Money Tips – Wealth Café Financial Advisors

9 steps to Financial Freedom

How incredible would it be to quit your day job and retire early, spending the rest of your life doing things you love? When you become financially independent, the income your assets generate for you are greater than your expenses, meaning your job is no longer necessary. Sound appealing, right?

Let’s go through all the 9 steps that will help you achieve your Financial Freedom. We have linked all our 9 videos below- you can check them out to learn more about it:

1. START NOW.

Still believe that small savings cannot generate big wealth? Think again. If you plan well, then even small savings can help you generate a good amount of corpus, as starting is important even if it means taking baby steps. Check out our YOUTUBE video - to know more about it.

Video Link - https://youtu.be/9Xh5FRaA0cE

2. AVOID DEBT.

While balancing the rising expenses and lifestyle changes on a day-to-day basis, it becomes difficult to save for our own financial goals. However, there is often a simple solution which can help you achieve some of your life goals: LOAN. But remember, borrowing should not be your go-to option always, you should opt for it only when it is extremely crucial and you are out of options.

Debt is one of the biggest roadblocks in your journey toward financial independence. Plan for it wisely! When you aspire to get to a state of financial independence or stability, living within your means is the best advice you can follow. We are not challenging you to adopt a minimalist lifestyle - It simply means learning to distinguish between the things you need and the things you want—and then making small adjustments that drive big gains for your financial health.

Video Link - https://youtu.be/X1F-GcyyA_g

3. JUST SAVE.

It is easy to say that saving can easily be done on a monthly basis, but it becomes very difficult when you actually start saving practically. The habit of saving regularly cannot be developed in a day. You only need to make sure that you end up developing this habit no matter how much time it takes. The more you save, the earlier you save - the faster you can become financially free - Your savings will act as fuel in your financial journey.

Video Link - https://youtu.be/_GE8iDjkn6k

4. GET GULLACKING.

Rent, utility bills, debt payments and groceries might seem like all you could afford when you're just starting out. However, you can still save a good amount of savings if you get your finance in place and give it a direction. Try our Gullacking Approach! Through this method, you will be able to start your investment journey in a better way.

Video Link - https://youtu.be/1Ajk5rKY6Sg

5. MORE IS BETTER.

“I am very happy with my salary and I don’t think I need a raise,” said no one ever. Most of us usually find ourselves thinking that the income we earn through our jobs or business is not enough. The bottom line is that no matter what we earn, we’d like to earn more. There are multiple ways to set up additional sources of income today - check out our YOUTUBE video to know more.

Video Link - https://youtu.be/jB8WQDEQaR4

6. TAKE RISKS.

Not focusing on risk is like not focusing on the amount of salt you put in food, it is very important. Risk is what you have to bear to get any return in life or investments. It is important to know the different types of risk that you have to bear when you make investments and how you can manage those risks to achieve your financial goals.

Don’t hesitate to take risks. Rather than being afraid, learn to manage it. Start taking Measurable Risks!

Low Risk = Low Return.

High Risk = High Return.

Video Link - https://youtu.be/tsoPAOVyT3g

7. SAFETY FIRST

We never know what the future holds for us, Right? So it's always best to be prepared by putting money aside. This will help you to avoid taking on an additional financial burden, without the clarity of how you would pay it back.

Let's go over the three most common contingencies that you could come across:

Financial emergencies → Emergency Fund.
Untimely Death → Life Insurance.
Health Issues → Health Insurance.

Video Link - https://youtu.be/XlCqCbokJAw

8. STAY AWAY

There is nothing known as ‘QUICK MONEY.’

Avoid taking shortcuts!

Video Link - https://youtu.be/5d1BtheuEXo

9. DON’T STOP LEARNING.

Money is something that we need to deal with every day. We have ample information ready on Youtube as well as various websites. We always suggest you never stop learning about it. Because if you do not learn about it or research about it - you will have to learn the hard way from your mistakes.

You can check out our courses to learn more about how to manage your money at https://courses.wealthcafe.in/s/store

Video Link - https://youtu.be/fQ14nVIdD-4

Wealth Cafe Advice:

Knowing exactly what you want to achieve makes achieving financial freedom a million times easier. But, financial freedom isn’t just about having enough money today – it’s about knowing that you’re covered in the future. Once you’ve got an emergency savings fund and you’re making progress towards short and medium-term goals, it might be time to think about diversifying your savings through other types of investments. If you’re a young investor with a steady job, you can consider higher-risk investments, such as stock funds, that offer higher potential returns in the long run. If you’re at a more conservative stage in life, close to retirement for example, then lower-risk options may be what you’re looking for. Either way, always consider how to make the most of the available tax advantages on investment and retirement accounts.

Therefore, financial freedom can help you take ownership of your finances and, more importantly, your life. It’s about living within your means, being a bit frugal, and making sure that money is spent on things you really need like food, shelter, and yup even vacations (relaxation is important too, you know). By following the financial freedom tips mentioned above, you’ll inch closer to achieving the financial freedom you deserve. Hence, take a look at those finances, build additional streams of income, pay down that debt, and before you know it you’ll be free.

So, how close are you to achieving financial freedom?

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

5 things to keep in mind before planning your next holiday?

Who does not love to travel right? With every long weekend, we are setting aside plans to make that trip happen. While you are checking off places you want to visit you must also set up the funds aside for it. Yes- Travel is a goal that you must set and save for and not just your regular monthly expenses.

In our conversations with many clients, we have observed that one major reason for a messed up monthly budget is our favourite TRAVEL. No plans are put in place for this but random expenses on the credit cards are made. This leads to erratic monthly spending and eventual savings.

Instead, do the following to ensure travel is fun with experience and expenses both.

1. Budget and Goal Setting for your Travels.

Set a realistic travel budget and have that money in advance. An idea that appeals to many is to maintain a dedicated separate account for the same, with automatic fund transfers in the form of SIP. You can set this budget in a liquid fund or a short terms debt mutual fund. This money should be more accessible and could also earn a bit for you. Please do not do equity for travel goals. You need it whenever you want to travel right? This will ensure that the necessities of daily life would not eat into your vacation money and ensure that the Insta stories bring back fond memories rather than financial guilt.

2. Get a Travel Insurance

Many people tend to ignore travel insurance as they do not like to spend on it. Are we okay to live on the edge rather than pay a few thousand to travel stress-free? It can be an expensive lesson to learn in case something unfortunate happens (Let's not forget what COVID-19 has taught us)

3. Balance your trips and plan ahead

You know all the long weekends that are coming up. Plan your dates and money too. Sit and decide that this is what is our travel budget and allocate it across various holidays in the year. If INR 3 lakhs is what you want to spend in a year on travel then it should be a mix of some local cheaper holidays, staycations, 1 longer holiday within the budget. If we go in without planning, we will never know how much you are spending and will end up taking loans.

4. Go against the trend!

Everyone is travelling! Everyone is using their long holidays to go to the same location - however, if your organisation allows, we suggest you work through the long weekends and take an off the following week/month - everything will be cheaper and less crowded.

For example - Go to Andaman in January (after new year), Go to Himachal in August (after summer break).

But do ensure you speak to your employer beforehand so that you are not taking unpaid leaves. The unpaid leave amount will get added to your travel budget cost. Do not ignore it. You don't want to receive only 70% of your salary the following month after your travels.

Some ways to avoid major expenses

Instagram travel is beautiful but know what you can afford. Stick to your budget.
On a 5-day trip, you could stay for 3 days at a budget hotel and then for 2 days at a nicer property to enjoy the place and relax.
Book for your travels using smart cards which will help you earn points and also offer you discounts.
Spread your expenses across 2 - 3 months for a longer vacation so it is not coming all in one go. And use the money from your travel goal for your travel expenses.
We all cannot have it all. So if you love to travel, maybe shopping and other expenses can take a back seat. I have the same winter jacket which I have been using for the past 5 years across 8 destinations. (choose your priority). Also, you can always borrow some one-time things from friends and family.

Wealth Cafe Advice

Do ask yourself what you are travelling for. Pictures? Experience? Running away from things back home? Or taking a break. You do not have to look your best and spend 1000 of rupees every day on a vacation to enjoy it. (well mostly not).

Also, remembering the actual trip will fade away in memories in a flash. Planning and anticipating your trip rather than actually taking it may make you happier. At least, this is true as per the study published in the 'Journal of Applied Research in Quality of Life. Another study at Cornell University also reaches a similar conclusion - When we plan for a life experience like a big trip, it creates a lot of happiness.

So as we approach the long weekend of the year i.e October, November & December - We hope you enjoy your travels and also start budgeting for it beforehand.

Education / Money tips / Salary - 09/23/2022

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

Helping your help - Financial Awareness

Don’t we all wish to help the weaker sections of our society? Many times we end up donating some money, clothes or other things but not really making a larger impact in their lives. The best way to bring a change is to educate and make someone aware of ways they can do better. One such way is to help the people around you know more about the options available to them to make their lives financially better.

The government has launched numerous schemes to support us financially but only 1.36 billion population avails and benefits from them. And do you know if your domestic workers and other employees are benefitting from them completely? Let us guide you with this article on the schemes that are available and how you can make people around you make the most of it.

Step 1 - Ensure that their documentation is in place, they have an aadhaar card (which is properly linked to their mobile number and address and have a voter's ID. In some cases, they may not have a PAN card so voter ID becomes handy. Also, check if they have a proper bank account, if not help them open a bank account with a nationalised bank or any good bank.

1. Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana is to invest for those who have a girl child and can contribute in it annually upto 1.5 lakhs and can withdraw the money only for her marriage or higher education. It is earning a fixed interest rate of 7.6% currently and is decided by the GOI year on year. It is a great way to save money for the girl child without anyone being able to withdraw it or close it for their personal gains.

2. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

PMJJBY is a life insurance policy that provides a cover of up to INR 2 lakh rupees against a small premium worth INR 330 per year. You can take this policy for your help and protect their family financially.

3. Pradhan Mantri Suraksha Bima Yojan (PMSBY)

Where you have factory workers, drivers, or even just other domestic workers, you can cover them from any accident and disabilities from those accidents by ensuring they have opted for Pradhan Mantri Suraksha Bima Yojana offers a renewable one-year accidental death and disability cover of Rs 2 lakh a JUST Rs 12 premium every year. This scheme is a great way to ensure that there is some financial support in case of any health issue or death from an accident.

4. Pradhan Mantri Shram Yogi Maan-Dhan(PMSYM)

PMSYM is a pension scheme to provide for their retirement. Most people in the unorganised sector have no ways to plan for their retirement and hence, this scheme should be opted for. They can get a pension of up to INR 3000 and through Atal pension yojana can earn a pension of up to INR 5,000. You can help them cover the investments to be made for these pensions and can work up a way to finance it on their own later. Do help them out with filling the form and understanding in better detail what these schemes are.

Wealth Cafe Advice:

You can contribute on behalf of the weaker section around you as the contribution amount is very small - if not - you can still educate them about it and encourage them to enrol in these schemes as this might be of great benefit to them. Also, if you contribute on behalf of them - inform them about how and when they can benefit from the same.

Making Money / Money tips - 08/26/2022

Should I take a travel loan for my travel plans?

A loan may seem like your ticket to a dream vacation when you lack the cash to cover the hefty price tag upfront. A vacation loan is simply another name for a personal loan you use for travel.

But looks can be deceiving.

That vacation loan you use to finance your seven-day trip could leave you shackled to debt for years and affect your ability to obtain credit when you need it.

Before you take out a travel loan, read the fine print. What appears to be a good deal may not be once you look closer at fees and interest rates.

Reasons to Say No to a vacation loan

Discretionary spending isn't a good reason to borrow money

We'll start with the biggest vacation loan problem: Buying gifts, traveling, and any other vacation expenses you incur are discretionary expenses. When you take out a vacation loan, you're paying interest for things you want, but don't need.

Even if you have excellent credit and qualify for the best personal loan rates, you'll still go into unnecessary debt. You're putting your future self in a more difficult financial situation so you can have what you want right away instead of saving for it.

You could go over budget and borrow more

Let's say you get a vacation loan for an amount you think will cover all your expenses. What if those expenses end up being much more than you bargained for?

Depending on the situation, you may be able to rein in your spending. If you took out a loan to buy gifts, you could look for more economical options. But what if you borrowed money for a vacation trip and you realize halfway through the trip that it's going to cost more than you thought?

You could find yourself borrowing more for those unexpected vacation costs, putting you even deeper in debt.

It makes your holidays more stressful

The whole point of a vacation loan is to enjoy your holidays, but that's hard to do when you're worrying about how you'll pay back what you borrowed and what your bank account will look like after the fact.

If you think you'll be able to push these thoughts out of your head while you celebrate, the odds aren't in your favor. Among people in debt, over half think about their debts at least several times per week and over a quarter think about them every day.

Loan payments make it difficult to save money

When you don't have much money saved, building your savings should be your No. 1 goal. You'll be better prepared for emergencies and future expenses that way.

The more bills you need to pay each month, the harder it is to save. If you get a vacation loan, those loan payments will hold you back from saving money.

It could become a bad habit

I've mentioned why borrowing money for discretionary expenses isn't a good idea. Another reason why you should avoid this is that it often turns into a habit. Once you've borrowed money for something you don't need, it gets easier to do it again.

Here's an example of exactly how this could happen with a vacation loan. You decide to get a 12-month vacation loan this year. Because of your loan payments, you can't save much. By month 11, you need money for the holidays all over again.

At best, you're back to square one -- it's the vacation season and you're short on cash. That's assuming you took out a 12-month vacation loan. If you got a loan with a longer-term and only made minimum payments, you're in an even worse position.

Vacation Loan Alternatives

The risks that come with vacation loans aren’t worth the financial consequences. There are other strategies you can use to put money aside, take that dream vacation, and avoid taking out a personal vacation loan, including:

Cutting back on expenses. If you know you want to take a vacation next year, start planning ahead and looking at your expenses. Ask yourself: Is there anything that I am spending money on that I don’t need? If and when you find areas where you can cut back on your spending, set that extra money aside in a savings account to help fund your vacation.
Automating your savings. Saving for any type of expense or investment is much easier when you use an automated system - SIP'S. Plan your budget and start your SIP today!
Creating a travel budget. Setting extra money aside is one way to set yourself up for success. Creating a travel budget is another. If you don’t know how much your vacation will cost, how will you know how much you need to save? Examine the costs of transportation, accommodation, tourist attractions, and restaurants to give yourself a good idea of how much money you should tuck away.
Utilizing credit card rewards. Credit cards are a handy way to earn rewards on the money you already plan on spending. By opening an airline credit card you can earn a bonus worth a free flight or two. Keeping your eyes peeled for cheap flights. There’s a method to the madness when it comes to snagging a solid deal on flights. While it can feel like luck of the draw, if you know where to look, you can score big. Using a resource to find cheap flights, is an easy way to track down a ticket that can lessen the dent in your wallet.

Wealth Cafe advice:

The best way to enjoy a vacation is to always plan well in advance. When your finances are built up, it would be the right time to embark on the trip. The idea of buying now and paying later could be an appealing alternative but there is no point to make your holidays costlier than necessary as it leads to financial stress later on. In the end, it is much of a personal choice in determining how much the vacation is worth to you. A few days of joy that lead to a loan hanging around your neck for the next few years may not be the best idea.

Loans should always be for necessities, assets, and emergencies. If it's for luxury, one may be living beyond their means.

To learn more about saving and investing enroll in our course: NM 101- Maximise your Savings

Budget 2021 / Debt / Money tips - 08/19/2022

How does floating interest on your Home Loan impact your finances?

Your home loan EMI is determined by 2 things - the rate of interest and the tenure of your home loan. Of these 2 factors, the interest rate is determined by the RBI and Banks, tenure is what you can adjust based on your home cost and your EMI affordability.

The first thing to know is that your Home loan interest rate is a floating Interest rate i.e. the interest rate on your home loans would increase and decrease depending on the repo rates set by the GOI. If the interest rate goes down, it will benefit you because you will be paying out a lesser amount of interest. On the other hand, if the interest goes up, then you pay more interest.

In the past 8 years, the interest rate has been on the downward trend making home buying a very lucrative deal for us as the home loan kept getting cheaper. However, in the past 6 months, the interest rate has been raised twice by the RBI. The RBI is increasing the interest rate to curb the rise in inflation. You can read more about it here.

See the Interest Rate chart here to know the movement of the Interest rate by the GOI.

How would increase in interest rate affect a home-buyer’s payout?

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

Many Investors, who bought houses at the interest rate of 6.75% - 6.95% (at their lowest), will now have a big impact on their EMI. Their Home loan interest rate would increase by at least 1% in the coming months. In fact, if there is a further increase from RBI, your home loan interest rate could also go up to 8%. The interest rate determines your EMI, so where there is an increase in interest rate, your EMI would increase. Many banks are offering that instead of EMI, increase your tenure of the home loan (which sounds more doable as it will not impact the home-buyers cash flows).

In the example below, we shall explain to you what you should opt for with the increased interest rates.

Increase your EMIs - keeping tenure the same.
Increase your tenure - keeping EMIs the same.

An example:

House Loan - INR 1 crore

Interest Rate - 7%

Tenure - 25 years

EMI - 70,678

Total Interest payout - 1,12,03,335

Total Payout - INR 2,12,03,335

How your EMI will be affected by an increase in interest rate by 1%

In this table, you can observe that with an increase in interest rate, the EMI is also increasing and hence, the total interest payout over your home loan tenure has also increased.

Banks these days instead of raising your EMI will increase the tenure of your loan. Let's understand how that would impact your overall interest payout.

How your increase in tenure can impact your loan payout?

However, many banks are not increasing their EMIs, but increasing the tenure on the home loans. Let's see how that would impact your total cash outflow over the home loan period.

You can observe from the above tables that the total interest payout when you keep the EMI the same is much more than the option of increasing your EMIs.

You can learn more about buying a house from our course - Money & Makaan -

Change in interest rate is not something you can control but is determined by RBI and the banks. The best approach is to be prepared for an increased rate and keep some cash flow free so you are able to afford the rise in EMIs.

Wealth Cafe Advice:

Remember when the increase in interest rates is beneficial to your banker, they will not call you and tell you how the tenure increase instead of EMI increase is better for them than for you.

The best approach for you would be to understand the difference between the 2 approaches and their impact on your cash flow. Connect with your banker and ask them to share a calculation, loan amortisation sheet, and understand your numbers. You can reach out to us at iplan@wealthcafe.in to know more about it.

loan / Money tips - 07/15/2022

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

Investments / Money tips / Real Estate / Uncategorized - 05/12/2022

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.

Investments / Money tips - 05/06/2022