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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    How is inflation affecting our everyday lives?

    Inflation can impact our finances in a number of ways – from the cost of our weekly shop to the value of our long-term savings – but what exactly does it mean?

    Inflation might be something that not many people understand. Yet, we all experience it and feel its effects. When you head to the store expecting to spend a budgeted amount of money on something, only to spend a lot more, you’ve experienced inflation. Of course, when a price rises on a product it’s not always due to inflation. Yet, inflation still affects your cost of living by increasing the cost of goods and services.

    This is why it’s so important to consider inflation when planning for the future, even if the future is as soon as next year. Especially when planning for retirement, you need to ask yourself what you want as your standard of living because inflation directly affects your lifestyle.

    Therefore, it’s important to understand how inflation works, as well as the effects it could have on your financial planning.

     

    What is Inflation? How does it personally affects you?

    Inflation is often referred to as a “measure of the increase in the price of goods and services over time”.

    Yes, it affects everyone. Yet, it affects everyone very differently. Your lifestyle is based on your income and your expenses. Sometimes, people who have a high standard of living but not a high enough income end up borrowing money to make up the difference.

    Inflation not only affects the cost of living – things such as transport, electricity, and food – but it also impacts interest rates on savings accounts, the performance of companies, and in turn, share prices.

    When inflation rises, borrowing money becomes very expensive. This means either people take out fewer loans or they’re unable to spend less money because it’s going towards debt payments. This reflects a reduction in the purchasing power of your money. In other words, this impacts your ‘buying power, as you’re now able to buy less with your money.

    For those people whose standard of living matches their income, inflation can be both a positive and a negative. Usually, when inflation rises, your income also rises as there are adjustments based on the cost of living. However, even with an increased income, expenses also rise. For those on a fixed income – like retirees – inflation can greatly affect their standard of living.

     

    Let me give you a few examples of where we were to where we are now when it comes to our spending habits or lifestyle expenses.

     

    Movie tickets: From 1975 to 2015

    Watching the latest flick, on opening day for just 3 rupees. Madness. Of course, while there are places where you can still get tickets for a tenner (DDLJ in Maratha Mandir), those places are few and far between.

     

    Coca-Cola: From 1965 to 2015

    This was before Coca-Cola was kicked out of the country in 1973. And here we thought a small Coke for 5 rupees was a big deal.

     

    Amul Butter 500 gms: From 1970 to 2015

    Guess those really were "butter" times, eh?

     

    Is Inflation bad for everyone?

    Inflation is perceived differently by everyone depending upon the kind of assets they possess. For someone with investments in real estate or stocked commodities, inflation means that the prices of their assets are set for a hike. Those who possess cash may be adversely affected by inflation as the value of their cash erodes. A higher rate of inflation can make repaying loans easier because they can end up paying back less money if the interest rate is lower than the rate of inflation.

    Therefore, Inflation influences all aspects of life. You’re going to have to navigate a variety of risks now and in the years ahead, no matter which direction inflation swings. Since everybody relies on goods and services in one way or another, inflation is felt by everybody – either negatively or positively. The best thing to do is to plan for it. If you are saving for the future, pay attention to inflation.

    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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      How are women behaviourally better equipped to make financial decisions?

      Many of my friends painstakingly plan their careers, write out where they see themselves in 5, 10, 20 years, and consider themselves independent-minded feminists. Yet the care and planning they put into virtually every part of their lives don’t always extend to their money — especially their investments.

      Managing money is a subject that isn’t taught at any level in school or college. On top of that, traditionally women are rarely asked to take up managing the finances of a family as a first choice compared to their men counterparts. This has resulted in the lack of confidence when women are put in a position where they have to make decisions about their money.

      Studies however show that, when they do, women are more successful at making money decisions. As per Fidelity's study in 2021 on Women and Investing, self-directed retail investors who are female consistently outperform their male counterparts by an average of 0.4%, or 40 basis points, every year. here are many reasons why women are behaviourally better equipped than men:

      1. Women are great savers

      We have known all our life that we are fantastic when it comes to budgeting and saving. Demonetisation in 2016 was a reminder of this, where many home-makers came out to deposit the cash they had saved over many many years. The traditional concept of putting aside money in a ‘gullack’ can easily be adopted using today’s technology to get the desired savings.

      2. Women can make smarter decisions under hysteria

      Another stereotype is that women are very sensitive and emotional and yes maybe we are but that makes us great leaders as we can connect with everyone we meet and work with. In fact, whenever the family faces any financial, emotional or other challenges, the women of the house become the pillars.

      Women can and have kept their emotions aside under distressing situations and taken more reasonable decisions. That is a skill set that comes in very handy in investing, where the markets go swinging and we use this skill set to stay put to logic and basis to the smarter decision required at the moment (keeping all points/statistics and people in mind).

      3. Women research for the best options

      Whether shopping or investing, we do not shy away from research, effort, and putting more time to find something that best suits our needs and budgets. Because we do not make hasty decisions (most of the time), we avoid most of the bad investments including the many Ponzi schemes. We like to buy everything after checking the labels, options, pricing, and our needs. We could and should do the exact same thing when it comes to picking our investments.

      4. Women are great planners and can think/behave long term

      Women tend to see the longer-term picture, and can often look beyond short-term problems. Whether relationships or investing, we know things take time to reach their optimum and are comfortable with waiting. Women have the patience that is required to build long-term wealth and make equity investments successful.

      We have got the right skill sets that are required to invest and create wealth. The only thing we have to do now is: 

      1. Start now and start early 2. Make mistakes and learn from them 3. Do not shy away from asking for help 4. Learn more, read more, and educate yourself

      We have all come a long way from only investing in gold and cash to exploring mutual funds and stocks today, but we still have a long way to go to take charge of our money. Let's start doing that from today.

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        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. 

        Be a part of our support system.

        Pradhan Mantri Jan Arogya Yojana (PMJAY)

        Pradhan Mantri Jan Arogya Yojana(PM-JAY) also known as Ayushman Bharat Yojana is a pioneering initiative of Prime Minister Modi to ensure that poor and vulnerable populations are provided health cover. This initiative is part of the Government’s vision to ensure that its citizens – especially the poor and vulnerable groups have universal access to good quality hospital services without anyone having to face financial hardship as a consequence of using health services.

        How does it work?

        The Ayushman Bharat Yojana scheme offers health insurance cover to beneficiaries without any premium cost, treatment cost during and after the hospitalization. Ayushman Bharat scheme covers both pre and post-hospitalization expenses in addition to the in-patient charges.

        And all the impaneled hospitals under PMJAY Scheme would have appointed Ayushman Mitra's, who will aid the patient by coordinating with the hospital’s beneficiary in order to cut the expenses. You will find these Ayushman Mitra at their help desk where they will be verifying the eligibility criteria, documents, and the enrolment process. They provide letters to all the beneficiaries with respective QR codes.

        Furthermore, this QR code is scanned and verified for authentication to check the eligibility for people to avail Ayushman Bharat Yojana benefits.

        And the best part about the Ayushman Bharat scheme is that it offers coverage across PAN India and offers cashless hospitalization benefits to the enrolled families in both public and private hospitals.

        What is Covered under Pradhan Mantri Jan Arogya Yojana?

        PMJAY covers the following expenses during the treatment:

        • Provides coverage for medical examination, treatment, and consultation fee
        • Pre-hospitalization expenses are covered 
        • Post-hospitalization expenses are covered for 15 days
        • The policy also covers the cost of medicine and medical consumables
        • Hospital accommodation charges are also covered
        • Non-intensive and ICU services
        • The expenses incurred on the Diagnostic procedures are also covered
        • Medical implantation services are covered where required
        • Expenses incurred on complications arising during the medical treatment
        • Food services

        List of Critical Diseases covered under PM Jan Arogya Yojana (PMJAY)

        PMJAY offers nearly 1,350 medical packages at any of the private network hospitals and all the public hospitals. Below are some of the critical illnesses that Pradhan Mantri Jan Arogya Yojana covers:

        • Carotid angioplasty with stent
        • Prostate cancer
        • Coronary artery bypass grafting
        • Skull base surgery
        • Pulmonary valve surgery
        • Double valve replacement surgery
        • Anterior spine fixation
        • Tissue expander for disfigurement following burns

        How to apply online?

        Here is a step by step guide on how you can apply for Pradhan Mantri Jan Arogya Yojana

        Step 1: Visit the official website, mera.pmjay.gov.in.

        Step 2: Now you have to log on to the government website.

        Step 3: On the homepage enter your mobile number.

        Step 4: Just below that you will see the captcha, enter the captcha in the empty box.

        Step 5: After that click on Generate OTP option.

        Step 6: An OTP number will be sent to your mobile, by which you can go to the website and verify.

        Complete the necessary details to get the most benefits out of this scheme. So, these were some initial steps you need to follow for Pradhan Mantri Jan Arogya Yojana registration.

        Documents Required to Apply For Ayushman Bharat Yojana Scheme

        • Age & Identity Proof (Aadhaar Card/PAN Card)
        • Contact details (mobile, address, email)
        • Caste certificate
        • Income certificate (maximum annual income to be only up to Rs. 5 lakh a year)
        • Document proof of the current status of the family to be covered (Joint or nuclear)

        Note: After your name is registered on the Pradhan Mantri Jan Arogya Yojana(PM-JAY) website, with the help of your ration card or mobile number, you can know that you are not getting the benefit of this scheme.

        How to Check your Name in Ayushman Bharat Yojana Scheme List?

        There are various methods to check your name in the PM Jan Arogya Yojana -PMJAY beneficiary list. Listed below are some of the ways that you can try:

        • Online Method- Ayushman Bharat online list can be checked by the beneficiaries. All you need to do is visit the official online site of the National Health Authority for Ayushman Bharat Yojana.
        • Common Service Centres (CSC)- If you are a beneficiary of Ayushman Yojna you can also visit the nearest Common Service Centres. If it is not possible to do so you can also visit any of the impaneled hospitals to collect the information form. You can check the Ayushman Bharat hospital list on their site or in your policy documents.
        • Contact their Helpline No.- You can call on any of the government of India provided helpline numbers (e.g. 1800111565) to contact their customer care and seek the information about PMJAY Scheme, Ayushman card/e-card, Ayushman card apply, Ayushman card download, and even Ayushman Bharat Scheme registration.

        If your name is there on the list, then only you will get the Ayushman Bharat Card.

        How to Download your Pradhan Mantri Jan Arogya Yojana Card Online?

        It is important to apply for the Ayushman card as it consists of a dedicated family identification number. AB-NHPM is provided to every beneficiary household. Below are the steps that you can follow to apply or download your Ayushman card online-

        • Firstly, visit Ayushman Bharat Yojana official website - https://pmjay.gov.in/
        • Now login with your email id and generate a password
        • Enter your Aadhaar number to proceed further
        • Click on the approved beneficiary option
        • It will be redirected to their help center
        • Now enter your password in CSC and the pin number
        • It will be redirected to the home page
        • You will see the download option form where you can download your Ayushman Bharat golden card

        Wealth Cafe Advice

        It is good to stay updated about this scheme where you or your family are eligible and could be a part of the scheme. As per the terms, you cannot apply for it on your own. Let's wait and see how it works out and soon most of the people would get covered under it. Until then apply for the other government schemes that are available to you. 

        1. Atal Pension Yojana
        2. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
        3. Sukanya Samriddhi Yojana
        4. Pradhan Mantri Shram Yogi Maan-Dhan

         

        Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

        A large portion of India’s population (80%) is without insurance of any kind i.e health, accident, or life. Therefore in the year 2015, the Finance Minister announced PMJJBY along with 2 other schemes in his budget speech.

        Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) is a life insurance scheme in India backed by the Government. The life insurance scheme is valid for one year and is renewable from year to year, offering coverage in case of sudden death.

        How does the scheme work?

        The scheme is applicable for a period of one year. The scheme will be offered by the LIC and all insurers who are willing to join the scheme. Bank will be the master policyholder and will execute the claim and issue the scheme on the insurance company’s behalf.

        This cover is only for death and hence the benefit will accrue to the nominee on death of the policyholder. Therefore, it covers morality and no investment component. 

        The current risk period is from the 1st of June to the 31st of May. . The same will be renewable yearly.  Delayed enrolment for prospective cover is possible with payment of pro-rata premium as described below;

        Simply put the premium amount that you have to pay will depend upon in which quarter you enroll for the scheme. Where you enroll in:

        • June, July & August: Annual Premium of INR 330 is payable
        • September, October & November: Annual Premium of INR 258 is payable
        • December, January & February: Annual Premium of INR 172 is payable
        • March, April & May: Annual Premium of INR 86 is payable

        A Lien period of 45 days shall be applicable from the date of enrolment. However, deaths due to accidents will be exempt from the lien clause, the Reserve Bank of India said in a note.

        The cover shall be for a one-year period stretching from 1st June to 31st May for which the option to join/pay by auto-debit from the designated individual bank / Post office account on the prescribed forms will be required to be given by 31st May of every year. Delayed enrollment for prospective cover is possible with payment of a pro-rata premium as laid down in the above parameter. 

        There is a waiting period of 30 days in the insurance policy when you first apply for it, which means, If you are enrolling for the first time on or after 1st June 2021, the insurance cover shall not be available for death (other than due to an accident) occurring during the first 30 days from the date of enrolment into the scheme (lien period) and in case of death (other than due to accident) during lien period, no claim would be admissible. 

        If you exit the scheme at any point you may rejoin the scheme in future years. 

        In future years, new entrants into the eligible category or currently eligible individuals who did not join earlier or discontinued their subscription shall be able to join while the scheme is continuing, subject to the 30 days lien period described above.

        Coverage

        The total death benefit provided is INR 2 Lakhs. In case of death of the insured, the nominee can claim the amount, which would be tax-free. The claim process is also simple and hassle-free. 

        Eligibility

        To avail of benefits, you must fulfill the below requirements:

        1. Must be a citizen of India.
        2. Must be between the age of 18-50
        3. Must have a bank account/post office account linked with your Aadhar
        4. Must have a valid mobile number

        Note: The PMJJBY may be terminated if:

        • An insured person crosses the age of 55 years
        • Closure of accounts with the Bank/ Post office or insufficiency of balance to keep the insurance in force.

         

        Pradhan Mantri Suraksha Bima Yojan (PMSBY)

        Pradhan Mantri Suraksha Bima Yojana offers a renewable one-year accidental death and disability cover of Rs 2 lakh at Rs 12 premium every year. You will get Rs 1 lakh in case of partial permanent disability.

        The entry age of the scheme ranges from a minimum of 18 to a maximum of 70 years old.

        How to apply?

        You can get PMJJBY as well as PMSBY via LIC or any other life insurance company in India. Also, many banks have the facility for PMJJBY & PMSBY at their branches. 

        The enrollment process is quite simple:

        1. Download the application form from jansuraksha.gov.in/FORMS.aspx 
        2. Submit the duly filled form with your bank
        3. Submit the necessary documents
        4. Upon verification, you will be successfully registered

        Most banks also offer an SMS-based enrollment process.  Check with your banks for the details on the same and proceed with the application. You can also apply for it from your bank's official website.

        How to get the benefit? 

        1. Nominee to approach the bank where the subscriber opened the scheme with a 'savings bank account' along with the death certificate of the member.
        2. Nominee to collect claim form, and discharge receipt from the bank or any designated source like insurance company branch, hospital, etc. including from designated website
        3. After that, the nominee will have to submit the filled claim form and the discharge receipt, along with the death certificate with a photocopy (Xerox copy) of the canceled cheque of the nominee's bank account or the subscriber's PMJJBY linked bank account. 

        Then the bank will start the procedure of insurance claim. The bank is expected to process it within 30 days to forward the completed claim form to the insurance company. 

        The union government has incorporated all the insurance-related information on this website - www.jansuraksha.gov.in

        Wealth Cafe Advice:

        Let us take an example of a regular life insurance scheme vs PMJJY and understand its benefits in a better way:

        Regular PMJJY
        Current Age 27 27
        Years of contribution until age  55 28 28
        Cover INR 5,00,000 INR 2,00,000
        Annual Contribution INR 5000 INR 330
        Total contribution INR 1,40,000 INR 9,240
        Annualized Return 5% 12%

         

        Please note that this to give you an idea that INR 2 lakhs may not seem enough for your insurance needs but the scheme is a very good scheme in perspective of the benefits it is providing to a larger section of the society who do not have any access to any insurance currently.  It is a great option to cover yourself and your loved ones, you must apply for it, in fact, ask your team member, help and other people around you to also apply for this scheme. 

        Having a government-backed scheme to financially protect your loved ones in case anything were to happen to you is a wise decision, especially if you belong to the low-income category. 

        You can also check for other 2 benefits provided by the government:

        1. Atal Pension Yojana
        2. Pradhan Mantri Jan Arogya Yojana (PMJAY)
        3. Sukanya Samriddhi Yojana
        4. Pradhan Mantri Shram Yogi Maan-Dhan

        EMERGENCY FUND

        In the current situation, many people have experienced salary cuts or even job loss. During such trying times, an emergency fund can come handy and help you tide over such situations with relative ease. However, you don’t have to wait for an economic rebound to begin saving money. Even if you’re already facing income disruption or financial hardship, you can begin setting aside cash for the future.

        Here is a quick guide  on  how to best make your emergency fund work for you.

        Why have an emergency fund?

        An emergency fund is like the fire extinguisher you keep at home. You hope you’ll never have to use it—but when there’s a need, you’re glad it’s there. 

        While you can plan for some foreseeable expenses, an emergency fund can help you manage all unplanned expenses efficiently. The current pandemic is an example of one such unplanned expense. 

        Here are a few cases in which you might dip into your emergency savings:

        • Job or income loss
        • Medical emergencies
        • Unexpected home repairs
        • Car maintenance
        • Family emergencies
        • Unanticipated travel (not your yearly leisurely travels)

        So, how much emergency fund is needed?

        Aim to have enough in a savings account to cover 6 months of expenses. 

        Everyone’s situation is different, so you can adjust that number based on your circumstances. Before calculating the amount of the emergency fund you need, it is important to calculate the minimum amount you need to get through the unavoidable monthly expenses. 

        This should include house rent, loan installments, utility bills, etc. Ensure that you don’t include avoidable expenses like movies, travel, etc. in this amount. 

        However, it is most critical to know where to park your emergency fund as the amount invested should not go down either and must deliver excellent returns. So, you must design it specifically to meet your contingencies.

        Where should you invest your emergency fund?

        Some of the options available to you are:

        1. Fixed Deposit: It is highly liquid and if you decide to withdraw before maturity, you can have cash deposited to your saving account. Your FD should be linked to your net-banking.
        2. Liquid Mutual Funds - They are considered to be safer than other debt instruments. Many liquid funds allow redemption of up to INR 50,000 or 90% of the invested amount. You can redeem any time. However, you  need to remember that withdrawal may take 1-3 days for funds to be credited in your bank..
        3. Cash at Home - Cash can be your biggest protection against any emergency or any circumstances in which you cannot withdraw money from the bank. You should  have up to 1 month’s expenses as cash for super sudden need!

        Considering the fact that each of these investment avenues behaves differently, it might be good to split up your emergency funds among them based on your comfort level. 

        Where you should not park your emergency fund?

        1. Equity: Never park your emergency fund in equity as the market is volatile. It would be unfortunate to have to sell an investment at a loss to access your emergency fund.
        2. EPF/PPF/ELSS: The number one rule of your emergency fund cash is that it should be money you can easily access in a pinch. Anything that has a lock-in period does not qualify; money in your Public Provident Fund (PPF), Employee Provident Fund (EPF) or Equity Linked Saving Scheme (ELSS) cannot be part of your emergency fund.
        3. Real Estate: Even if you have crores of money in real estate it is impossible to generate emergency funds out of it due to illiquidity.

        Therefore, the emergency fund is a personal insurance policy and not a wealth builder. The money must be easily accessible to you and your immediate family, or it may defeat the purpose if you are elsewhere or hospitalized and cannot access it. Safety and liquidity are the only two parameters that should be taken into account.

        Wealth Cafe advice 

        Emergency fund is like your parachute that saves you from a freefall in the event of a financial crisis. So, always give it the importance it deserves.

        It would be useful to keep reviewing your emergency fund requirements at least once a year, as there may be changes in your life like starting out a business, taking a sabbatical from work, addition of a new family member or a change in your lifestyle.

        Check out our course NM101: Maximise your savings - to learn how to manage your money and get started with savings.

        You can also enroll to NM 102: Build a Safety Net - to learn more about emergency funds and insurances

        What is a recession? What causes recession?

        Do you remember the financial crisis of 2007? It caused global economic chaos and an extended period of an economic slowdown. Well, that phase in the global economy was a phase of recession. So what is a recession and what causes it? Let us learn more about it.

         

        Let us first understand, What is recession?

        A recession is when the GDP growth rate of a country is negative for two consecutive quarters or more. It  is a significant economic downturn spread across the economy that lasts more than a few quarters.

        Although an economy can show signs of weakening months before a recession begins, the process of determining whether a country is in a true recession (or not) often takes time. A recession is short, but its impact can be long-lasting. It is based on key economic indicators like manufacturing data, decline in incomes, employment levels etc.,

        So during the period of recession, the economic performance of the entire country stagnates. Businesses across the country will suffer the effects of the recession. The government too will be helpless to an extent. Take for example the global recession of 2007-2008. It started due to the housing market fiasco in the USA, but the global economy suffered and its adverse effects were seen in India as well.

        What causes a recession?

        There are many theories as to what may cause an economy to go into an economic slowdown. Some factors have been identified that may cause an economic slowdown in a country that ultimately results in a recession. Let us take a look at some such factors.

        Economic shocks. An unpredictable event that causes widespread economic disruption, such as a natural disaster or a terrorist attack. The latest example is the recent COVID-19 outbreak.

        Loss of consumer confidence. When consumers worry about the state of the economy, they slow their spending and keep whatever money they can. Because close to 70% of GDP depends on consumer spending, the entire economy can drastically slow.

        High interest rates. High interest rates makes it expensive for consumers to buy houses, cars and other large purchases. Companies reduce their spending and growth plans because the cost of financing is too high. The economy shrinks. We saw this in 1980 in the USA, when the rates were raised to battle stagflation. But instead, this resulted in a recession.

        Deflation. The opposite of inflation, deflation means product and asset prices fall because of a large drop in demand. This encourages the consumer to wait until the prices to reduce further. This can cause a recession in the economy.

        Housing Crisis: When the prices of houses fall the owners start losing equity. They can not pay their mortgages or take second mortgages on their homes. This may lead to foreclosure. This was the cause of the Great Recession of 2007.

        Falling Wages: When the wages and salaries of workers do not increase with the same level as the inflation in the economy, the purchasing power of the public will reduce. He will not be able to afford the same goods and services that he used to. This can cause an economic slowdown.

        Economic Scandals and Frauds: Sometimes banks, large corporations, and even government institutions employ questionable practices and illegal activities to boost profitability. When such schemes and scandals are exposed, the entire economy suffers. Take for example the current financial scandal of Sahara.

        Stock Market: In a bear market, investors will pull money out of the stock market. This will drain capital out of the businesses and cause an economic slowdown. Crashes in the stock market are very harmful to the economy.

        How Does a Recession Affect Me?

        You may lose your job during a recession, as unemployment levels rise. Not only are you more likely to lose your current job, it becomes much harder to find a job replacement since more people are out of work. People who keep their jobs may see cuts to pay and benefits, and struggle to negotiate future pay raises.

        Investments in stocks, bonds, real estate and other assets can lose money in a recession, reducing your savings and upsetting your plans for retirement. Even worse, if you can’t pay your bills due to job loss, you may face the prospect of losing your home and other property.

        Business owners make fewer sales during a recession, and may even be forced into bankruptcy. The government tries to support businesses during these tough times, like with the PPP during the coronavirus crisis, but it’s hard to keep everyone afloat during a severe downturn.

        With more people unable to pay their bills during a recession, lenders tighten standards for mortgages, car loans and other types of financing. You need a better credit score or a larger down payment to qualify for a loan that would be the case during more normal economic times.

        Wealth Cafe advice:

        Recessions are unavoidable and can be hard to predict. So even in times of healthy economic growth, it is good to be prepared for an economic downturn. Preparing for a rainy day now can save you trouble down the life.  Here are some ways you can prepare your finances for the possibility of a recession:

        1. Make sure you have an emergency fund of at least 6-7 months of your salary 
        2. Live within your means. Spending more than you make is never good.
        3. Limit your existing debt. You should not have an EMI of more than 30% of your income.
        4. Diversify your portfolio and plan an asset allocation based on your risk tolerance. You can use this risk calculator- https://financial.wealthcafe.in/risk-calculator/ 

         

        Check out our course NM101: Maximise your savings - to learn how to manage your money and get started with savings.

         

        Also, please note that we are not indicating or moving towards recession currently. There are many things that are happening around us and the world. We are opening back after COVID 19 lockdowns and there is a supply demand mismatch, but every industry and everyone is working towards making things better. Invest as per your allocation and goals and keep a tab of the overall macro market.

        How to do budgeting - different ways in which you can budget

        There are many different budgeting methods out there floating around in the ocean of information that we call the internet. Some are simple and some are complicated.

        A lot of them don’t work. This makes it hard to find a method that will work for you.

        Budgeting methods to consider

        Before picking a new or different budgeting method, you might want to figure out where your money is going so that you know what areas need your attention.

        Once you have an idea of your spending habits and where you can make changes, five different budgeting methods can help you make it happen.  No single budgeting method is best for everyone, so it’s important to compare each and determine what works best for you.

        1. Zero-based budget

        The concept of a zero-based budgeting method is simple: Income minus expenses equals zero.

        This budgeting method is best for people who have a set income each month or at least can reasonably estimate their monthly income. After calculating your monthly income, add up your monthly spending and savings to equal that income amount.

        It’s important to plan out all your expenses as accurately as possible. If you go over one spending category, you’ll need to take cash from another category to make up for it. And if you forget a large expense, it could throw your budget off.

        Zero-based budgeting is the most time-consuming method because you have to dig into the details behind each line item.

        Since there’s less room for error with a zero-based budget, it might be a better option for someone who has already been budgeting for a while. Even then, it’s a good idea to keep extra cash in your checking account as a buffer. Also, have at least a small emergency fund in case you incur a large unexpected expense.

        2. Pay-yourself-first budget

        The pay-yourself-first budget is another simple budgeting method that focuses primarily on savings and debt repayment.

        Paying yourself first is one of the golden rules by many financial planners. Each month you should remove a fixed % of your income as savings and keep it aside. Now use the remaining amount to spend on your monthly expenses.

        So how will you ensure you are paying yourself first?

        We do this by having two separate bank accounts.

        1. Income account – in which your salary/fees, basically any earnings, are credited each month.
        2. Investment Account – in which you shall transfer your savings from your salary account. This account will be for all your investments. You will make all your investments, for example, insurance premiums, mutual fund (SIP), deposits, and equity, from this account.

        This system of having two bank accounts will ensure that you are saving first – as you MUST transfer a fixed sum of money from your income account to your investment account.

        This budget is best for someone who struggles with saving each month or doesn’t want to focus too much on budgeting each expense.

        3. Gullak Method of budgeting/ Envelope system budget

        This budgeting method is similar to the zero-based budget but with one big difference: You do it all with cash. In an envelope budgeting system, you plan out how you’re going to spend your money each month and use an envelope for each spending category. Then you withdraw as much cash as you need to fill each envelope based on your budget.

        As you go grocery shopping, for instance, take your grocery envelope and pay for your items with cash. If you run out, that’s all you can spend in that category for the month unless you want to take cash from other envelopes. Avoid raiding other envelopes too often, though, because it can cause a snowball effect and you can run out of cash before the end of the month.

        The biggest proponent of the envelope system, so it’s a great option for people who espouse their beliefs about money, which focus heavily on paying down debt quickly and using cash, not credit cards.

        But it’s not a good budgeting method for someone who doesn’t feel comfortable having that much cash on hand or prefers using credit cards or debit cards.

        4. 50/30/20 budget

        The 50/30/20 budgeting method is straightforward and requires less work than the zero-based and envelope budgets. The idea is to break down your expenses into three categories:

        • Necessary expenses (50%)
        • Discretionary expenses (30%)
        • Savings and debt payments (20%)

        This budgeting method is a great option for newbie budgeters because it doesn’t require meticulous tracking of all your expenses. You can succeed with this budget as long as you know what counts as a want versus a need and put enough money toward savings and debt.

        The main drawback is that the 50/30/20 rule might be unrealistic for people who have a lot of debt or have big savings goals because 20% isn’t a lot.

        But the good news is that you can customize it to fit your needs. For example, you may want to consider increasing the savings and debt repayments category and decreasing the discretionary or necessary expenses categories.

        In other words, don’t get stuck on the 50/30/20 proportions. Tailor the concept to your needs.

        5. The ‘no’ budget

        This “budgeting” method is based solely on your income and expected expenses and moving your money around each month with intention. That’s it.

        Before You Start the “No Budget” Method, Do a Quick Assessment of Your Income and Typical Monthly Spending

        • Determine your income
        • Determine the total of your bills each month
        • Estimate how much your other spending costs per month
        • Figure out how many extras there would be for debt/savings/investing each month
        • Use these as a baseline number each month going forward

        How to Implement the “No Budget” Method Every Month

        Step 1: At the beginning of the month, as soon as you get paid, pay all your bills first.

        Step 2: Next, save money or pay off the debt in the amount you’ve determined you can afford each month.

        Step 3: Whatever is left over is yours to spend on your variable expenses until you get paid again.

        Important: rules for using the “no budget” method

        1. Don’t use credit cards. this ensures you’ll never overspend.
        2. On the last day of the pay period/month, move any extra money in your bank account over to savings or to pay off debt
        3. Keep a buffer amount in the saving account just in case
        4. Check your bank account regularly
        5. Set up automatic investments and your bills
        6. Review spending at the end of the month 

        While the “no” budget sounds easier than the other methods we’ve listed, it’s not always easy to tell yourself “no.” This budgeting method is best if you’ve demonstrated spending discipline in the past and are confident that you can continue that streak.

        Also, it’s best if you use only a debit card with this budget because it’s tied directly to your bank account and automatically updates your balance.

        Wealth Cafe advice:

        The important thing is to create your own budgeting rather than trying to conform to someone else’s.

        Do that and you will have clarity on how to reach your goals, and you won’t have to worry about being limited in your budget.

        You cannot be in complete control of your money if you’re not budgeting in the best way for you.

        Budgeting method Good for…
        1. Zero-based budget Tracking consistent income and expenses
        2. Pay-yourself-first budget Prioritizing savings over spendings
        3. Gullak Method of budgeting Making your spending more disciplined
        4. 50/30/20 budget Categorizing “needs” over “wants”
        5. The ‘no’ budget Lowering and avoiding unnecessary spends

         

        To conclude, there are different methods of preparing budgets, and there is no best method that fits all. Whatever you do, the important thing is that you develop the habit of managing your money in a way that helps you improve your financial health and achieve your goals.

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

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