks. This may result in a vicious cycle as FII outflows lead to further currency depreciation.

The above graph shows that a rise in interest rate was followed by a correction in the market. 

Please note: There could be other variables as well working around the time to affect the market. And the market has corrected over a period of time post that. Do note that historical numbers are not a representation of what will happen in the future.

II. Impact on Debt/Fixed Income 

  • Interest and returns have an inverse impact on long-term debt products. Where the interest rate reduces, the price of such funds increases, and in an increasing interest rate scenario, long-term debt funds reduce. This is because long-term funds are invested with debt securities with earlier interest rates and longer maturity. 
  • Short-duration debt funds/FDs become more attractive because they offer higher returns in line with the increased interest rates.

 

III. Impact on Gold

With the increase in inflation and fall in equity markets, people tend to use gold as safe haven which could push its prices even higher. However, gold is already trading at a high premium so it is difficult to analyze how it would move from here. Do remember that gold is also volatile 

 

IV. Impact on Real Estate

The increase in the cost of raw materials combined with higher interest rates would make it a tricky situation for real estate. However, the money from Equity could find its way back to real estate. Despite all this, real estate is always driven by location, location, and location. You must study the local area market scenarios and prospects before locking your money in real estate. Check our course Money & Makaan to learn more about it.

 

How should you Invest during inflation? - Wealth Cafe Advice

Stick to your asset allocation, it will guide you on what needs to be done with your investments - when you need to sell and when you need to buy. Do not get distracted from your goals and the money needed for those, for short-term goals - invest in debt, for the long term (more than 3 years) - explore equity. 

Do not stop your long-term Investments SIP - Where your short-term and mid-term goals funding is provided for through your debt investments, then you should continue your equity SIPs. It is in these corrections that you get the opportunity to create wealth. Equity is the Investment that can beat inflation, and increase the money in your hand. 

Watch our Youtube Video to understand the Mistakes that you should avoid during the current downward market scenario.

What is Capital Gain Account Scheme?

In our earlier blog, we have discussed some of the ways in which you can reduce your capital gains while selling a house - but what if you are unable to reinvest your capital gains before the specified duration to benefit from the exemption available? To address this, the Capital Gains Account Scheme(CGAS) concept was introduced.

For example, Mr A sold a residential property in January 2022 and he intends to claim capital gains exemption by purchasing a new residential house. To claim the capital gains exemption, he must purchase the new residential house within 2 years i.e. before January 2024. However, the due date of filing of ITR for the Financial Year 2021-22 is 31st July 2022 and the gains arising on the sale of the property are required to be reported in the ITR.

In such cases, the govt prescribes that the amount to be reinvested be deposited in a Capital Gains Account before the filing of the ITR. The seller does not immediately have to deposit the amount in the Capital Gains Account and he can do so at any time before the due date of filing of ITR i.e. before 31st July for non-audit cases and before 30th Sept for audit cases.

By claiming this Capital Gains Exemption, the taxpayer would be able to save the 20% Long Term Capital Gains Tax which he would be required to pay in case he does not intend to claim this exemption.

What is a Capital Gains Account Scheme?

Capital Gains Account Scheme (CGAS) allows you to safeguard your long-term capital gains until you are unable to invest it in a house before the due date for filing an income tax return (July 31 after the given assessment year)  and before the income tax returns are furnished.

But to benefit from this, you need to ensure that you utilise the amount deposited in the capital gains account within 2 years of the sale of the property. If this is not done, the unutilised amount will be subject to capital gains tax in the fiscal in which the deadline ends.

Also note, You are not permitted to hold a joint account under this scheme but up to 3 Nominees can be nominated). The proof of deposit into the CGAS account should be attached along with the income tax return for you to be able to claim exemption from long term capital gain tax for the financial year during which the transfer was made.

Where can you open a Capital Gains Account?

You can open a Capital Gains Account in any branch of the authorised banks recommended by the Government which includes Central Bank of India - State Bank of India and the public sector banks like Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Indian Bank, as well as Union Bank of India are some of the 28 permitted banks. However, these facilities are unavailable for their branches in rural areas.

What are the different types of deposits available?

There are two different types of deposits that you can avail of under the Capital Gains Account Scheme. 

Type A: Referred to as a savings deposit, this capital gains account is similar to a regular savings account. It even earns a similar interest rate. The interest is credited at regular intervals, and you will receive a passbook to record all your transactions. Like a savings account, this type of deposit is highly liquid, so you can easily withdraw at any time.

Type B: Referred to as term deposits, this type of deposit is similar to fixed deposit schemes of banks. The rate of interest, terms of investment, and restrictions are also very similar to that of a fixed deposit. This type of account has a maximum term of 3 years if you are constructing a house, and 2 years if you plan to buy a ready house, and it will not auto-renew at the end of the term  - any premature withdrawal will attract a penalty. Like you would with a fixed deposit, you will receive a deposit certificate, which will be required when you need to withdraw. The term deposits can be cumulative or non-cumulative.

For both types of deposits, the RBI fixes the rate of interest periodically. Based on your plan of investment and rate of interest, you can select the deposit type that best aligns with your requirements.

Generally, it is Prevailing Interest Rates as applicable to general Saving Bank and Term Deposits shall also apply to Savings and Term Deposit opened under CGAS.

Withdrawl from Capital Gains Account Scheme

Withdrawal is a slightly complex process. You cannot withdraw money freely from your Capital Gains Account, you can utilise it only for the purpose for which the deposit was made. Such purpose needs to be submitted to the bank in Form C while withdrawing money from Account A whereas to withdraw money from Account B, you need to transfer the balance amount from Account B to Account-A and then according to the CGAS provisions you can withdraw the amount. Also, you need to make payment through crossed demand draft for withdrawal of more than INR 25,000.

The amount withdrawn should be utilized within 60 days of such withdrawal. The unutilized amount should be again re-deposited into the CGAS account. In case the withdrawal amount is not utilized and not deposited back within 60 days then you will lose the benefit of exemptions i.e. it becomes taxable.

At the time of closure of all accounts, the depositor will have to produce a specific authority letter/ certificate from the Income Tax Officer of the respective jurisdiction. The closure would be allowed on the terms mentioned in the letter of authority.

What happens if you were not able to construct or buy a new house till maturity?

If the amount not utilized remains in the Capital Gain Deposit Account Scheme even after a specified period of 2/3 years, 100% of the not utilized amount will be taxed as long term capital for the financial year in which the specific period gets over.

Things to note:

No loan facility against this deposit is available. This term deposit can neither be accepted as margin money for non-fund based nor as collateral to any type of fund-based facilities.
On your own desire, you can apply for a transfer of your account from one deposit office to another deposit office of the same bank.
Closure of both Type A and Type B accounts require prior approval from the jurisdictional income tax officers.

In case of closure of the account due to the death of the account holder, the legal heirs can claim the deposit through Form H. Please note, that the legal heir can withdraw the amount without any tax implications.

Wealth Cafe Advice 

Purchasing a new residential property may take time. You have to find a preferred home/apartment that you like to buy, negotiate with the seller and complete paperwork – all of which can be time-consuming. Investing in capital gains accounts gives you temporary relief. Consider this as parking your capital gains tax safely for the time being, while you scout for a new property.

Blog Article 2022 (2)

Should You Buy A House Using EPF?

Buying a house is one of the biggest/most expensive purchases for most of us.

You may lack the funds required to make a purchase even when property prices remain stable or fall. As we all say one has to strip naked financially in order to buy a house and in such a situation the thought of breaking your EPF investment may come across your mind.

But is funding your house using EPF a good idea? Let's discuss it

Firstly, let us understand the withdrawal rules of EPF

You are allowed to withdraw EPF accumulations to make down payments to buy a house or for paying EMIs of a home loan. Let us understand it individually:

For Purchasing or constructing a New House-

  • In accordance with Section 68B of The Employees’ Provident Funds Scheme, 1952 (‘EPF Scheme’), you can withdraw: 24 months of basic salary plus dearness allowance (DA) or actual cost of the plot - whichever is lower
  • For this, you should contribute in your EPF account for at least five years.
  • The minimum balance in the EPF should be INR 20,000, either individually, or together with your spouse, if he/she is also a member of EPFO.
  • The house in question should be in your name or jointly with your spouse.
  • You would need a letter of authorization from your employer for PF withdrawal if you have not verified your Aadhar Card.

For Repaying Home Loan-

  • For the purpose of repaying the outstanding home loan, the PF member is allowed to withdraw up to 90% of the corpus if the house is registered in his or her name or held jointly.
  • For this, you should have at least three years of service after opening the EPF account.
  • If PF/EPF withdrawal is done before 5 years of opening the account, then the amount is taxable.

The provident fund scheme allows you to withdraw funds, only up to 36 months of your basic salary plus DA  for any of the above purposes. Also, you can withdraw from it only once in your lifetime.

Does breaking EPF for buying a house make sense from your entire financial planning perspective?

EPF is an opportunity to accumulate money for the post-retirement period. You keep contributing a small fraction of your salary to the EPF and your employer matches your contribution. As the salary increases, the contributions do go up. That makes a large corpus in your hand for your retirement, provided you do not withdraw it for any other purpose. You let the magic of compounding work for you by investing regularly and consistently in your EPF corpus.

For example, an EPF contribution of 16,000 per month from the age of 25 - increasing at 10% per annum would become a corpus of INR 3.27 crore on retirement. Now, if you withdraw 90% of the corpus at 30 i.e. INR 17.1 lakhs amount. At 60, your corpus will only be INR 2.29 crore.

You are reducing your actual retirement corpus by INR 98 lakhs approx.

Hence, you should not withdraw your investment from EPF before its maturity as this could jeopardize your retirement by exposing you to the risk of leaving no funds/reduced funds for your retired life. Remember, no one will give you a loan for your retirement but for a home, you can manage.

We do understand that a house is a necessity and in the Indian context ‘owned house’ is a social and psychological need for many of us. But, short-term thinking’ focused on immediate gratification must be avoided at any cost.

How to arrange for the downpayment of your house?

It is better to make a plan for home buying. Start saving money to accumulate the down payment amount over three to five years. If the home prices go up or your investments yield less than expected, you may want to delay the home buying by a year or two. Avail of the home loan after you make the down payment but do not touch your EPF money. That is your retirement security.

Wealth Cafe  Advice

Do not break your one goal to achieve another. Especially when it is the retirement goal. Do not break your EPF for home buying, unless you have other means to secure your retirement. Plan ahead and plan properly.

Check our course - Money & Makaan - to learn to plan for home buying

Talk to your mother about Money

My mother (and I am sure yours too)  has always been a support to me no matter what - whether it is my choice of clothes, my career decisions, relationships I should or should not be in, she has always been by my side. It is said a mother-child relationship is the most unconditional relationship ever.

This mother’s day, gift your mother (the love and support) she has given you in return by making her financially independent. She is the reason you can do whatever you want to in the world. Be her reason to be financially confident and be adaptable to what comes next. Whether your mother understands money, finances, English or just banking in general or not, this blog is to guide you on what kind of conversations & learnings you can have with your mother. 

As a step 1 - Understand where your mother is financially today and then guide her on what more she can learn to be financially secure and confident. Let's get started.

What are the financial things you can talk to your mother about?

1. Keep her informed about what you do

Before you tell her what she should do, it is important to tell her what you are currently doing. Discuss your job/work with her, explain to her your work profile, your salary, where you invest and why. We tend to discuss our expenses with our mother because she has some great answers on how to save better. Take it to the next step - discuss your investments with her. 


2. Where the money is Invested

Keep your mothers informed. How she knows about everyone’s health issues, food preferences and other things. Inform her about financial things as well. Whoever may be the decision-maker (you or your father or grandfather), get her involved in financial discussions of the family. Tell her where the family money is invested and how she can access it when and if the time arises.


3. Basics of banking 

One of the first things to make your mother confident about money is to guide her with banking work. Ask her to go to the bank and deposit cheques, visit the branch for any work that may need bank help, update the passbooks frequently and withdraw cash from the ATMs.

Explain to her how a credit card works and how she can make the best use of it, it will encourage her to use it to spend on her shopping and earn points too. You can buy things for her from the reward points earned on the card. 

These may seem very simple for us but for her, it means freedom and access to money without asking us or our father constantly. 


4. Guide her to be digitally smart

Gpay, paytm, phone pe is the way to go ahead and it only makes sense that your mom can shop by paying via gpay. I mean even our next-door sabji wala is now taking money on UPI payment apps. It may take time to explain to her how to do this, she may be scared, confused and ask you the same thing again and again. Do not lose hope and patience, explain to her slowly and trust me she would get it.

I now get shagun on gpay from my mom for festivals, so it is a win-win for everyone.

Where your mom has gotten the basics right, you can start by explaining her mobile banking and online shopping. Again 2 very important life skills are needed in today's time. Ask her to start with small ticket things and then move ahead. It will give her confidence and eventually reduce the calls to you about how to send money to someone, or buy a new dabba for the kitchen. She will do it all herself. 


5. Make her aware of financial fraud but don't scare her.

The reason our moms are not going and doing everything online is that financial frauds are scary and very much real. She must be knowing someone who has been a part of it and does not want to meddle with family’s or her money. Take it as your job to build her trust in the system, teach her how to do it right and never to do it around strangers.  


Most importantly make her feel secure that if anything does happen, you are there to take care of things.  One line will change her entire approach towards this process of learning UPI and more and she will do it overnight. 


6. Insurance - check if she has one and she is informed about others

Continuing from our earlier discussions on keeping her informed about the various financial situation of the family. You must inform her about insurance as well. Keep her informed about insurance you have/other members of the family have and where are the papers for the same.


Check if she is properly ensured (health insurance), if need be get a top-up for the same and also tell her where the documents are and how to access them. For example, my mother books her annual free health check-up (which is provided to her by her health insurance) by herself now and gets a check-up done. One thing she knows is that it is important and FREE. So she never misses it. Give your mother the incentive to learn and see her fly. 


Wealth Cafe Advice:

Do remember that it will take time, patience and a lot of arguments (I must have left it thrice and then gone back to explain her again), the end result is beautiful and it will make your mother confident and independent. Yes, loving your mom, cooking for her that one day or handholding her with different things does make us all happy. Along with this, work towards making her independent too.  The confidence she would feel when she goes to the bank or transfers that money to you cannot be compared to the best compliment ever given her.


Our mother may lack behind in investments, but you all may agree she is best at saving and budgeting. 

We need to motivate her and tell her how good she is managing her monthly budget, how good is she at bargaining and finding the best deal while buying groceries or shopping, and how well she has managed to teach herself to spend wisely. Just take it to the next level and teach her on how to do it all online and invest too.

You can enrol her to our Be a Fe-Money-ist Webinar that we are conducting this Saturday, i.e on 7th May - for more details - click here.

If you wish to learn more about the various asset classes you can learn more about it here. Use code SAVE20 for 20% off.

Blog Article 2022 (4)

Financial planning: Steps to take when you have a Newborn

It’s no secret that pregnancy comes with a long to-do list. There are the obvious tasks (setting up a nursery and baby proofing your home), and the less so (applying for baby’s aadhar card and opening a bank account). Things might get difficult to manage when the baby arrives but with a little bit of planning, you can get a head start on these crucial to-dos to save you time (and stress) once the baby arrives. 

So here is your handy guide to getting the baby's important documents – from where you can get them, to how to go about applying for it, and everything in between! But before you even plan to make any of the following documents, it is important to name your child. Always remember, to mention your child's name without any spelling errors - even a letter change or an extra space can make a huge difference.

 

1. Birth Certificate

Let’s start with the very first document you need- Baby’s Birth certificate. This is a vital and mandatory document that you would have to prepare for your child within the first 21 days of the child’s birth, by filling up the form prescribed by the Registrar. It contains details such as time and date of birth, location, gender and parents’ names. Most Birth Certificates today contain the name of the child unlike in earlier times, which makes it a valid Proof of Identity. It usually takes up to seven days for the authorities to issue a birth certificate. However, if due to some reason, you fail to register your child within the stipulated time, you will have to pay a late fee. 

Documents needed: Self-attested declaration stating the purpose to be submitted to the Corporation along with the form issued by the hospital. 

 

2. Aadhar Card 

Starting from gas subsidies to working as valid residence proof, the Aadhar Card has numerous benefits and it only takes a little time and effort to make one for your child. 

Getting an Aadhar card for a newborn involves no biometrics. You just need to book an appointment online by logging in to the official UIDAI website. Your child will be processed on the basis of demographic information and facial photographs linked with your UID. However, you need to update their biometrics of ten fingers, iris and facial photographs, when they turn 5 and 15.

Documents needed:

  • Child’s Birth certificate
  • Aadhar Card details of either/both parents of the child

Note: Original copies for both these documents will be required for the verification process.

 

3. Bank Account 

Opening a bank account is one of the most important steps to undertake. Once you have a kid you will start getting gifts on their birthday as well as at various festivals. Many times these gifts include cash which you tend to spend here and there. Instead, you can deposit all these gifts in cash in their savings account behalf of them.

Documents required to open a bank account for a minor:

  • Child’s Birth certificate
  • KYC documents of the parents/guardian.
  • Child’s Aadhaar card.
  • Specimen signature of a guardian. The minor's specimen signature if he/she is 10 years old or above.

 

4. Pan Card (optional)

Many people face the question - of whether a minor can apply for a PAN Card as it acts as an important identity proof. The answer is yes, it is possible and the procedure for applying it is a simple and streamlined one. You need to submit an application on the official website of NSDL. Upon submitting the application, you will get a receipt number using which you can track the PAN card application of your ward. Usually, the PAN card reaches your given address within 15 days of successful verification. 

Documents needed:

  • Child’s Certificate of Birth
  • Child’s Aadhaar card 
  • Child’s Photo
  • ID and address proof of the parents

 

5. Passport (Optional)

A valid Indian passport holds a lot of importance and is considered an accepted Proof of Identity and Proof of Address for procuring various other documents and even for school admission procedures. Thanks to simplified computerised procedures, getting a passport for your child is no longer a hurdle. 

You can book an online appointment at www.passportindia.gov.in and after booking an appointment on the website, you can reach the PSK (Passport Service Kendra) with your child at the allotted time slot to avoid unnecessary waiting.

Documents needed:

  • Child’s Certificate of Birth
  • Child’s Aadhar Card
  • Filled and signed Annexure H which can be procured from the Passport Seva Kendra website.
  • Identification photograph of the child against a white or light-coloured background.
  • Arrangement receipt
  • Marriage certificate if the spouse's name has not been endorsed on a parent's Passport

 

Now that all the documents are in place you need to start planning for their investments. In case you have a girl child you can open a Sukanya Samriddhi Account.

We hope this was useful for you. In case of any queries, you can reach out to us at iplan@wealthcafe.in

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    Blog Article 2022 (2)

    Financial Planning for Siblings

    “Blood is thicker than water” we have all heard this growing up, in fact, experienced it as well with our siblings. Along with this, we have also heard stories in our families or otherwise where siblings ditched each other for ancestral property, did not pay back the loan or diss one another for having more money. Yes, Money is great when you start as you celebrate together, shop together and enjoy everything together but it could also turn into something very complicated. 

    Money discussions between siblings may not be the most common dinner conversation but it is a good practice to take some time out and start talking about money before things get sour. Here we are sharing our insights on how and what you can talk about: 

    WHERE YOU LIVE TOGETHER : 

    Money is obviously an important factor when you live together as there will be some shared expenses between you two. In some families, parents take care of expenses and there this might not be a major discussion. But as the year's pass, the responsibility would eventually fall on the children and it is best to be prepared for that discussion or maybe have it in advance. Usually, the elder sibling takes care of the family expenses (especially where there is a brother-sister equation). However, there may come a point where they would have more responsibility or may be strapped for cash or want to splurge on themselves and then it could end up getting ugly. Instead have a discussion and set certain things right:

    1. Talk about who will take care of what expenses. How will you split the bills?
    2. The person earning more can contribute higher but the other one should also contribute some money so there is parity.
    3. Include the other in your financial plans where you are planning to help the other with their goals like marriage, higher education or setting up a business. 

    WHERE YOU LIVE SEPARATELY:

    Money is not too much of a problem when you live on your own and both are taking care of their individual needs. Over the years though you could have some shared responsibilities like your parents and their retirement. 

    1. Understand from your parents how financially prepared they are for their own health concerns and retirement so you both know what and how much you need to take care of in future. 
    2. Decide how you will both(all) contribute and take care of the expenses of your parents.
    3. Where one sibling wishes to splurge on parents any financial need, the other should be accommodative and not jealous of the same. Have a talk!

    WHERE YOU HAVE AN INHERITANCE COMING:

    We could write pages and stories on what all can go wrong with inheritance but we are expecting better of our wealth cafe investors. Do not get carried away by greed to own everything that your parents do but understand what they wish for you and your siblings. 

    1. Have a discussion with your parents, and ask them to have a will in place so there is no fight tomorrow. 
    2. Talk to each other as well, if you feel you are comparatively better off than your sibling, let them have a bigger chunk of the inheritance.

    Remember that you are siblings before money. Do not lose your brother/sister for some money that may or may not come to you. Develop some money values between yourselves

    1. Talk and communicate with each other.
    2. Be honest. Contribute where you can.
    3. Do not take undue advantage of the one with more money or otherwise.
    4. Ask your parents to be a part of this discussion.
    5. Where you have sisters ensure she is included in discussions and financially aware of things the family is doing.
    6. When you give loans to each other, have proper documentation in place so you do not have a fight regarding it in future. 

    We have all seen situations where one brother defies another for a better inheritance or money, we are hoping that the coming generation will be better off. Money can be a major cause of families breaking - up. Hence, the best way to ensure that does not happen is to talk to each other. 

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      Things you need to be aware of before investing in foreign stocks

      Invest in what you know is the basic investing philosophy that is explained and followed by Peter Lynch, a very successful fund manager of the US fund company in his book - One up the wall street. 

      He basically explains that as an investor, find companies and businesses around you, from your every day to day life that you are familiar with (and then of course follow up on that with fundamental analysis). When we check the companies around us, we come across businesses like Microsoft, Google, Amazon, Sony, and hence, the desire to invest in foreign stocks begins. Furthermore. Higher returns, lower risks, better companies, and geographical diversification further increase the need to invest in foreign stocks


      Where investing in foreign stocks is all fun and hopefully higher returns, one must also understand the setbacks or the costs of investing in the same. 


      1. Remittance charge 

      The costs of a remittance transaction include a fee charged by the agent/broker to you for their service of converting and remitting funds from Indian banks to US bank/broker accounts. It also includes FX conversion fee or spread for the purpose of investing in the US. This can range from 0.5-2% of the amount remitted and depends on two factors.

      1. Does the platform/app/broker you are using to invest have any tie-up with any of the Banks in India.  For instance, Vested has a tie-up with the Bank of Mauritius, which helps as you pay only a 1.2% remittance charge for each side.
      2. If you are going to transfer directly and there is no special tie-up between the bank and broker, you can end up paying INR 1000 + GST (Fixed) to a minimum of 0.8 % of the transferred value as a remittance charge.

      However, you can negotiate a better rate with your bank, depending on how much and how frequent your remittances will be. Even if you do at best, you can get a rate close to 0.8% of the transferred value.

      Assuming you don’t make any gains from your investment and stay flat, you would incur approximately 2% in remittance charges. The bottom line, you end up losing a % of your funds to charges even before your investments start making money for you. Hence it is recommended that you transfer in and out in bulk rather than follow a SIP kind of approach to transferring money when investing in foreign stocks. This is especially applicable for smaller accounts. 


      2. Taxes collected at source (TCS)

      The Union Budget 2020 introduced a tax on forex transactions. A 5% tax collected at source (TCS) will be applicable on all remittances above INR 7 lakh under RBI’s Liberalised Remittance Scheme (LRS).


      TCS will apply only to over INR. 7 lakh in a fiscal year and not on the total amount. For instance, if you remit INR 10 lakh in a financial year, TCS will apply to the balance of 3 lakhs at a rate of 5% and thus will incur a tax of INR 15,000. The taxpayer will get a TCS certificate and can claim a refund while filing the annual IT returns. Thus, this is not a direct cost but gets added to your cash flows while investing the money.


      3. Taxation 

      You may not have to pay taxes on the earnings made from capital gains in the USA from US stocks but you would have to pay the same in India. For dividend tax is deducted at source in the USA but you do get credit for the same when you are paying taxes in India. Basically, it is good to know about the tax liability and compliances that you have to do when you invest in foreign stocks, you can learn more about it here in detail - How taxes work when buying US stocks from India


      4. Death - Estate Tax

      We Indians are not used to paying taxes on death and inheritance but in the US, Estate tax is payable by the heirs on the estate of a deceased individual, which can be as high as 55%. The estate tax can arise by way of investing in US assets. So your stocks and other capital market investments in the US are subject to estate tax when they are passed on as inheritance.This tax could end up eating into all the gains that one would make from investing in US stocks. Ways in which you can manage the estate taxes are as follows:

      1. Buy a separate (top-up) term insurance to cover this tax liability on your foreign stock investments. 
      2. People set up joint accounts to deal with Estate taxes, so in the event of the death of one of the account holders, its estate tax is levied only on the portion of the asset held by the deceased.
      3. Now, if you are a UHNI (Chances are you would not be reading this, still) and looking at better ways of managing all of this, setting up an offshore trust to invest in the US seems to be the recommended route.

      These charges and taxes are not a deterrent to your investments in foreign stocks but do know them and plan your investments around them.

      How can Men help Women take charge of their finances

      A lot has been said and written on the fact that women must take control of their finances and we, at Wealth Cafe, strongly believe that.  Being Financially independent gives you the real power to make your own choices and take control of your life.

      But then, why are women not managing their money on their own?

      We know that women are great savers, but when it comes to making a decision to invest the money they find themselves short on confidence. This is because finance has never been the first choice of role for women. They have never been part of money discussions at home or socially resulting in their lack of interest and hence the underconfidence.

      Growing up, I personally remember being told to make the perfect chapatis but discussions about decreasing interest rates in the 1990s were reserved for my male cousins. Well, today, I can’t comment on my chapati-making skills but I can definitely explain everything about interest rates. Qualification aside, I am financially aware because of my upbringing where my father discussed money with me in our daily conversations. 

      An educated man is one person. An educated woman is an educated family. And this applies to money education as well. 

      So how can men change these years of social conditioning and empower the women in their lives to handle money better?. 

      Let me answer this by looking at the various relationships around me:

      Father- Daughter

      I remember I was 14 when my father was driving me back from school and telling me that I am old enough now and I should know all about the investments he had made. For a teenager who had just entered her 10th grade and was worrying about getting her maths right, this conversation seemed pretty out of context. He showed me this red book in which he kept all the records (it was 2005) and also explained to me what insurances he had and whom to reach out to. This was the beginning of my financial journey which set the foundation of what I am writing here today. Here are three ways you can start talking to your daughters about money: 

      • Once a week, over dinner, discuss your work and your investments with her. 
      • At any age, as early as 5 years, open a bank account in her name and teach her how to use an ATM or debit card.
      • Talk and support other women in your life, she will learn what she sees.

      Like any habit, she will learn by watching you. Expose her to good money habits so that she gets a strong foundation early in life.

      Son-Mother

      The relationship between a son and mother is very beautiful and unconditional with mothers giving it all taking care of their sons. As a son, you can reciprocate that by equipping her with the basic survival financial skills.   Here are some starting ideas:

      • Sit with your mother and explain to her how banking transactions work. Show her how to use the mobile app and make her do it on her own. Watch. Be patient. Repeat.
      • Educate her about the basic frauds and how she should be careful about the PINs, OTPs, and cards. She needs to learn to be careful rather than avoid using technology completely. 
      • Transfer some funds to her account each month, and let her use the money as she pleases, no questions asked. She will begin to feel financially free. No one deserves it more. 
      • Make some investments in her name and show her the statements for the investments. Let her feel proud of what she owns and give her a regular update on the value of her investments. 

      By equipping her with the basic skills, you are doing a favour to yourself as you have another person whom you can speak about money, before making decisions. Every now and then, I get INR 500 on Gpay as ‘nek’ / ’ tyohaar ka shagun’ from my mother and a cute WhatsApp message saying - “maine bhej diye paise” (I have sent the money). It's a small thing, but a huge step in blurring the distances between us.

      Husband- Wife

      3

      With marriage, your lives get entwined together, more so financially.  Whether working or not, your wife can play a critical role in easing your financial life. So some of the things you can do to support your wife are: 

      • Sit together and set your future goals and how you both can save and invest to achieve these goals. Having common goals results in a smoother life. 
      • Discuss your bank accounts, investments, and insurances you have. Ensure she is a part of your meetings with your Chartered Accountant, your Financial advisors, and your Insurance agents.
      • Especially when your wife is a homemaker, encourage her to do more than just manage the expenses. For example, let her manage the credit cards payments or track the insurance premiums due and actually make the payments.

      Be patient if all of this is new to her. In case you ever face an emergency, she will be the person nearest to you and in the best position to make a decision. A financially aware decision can make a lot of difference.   

      Brother- Sister

      Siblings have a cute love and hate relationship. I do not have a brother so I was spared of all the crickets and bashing as a child. Apart from the fun, as a brother, you can be her stepping stone to develop the interest and knowledge in matters relating to money. Three things that you can start with:

      • On celebrations, gift her financial instruments like stocks, mutual funds, SGBs instead of cash.
      • If you are part of a  family business, you can encourage her to be more involved, take her side, share her insights with your family.
      • Be more proactive and push her to take care of her own finances.

      Wealth Cafe Advice

      You can be a ‘real man’ by taking these small steps in making the women in your life financially aware and self-dependent. Talk to the women in your life as an equal, as your friend, keeping aside the attitude of ‘know it all. Remember that as men, money is taught to you at every step but as women, we have to take the extra steps to learn about it. 

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