Smart investing: Time to re balance your investment portfolio

Investing isn’t something that’s a one-time exercise. Sure, you need to put a great deal of thought into selecting the investments that make up your portfolio. But once your investment portfolio has been ideally constituted, does that mean your job is done? Surely not. Your investment portfolio needs to be analyzed from time to time to check if it’s still ideally aligned with your risk-return profile

For instance, you invested in a mutual fund. The fund is up 50%. You are pleased and redeem your money. 

Before we discuss if it was a good idea to redeem and exit your mutual fund investment, we have to ask, why did you invest in the fund? Was it for a specific goal? Was it to create long-term wealth? 

If you redeemed because you reached your financial goals, then BRAVO!!!  On the other hand, if you are a long-term investor, then you probably need to rebalance your portfolio on a periodic basis. It is important for two reasons: risk management and improved returns.

As markets fluctuate, rebalancing your investments will require buying or selling some portion of your mutual funds so that your asset allocation is in line with your risk profile.

Why do you need to rebalance?

Rebalancing is probably one of the most overlooked aspects of Investing. 

If pedaling is like injecting savings into your portfolio (by far, the hardest part) and wheels are transforming it into returns then what is rebalancing?

As conditions change, gears help to keep the legs spinning at the pace you want.  The same goes on with rebalancing. Adjusting the gears so that you won’t injure yourself when facing an uphill battle or strong winds.

Over time your strength may not be the same anymore, at which point the gears you use may change more permanently.

Bulls and Bears – when you need to take action!

 

When should you rebalance your portfolio?

Now that you’ve understood the portfolio rebalancing meaning, it’s time to move on to the next big question – when should portfolio rebalancing be done? Typically, there are different triggers that make portfolio rebalancing necessary.

Here’s a preview of some such scenarios or situations when you need to revisit your portfolio and check if it’s still aligned with your goals.

Market Condition

A standard rule of thumb is to rebalance when an asset allocation changes more than 10%. You can refer to my article- How am I investing in current times 

Changes in your risk profile

When you first constituted your investment portfolio, you may have been an aggressive investor who was open to taking more risks. But with time, your risk profile could have undergone changes. You may have become less tolerant of risks, reducing your risk taking capacity. In such a case, with changes in your risk profile, portfolio rebalancing becomes necessary.

A new financial goal on the horizon

Over time, new financial goals may be added to your objectives. When you start a family, for instance, you will have to make room for additional goals like paying for your child’s college education. When new goals like this are added to your investment objectives, you may need to revisit your portfolio to ensure that it’s capable of meeting these new targets. If it’s not so equipped, portfolio rebalancing can help.

Fast-approaching retirement

When you’re nearing retirement, it becomes increasingly essential to ensure that your investments are properly aligned to meet your retirement goals. Rebalancing your investments may be necessary to help you achieve that target corpus you have in mind. So, if you find yourself just a few years from the big day, check your portfolio and use portfolio rebalancing strategies to adjust the asset allocation, if needed.

 

Portfolio rebalancing strategies: How to rebalance your portfolio?

Rebalancing your portfolio will depend specifically on your investment needs and goals. However, a few simple steps can help you understand the process better. 

  1. Have a target asset allocation in place. Factor in your life goals, your risk appetite, and your retirement goals to make your asset allocation aligned with your investor profile. 
  2. Constitute your investment portfolio based on your required asset allocation.
  3. Revisit your portfolio every six months or every year to check if the assets therein continue to adhere to the original target allocation.
  4. Also, revisit your asset allocation target periodically to ensure that it is in tune with your life goals.
  5. In case your target allocation is not met, you may have to purchase new units of some assets or sell off existing units of other assets as needed, till the right asset allocation is achieved once more.

Wealth Cafe advice: 

Rebalancing is an important part of managing an investment portfolio and is typically needed just once per year. Through rebalancing, you can keep the risk level of your portfolio consistent and perhaps even enhance your returns. Essentially, rebalancing will help you stick to your investing plan regardless of what the market does and also help you maintain your original asset-allocation strategy. When rebalancing, though, you have to be careful not to trigger excessive taxable income in taxable accounts. 

If you’re unsure about how to rebalance your portfolio, it’s always a good idea to seek the help of a financial advisor. We are SEBI registered investment advisors and can help you make sound investment decisions – you can reach out to us at iplan@wealthcafe.in, in order to help you make a financial plan for yourself.

Advice to to-be married/newlywed couples on money

Starting your new life as newlyweds means blending your worlds, and that includes your finances. Talking about your finances may not be the most romantic topic of conversation, but it is an important one to have. That’s why it’s crucial to find the best advice for newlyweds that will help you manage your money the best way possible.

Even if you already lived together before getting married, managing your money will change after you become legal partners. These money matters may be awkward to talk about at first, but doing so will improve your communication skills and prevent any money misunderstandings in the future.

Also, working together as a team with your finances will strengthen your relationship and help you achieve your money goals together! 

In order to help you out, we are finally announcing the pre-booking of our course- Honey & Money.

Financial Advice for Newlyweds

Don’t let your money matters put a damper on your relationship. Here is some advice to newlyweds to keep their finances in order!

1. Discuss Financial Priorities

Talking about money can be stressful, but it’s important to talk about your financial priorities with your partner.

  • Is saving and investment a major priority for you, or do you prefer to spend money at the moment?
  • How much of your income are you willing to spend on luxuries versus necessities?
  • If you plan to have children, how much do you want to support them financially?
    • Will you pay for child care, or will one of you be a stay-at-home parent?
    • Will you pay for the entirety of their college education?
    • Do you expect your children to support you financially in your old age?

These questions don’t have a “correct” answer. Making sure that you and your partner have similar priorities, or can find a compromise somewhere in the middle, can help avoid financial arguments in the future.

2. Talk about your family financial history

Discussing your family financial history is one of the most critical newly married couple tips you can do. Talking about your family’s history with money is a great way to open up the conversation about your marriage finances. 

Revealing how your parents handled money, what you learned from their financial resume, and how they taught you to save or spend can be helpful information for couples.

This can also help you figure out if you’ve inherited financial insecurities or have any money blocks you need to work past. This way, you can tackle them as a team and work towards financial success!

3. When in Doubt, Spend Less on Your Honeymoon

Keep this in mind as you’re planning your honeymoon. Your memories won’t revolve around where you were cheap – you won’t even remember it at all. It can be memorable even if you stayed way out of the city center in a much less expensive hotel. 

This is a prime opportunity to learn about one of the fundamental rules of personal finance together. Money spent on nonessential stuff that you won’t remember is money wasted. Remember what’s essential is you being with your partner. Don’t burn money on other stuff if you are out of budget. All you’ll do is hurt you and your partner in the future.

4. Don’t hide your spending habits

A common issue that causes conflicts in marriage is problems with overspending. Overspending can rack up debt, cause mistrust between partners, and shows a lack of respect within the marriage.

Avoid these relationship issues by consulting your partner before making big purchases and being open and honest about your spending habits.

5. Open A Joint Account But Keep Existing Separate Accounts

Before it is even a question of making decisions about retirement planning in a partnership, couples often face a tense conflict in their relationships much earlier. The conflict regarding the allocation of financial resources comes almost unavoidably to all couples.

We advise that both partners should first keep their existing accounts and also open a joint account to which each partner makes a monthly deposit. This joint account will ensure that all your expenses are running from the common account. We have discussed it in detail in our session 1 of the course – Managing cash flows.

6. Start an emergency fund

You never know what the future holds for you, so it’s always best to be prepared. You will never regret starting an emergency fund after marriage. For example: if you lose your job, if you are suddenly expecting a baby, if the roof leaks, the car breaks down, and the list goes on.

The size of the fund would depend on several factors such as your income, lifestyle, and number of dependents, existing debt, and so on. It is advisable to save for 3-4 months at least so that the amount should ideally cover your expenses.

Some of the options available to you are:

  1. Fixed Deposit (should be linked to your net-banking)
  2. Liquid Mutual Funds
  3. Cash at Home – Up to 1 month’s expenses (For super sudden need!)

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, the addition of a new family member, or a change in your lifestyle.

7. Create financial goals as newlyweds

Some of the best advice for newlyweds is to create financial goals together. Having goals set can help you achieve your big visions in life! It will be much easier to reach your goals if you can work toward them together, and it can help reduce tension if you make sure you don’t have goals that directly contradict one another’s.

  • Do you want to live in a lavish house or a small one?
  • Would you rather rent or own your home?
  • Do you want to retire early or work full careers?

8. Discuss your finances with your spouse regularly 

Your marriage finances should not be swept under the rug. Circumstances are bound to change at various points in your married life. So make it a habit to review your finances on a monthly or bi-monthly basis to ensure you are staying true to your household budget.

This is why it’s so important to have “money dates”. In simple terms, a “money date” is a regularly scheduled conversation between you and your partner where you discuss finances. They’re an opportunity to talk about your day-to-day finances, as well as prepare for any short or long-term financial plans in a fun manner.

While money dates can be enjoyed by couples at all stages of their relationship, we recommend you start as soon as you move in together and begin sharing large expenses together. This allows you to build the habit of talking about money together and makes the conversations easier over time. Best of all, you’ll quickly start to feel like you’re on the same team, working towards shared goals together.

Getting married is an exciting but potentially stressful time. These newly married couple suggestions can help you budget better, create goals, and most importantly find enjoyable things to do together too. Why not get started by taking our free financial courses together to work towards financial success!

Pre-book to our course- Honey & Money to get  70% discount now – click here.

I am unable to ‘Save’ any money ! Guide me.

A common question people ask is, “Where does all my money go?” Though they mean it as a joke, it’s said with a sense of sadness. But the reason they don’t know where their money goes isn’t that they lost it or forgot the pin number to their bank card. They don’t know where their money is going because they don’t control the cash flow pattern of their money, their money controls them.

Once a young man named Raj approached us for our advice, as he was facing the same issue – how should he manage his expenses?. Raj is a bachelor living in Pune alone in a rented house away from his hometown, Lucknow. It’s his first job so he wanted to enjoy his money but he is also responsible to send some back to his parents however, he just cannot save. Every month he feels, this is it, I am going to save money today but it just never happens. He approached us as he had no surplus of money left at the end of the month and hardly had any savings.

Are you A RAJ !!?

Does this happen to you? Do you feel you are doing everything right but you are still not saving any money at the end of the month? Let us help you with it.

Let’s review Raj’s monthly income and expenses and help him find some money to save!

We believe everyone can save a bit if they just push themselves a bit.

 

Step 1 -Review of his monthly income & expenses – HIS CASH FLOWS

Raj’s Expenses:

ParticularsAmounts
Rent15,000
Toiletries + Basic monthly expenses5,000
Bills5,000
Sending to his family10,000
Food 18,000
Traveling6,750
Misc2,500
TOTAL62,250

Raj’s Income = INR 60,000

Extra Spend/Loss = INR 2,250

Looking at his expenses it was a little difficult to figure out until we had a close look at it. Most of the expenses like Rent, Toiletries + Basic monthly expenses like utility bills & the amount that he uses to send his family were expenses that we couldn’t fidget with and were his absolute needs. Further, we noticed that he was spending INR18,000 on food! So we asked him to share more details of the same. Traveling expenses and Miscellaneous expenses were also much more than one would expect someone to spend in Pune on a monthly basis. Therefore, we further explained to him how such expenses were harming his savings.

On a closer look at his expenses, we guided him to look at cheaper alternative options for things he was splurging (provided he was ready to make the shift). We also guide him on how these reduced expenses would increase his savings and when these savings are invested it would grow to be a substantial amount for him.

Wealth Cafe Solution:

Food:

So Raj was ordering in every meal (almost) and while it seemed fun and easy, it was making a huge hole in his pocket. So, rather than ordering we advised him to opt for having help to cook at home. Making food at home isn’t free, but it could probably squeeze out savings if, 

  1. you buy your groceries in bulk 
  2. if you are ready for home-cooked ‘good’ and ‘healthy food’
PrincipalNo of meals 

(per day)

Cost per mealDaysTotal cost a month
When you order from outside
How much do you spend23003018,000
When you cook at home/or have help to do that
Help expenses3,500
Grocery spends5,000
once a week you still order130051,500
10,000
Monthly Savings8,000

Further, we explained to him how grocery shopping should be done, with the intention of saving money. The key here to save money is by buying groceries in bulk and managing it wisely. I have shown it in detail in the table below by taking an example of rice and wheat flour.

RationRice*Flour*Total
Where I order 1 kg18055
how many times ordered55
The total cost of 5Kg9002751175
Where I order 5 kg directly639269908
Monthly Savings2616267

*Price referred from dmart website.

By buying Rice and Flour in bulk, one could save approx 23% in comparison to buying in small quantities. Raj could follow this with other grocery items as well so as to save his money.

By just shifting your monthly habit of ordering into cooking at home, he can have enough savings to start investments and SIPs. This may seem a very small thing but trust us many people get stuck to order in and this just changes everything in your monthly budget.

Traveling: (7 km)

PrincipalCost per day (both side travel)DaysTotal cost a month
Uber/Auto/Taxi270256,750
Public transport (train + bus)50251,250
Monthly Savings5,500

By using an alternative, i.e, public transport Raj could save INR5,500 every month. That is INR 66,000 every year. Public transports are everywhere and paid for by our taxes. Which means it’s a bit of a waste if we don’t use them at all, right?

Miscellaneous

A major proportion of Raj’s miscellaneous expenses consisted of buying cigarettes. It is easy to look at small purchases and say “whatever, it’s only INR 15.” As standalone instances, INR 15 for anything isn’t a lot of money. However, spending INR 15, on a cigarette 5 times a day adds up to a lot of money per year.

In fact, it’s INR 27,000!

PrincipalNo of cigDaysCost per cigTotal cost a month
How much do you spend530152250
Reduce it 1 a day13015450
Monthly Savings1800

If Raj could decrease his cigarette intake from 5 times a day to once a day, it would save INR 1800 a month whereas INR 21,600 a year. I need not tell, as a bonus, it saves his doctor’s expense as well in the coming future.

His expense now:

PrincipalAmounts

(Before)

Amounts

(After)

Rent           15,000           15,000
Toiletries + Basic monthly expenses             5,000             5,000
Bills             5,000             5,000
sends family            10,000            10,000
Travelling              6,750                 1250    
Food order (does not cook)            18,000           10,000
Misc               2,500                     700
TOTAL            62,250              46,950


We do not deny the fact that savings are easy but it is not impossible. You can start with savings of INR 2000 each month or look at at least 10% of your monthly income and move forward. By cutting down his expense wisely Raj could save 15,300 (approx 25%) in comparison to before. He is saving INR 13000 monthly (INR 1,56,000 yearly) from his income, whereas he was spending more than his income with no surplus of money before.

Where we always talk about the approach of pay yourself first, where you transfer your fixed savings to a second bank account so even the urge of spending your money does not come in the way of your savings – NM 101: Maximise your Savings

 

So now that you know what you could be saving. Why not invest it? 

As you see, he has a savings of 13,000 Rs, but by giving him INR 3000 for overheads, he could still invest INR 10,000. When making investment decisions, and investors’ portfolio distribution is influenced by factors such as personal goals, level of risk tolerance, and investment horizon. As Raj was towards balanced investment, his Debt-Equity Mix will be 50% debt and 50% equity. He invested INR 5000 in equity mutual funds which he could keep untouched for long-term goals whereas the other INR 5000 was diversified in liquid/short-term debt funds for emergency and short-term plans.

Did you see how easily the portfolio was diversified? You can learn more about diversification and how to invest in our course – NM 105: Plan & achieve your goals. Once he had a proper hang of investing and could increase his risk tolerance, he could diversify his investments even more after doing proper research. But remember, diversification of assets should be up to a limit. Over diversifying can hurt your investment returns. 

 

LET’S GIVE HIM AN ADDITIONAL INCENTIVE TO SAVE! LET’S GIVE ONE TO YOU TOO !!

Spoiler: something beautiful happens. He builds more wealth!

Let’s assume Raj makes a 11.50 % average return on investing INR 10,000 (expected equity return =15%, Expected debt return = 8% and based on his ‘balanced’ risk profile)

Five years from now… he would have  ₹8,05,849

Ten years from now… he would have  ₹22,34,032

And in Twenty years… he would have  ₹92,51,011

Don’t wait. Don’t hesitate. Don’t ponder and contemplate. Get started. Chances are good that at least some of the suggestions on this list will work for you and help you spend less money. By reducing your outflow and directing more money to financial goals, you’ll be more successful in saving for big things so you can grow your net worth and build real wealth over time. It’s worth the effort. 

 

To learn more about Saving & Investments enroll in our course NM 101: Maximize your savings

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EDLI Scheme 2021: Features & Benefits

The scheme of the name EDLI or Employee Deposit Linked Insurance is not one that many are familiar with. It is a Life Insurance of Rs.2.5 lakh that is built into your EPF Life Insurance of 7 Lakh.

Earlier the maximum ceiling was Rs.6 lakh, Government increased the maximum limit to Rs.7 lakh with effect from 28th April 2021.

Features of EDLI Scheme 2021

  • All employees who are members of EPF are automatically eligible for EDLI.
  • This Life Insurance coverage is irrespective of whether the death occurred during working hours or non-working hours.
  • It covers the death of an employee, irrespective of the cause of death.
  • There are no exclusions under this plan.
  • Coverage and premium will be purely based on your salary but not on age or gender.
  • Earlier there was a condition that one must complete a year to be eligible for EDLI. Recently they removed such restrictions. Hence, you are covered from the first day itself.
  • There is no maximum age set for this insurance.
  • You no need to add nominees separately. Your EPF nomination itself is considered for this scheme.
  • Your Employers can also set up a separate insurance scheme for their employees with approvals from the EPFO if they find that the current coverage is low.
  • You get covered even if you shift jobs and work for another employer covered by the EDLI scheme before you complete one year of service. Earlier, 12 months’ service was applicable under one establishment.


EDLI Scheme 2021 – EPF Life Insurance of Rs. 7 Lakh

Under new changes, now EPF offers Life Insurance of Rs.2.5 lakh to Rs.7 lakh. The employee will not contribute to EDLI. Only your employer will contribute to it. It is 0.5% of Rs.15,000 or Rs.75 per month to the maximum (based on your actual Basic+DA). The maximum amount payable by the employer is Rs.75.

How is Employees’ Deposit-Linked Insurance (EDLI) calculated?

The average monthly salary (Basic+DA) drawn (subject to a maximum of Rs 15,000), during the last 12 months preceding the month in which the employee dies, is first multiplied by 35 times (Earlier it was 30 times). This is added to 50% of the average balance in the account of the deceased in the provident fund during the preceding 12 months or during the period of his membership subject to a ceiling limit of Rs.1.75 lakh (previously it was Rs.1.5 lakh), is also paid to the beneficiary family. 

Note that Rs.15,000 is the ceiling under the EDLI scheme for the purpose of this calculation even if your basic salary exceeds this amount.

The minimum payable will now be Rs 2.5 lakh while the maximum will be Rs 6 lakh.

Let us assume that Mr.A’s salary (Basic+DA) at the time of death is Rs.10,000. Then assume his last 12 months’ average salary was Rs.10,000. Then we have to multiply this by 35. This will be Rs.3,50,000.

Now we have to add 50% of the average balance in the account of Mr.A during the preceding 12 months. Assume his EPF balance for the last 12 months is Rs.1 lakh. Then 50% of this is Rs.50,000. However, the maximum ceiling is Rs.1.75 lakh. Hence, his nominee will receive Rs.50,000 as a bonus but not Rs.1.75 lakh.

So in total, his nominee will receive Rs.3,50,000+Rs.50,000=Rs.4,00,000.

Now let us assume a simple calculation like one’s salary is Rs.15,000, then 35 times of Rs.15,000 is Rs.5,25,000 and the bonus added to the maximum is Rs.1,75,000. Hence, the total maximum benefit under the EDLI is Rs.7,00,000. The benefit will not go beyond this amount.

How to claim the EDLI Benefit?

  • A nominee can claim the amount.
  • In case there is no nomination, then the legal heir can claim the amount.
  • If the nominee or legal heir is a minor, then a guardian of the minor nominee can claim the amount.
  • You have to fill the forms like Form 20 (for EDLI), Form 10D/10C (for claiming the Provident Fund dues and Pension/Withdrawal Benefit as applicable).
  • All details should be in BLOCK LETTERS.
  • Provide bank details (better to attach a cancelled cheque copy for accuracy of bank details).
    Attach the death certificate of a deceased employee.
  • Guardianship certificate (If the claim is on behalf of a minor family member/nominee/legal heir is by other than the natural guardian.)
  • Succession certificate (in case of a claim by the legal heir).
  • In case the members were last employed under an establishment exempted under the EPF Scheme 1952, the employer of such establishment should furnish the PF details of the last 12 months under the Certificate part and also send an attested copy of the Member’s Nomination Form.
  • You have to send such a filled application to the EPFO Commissioner through the employer.
    In case the company closed or they are not cooperating for a claim, then you have to get the claim form to be attested by any one of the following officials-Magistrate, A Gazetted Officer, Post/Sub-Post Master, President of the Village Panchayat, where there is not Union Board, Chairman/Secretary/Member of Municipal/District Local Board, MLA or MP, Member of CBT/Regional Committee EPF, Manager of the Bank in which the Bank Account is maintained or Head of any recognized educational institution.
  • A claim must be settled with 30 days of such submission.
    However, if there is any fault in filling the form or processing, then you will receive the letter from EPFO for the same and that too within 30 days.
  • If EPFO does not settle the claim within 30 days, then EPFO Commissioner will be liable to pay the 12% per annum interest on such claim amount from the date of the set period for claim settlement.

Conclusion: For some, this Rs.2.5 lakh to Rs.7 lakh insurance may be a small amount. However, for many families, in case of the sudden demise of an employee, this amount would help a lot.

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An Education Loan Guide Book

Quality education comes with a hefty price tag. In today’s education arena, competition is stiff and it is often the ones with the heavily lined wallets that beat out the rest. Fearing losing out on a seat in a premier institute because of lack of funds, parents try their best to gather and keep aside as much funds as possible; but despite their best efforts, they may tend to fall short. During this time education loan comes to one's rescue, as it helps to bridge the gap between the shortfall and the needed money.

What is an Education Loan?

The term education loan refers to the sum of money borrowed to finance school or college-related expenses. Repayment of the loan is generally deferred when the students are studying in school and a six-month grace period is provided post-graduation.

Types of Education Loan in India

In India, the types of Education Loan are broadly classified as Undergraduate Education Loan Graduate Education Loan Career Education Loan

1.      Undergraduate Education Loan: It is a loan which can be availed by students who have completed their secondary education and are planning to pursue further courses to enhance their skills for securing a job.

2.      Graduate Education Loan: These loans can be availed by students who are planning to pursue an advanced degree or higher education at colleges. To apply for this loan, students should have completed theirs under graduation courses.

3.      Career Education Loan: As the name suggests, the career education loan can be availed by students who prefer to attend undergraduate career-oriented programmes provided at technical and trading schools and colleges (like ITI) in the country.

How Does An Education Loan Work?

An education loan helps students to cover the expenses incurred for their academic fee and it also covers their non - academic expenses which occur during their tenure as students. The provision of a student loan unlike any other kind of loan comes in with a set of payment terms and the interest will be charged over the initially borrowed money. An education loan is also known as Student Loan. The EMIs for student loans should be paid over monthly installments which allows the applicants to repay the loan amount through step - by - step procedure.

Eligibility for an Education Loan

·         The applicant should be a resident Indian.

·         The applicant should be aged between 16 - 35 years.

·         The applicant should have either secured admission in any of the designated educational institution or a college which is approved by the bank. Most of the government and some of the top private ones are being recognized by the relevant competent government body and are usually included in the list of approved institutions for an education loan.

Please Note: The education loan covers the complete school fees until the completion of the course and is disbursed to the institution directly from the bank (the money will not be handed over to the students). Any kind of boarding and lodging expenses incurred by the students (includes relocation to a different city for studies) should also be included in the education loan.

 

List of Expenses included in Education Loan

A student loan covers almost all kinds of academic expenses incurred by a student. Almost all the banks in India provide loans that cover both tuition fees as well as other institutional expenses. It is better if students can check beforehand if their chosen bank or the financial institution will cover all the expenses or not to avoid inconvenience at a later point in time.

Academic Expenses Covered in an education loan

·         Registration Fee

·         Tuition Fee

·         Capitation Fee

·         Examination Fee

·         Counselling Fee

·         Laboratory Fee

·         Hostel Fee

·         Library Fee

·         Transportation Fee

·         Food (Mess) Fee

·         Study Visits and Education Tour Fee

Non - Academic Expenses Covered in an education loan

·         Building Fee

·         Student Insurance Refundable Caution Money

·         Transport and Commuting Expenses

·         Laptop

·         2 - wheeler Equipment and Project Expenses Student Welfare Contribution

·         Entrance Exam Fee (GMAT, TOEFL, LSATS, MCAT, GRE, SAT Exam and so on)

·         In-Flight Expenses (abroad studies)

 

List of Things to Keep in Mind Before Applying for an Education Loan

Opt your Institute Carefully

Most of the Indian banks and financial institutions will have a list of accredited universities list and they usually restrict themselves to lend loans to the universities or colleges which are listed with them. They also have a few blacklisted universities for which applications will be rejected. If in case, your chosen institute is not on the list of the bank's pre-approved universities then it is better to look out for banks or other institutions that will provide education loans based on the reputation of the institute.

Such banks take note of certain factors like rating, job placement facility, infrastructure into consideration before approving education loans. Students who are planning to study in India can apply for universities that are recognized by the government, University Grants Commission (UGC), Institute for Mediation and Conflict Resolution (IMCR), All India Council for Technical Education (AICTE), and so on. Those who are planning to study abroad should look for the university's reputation and standing.

Maximum Amount for Education Loan

For higher education in India, one can secure a loan of up to Rs 75 lakh with a maximum repayment tenure of up to 15 years. If you are looking for abroad education, then the maximum loan amount available for students is Rs 1.5 crore with a maximum 15 years repayment period.

Interest and Processing Cost

The interest rate for education loans in India stands between 8.50% - 15.20%. Some of the banks provide interest rates at discounted rates if you pay interest on time. Few banks even provide a concession for women applicants at a rate of 0.5 percent. One should also check for the processing fee which is refundable at times based on the bank from where you are procuring the loan amount. Some of the lenders fix processing fees between 1% - 2% of the entire loan amount. In the case of public and private banks, the processing fee ranges between Rs 5,000 - Rs 10,000. Please Note: One may have to incur additional charges like administration fees and service charges during the loan application process.

Decide on the Marginal Amount

Marginal amount refers to the amount which one needs to pay and it ranges between 5% - 15% based on several factors such as the rating of the institute, location, subject. Bank usually funds 80% - 90% of the total required amount for education the remaining part has to be pitched in by you (or parents) from your saved funds. Some of the banks and financial institutions even offer to foot the entire cost based on the student's academic background and performance over the years.

Collateral And Co-Applicants

As per the RBI norms, if your loan amount is less than Rs 4 lakh, then you need not pledge any collateral nor you will have to arrange for anyone as a third-party guarantee or as a co-applicant. If your loan amount exceeds Rs 4 lakhs, then you may be asked by your bank to arrange for a co-applicant. Banks will seek collateral if the loan amount exceeds Rs 7.5 lakhs.

Repayment Holiday

In the case of a student loan, banks usually give a moratorium period (time frame wherein you have availed a loan but has not started for repayment) and hence it is better if you can plan and pay interest during this tenure as interest will accumulate on a simple interest basis during this period. If you start paying your equated monthly installments (EMIs) during the moratorium period, then you can prevent the loan amount from becoming bigger.

 

Each year, millions of college hopefuls flood into Indian banks to get financial support for their college careers. It can seem daunting, with dozens of forms from multiple institutions, but knowing where to start and what to ask can make a world of difference.

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What Should You Do With Your Old Inactive EPF Account?

I have come across many individuals who have changed jobs or quit their jobs and have their EPF account lying dormant. Some are lazy and some just do not know what to do. And others believe that they are earning interest on the balance lying in their EPF account.

EPF currently provides the tax-free 8.5% rate of interest. This is one of the best debt products which is offering such high returns with utmost safety. Hence, many salaried usually not withdraw their EPF and keep it as it is. However, there are certain rules to it. Don’t blindly believe that you can keep your EPF account as long as possible.

Existing Rules of EPF

Any EPFO Account which fails to make contributions for 36 continuous months (3 Yrs) is called an INOPERATIVE Account. In addition to this, if you applied for a withdrawal but due to wrong address, bank details, or some other reasons you fail to claim the amount and laying with EPFO for 36 months (3 Yrs) from the date of it become payable are also classified as INOPERATIVE Accounts.
However, later on, EPFO clarified that interest will be payable on such a non-contributory period for up to the age of 58 years of the member, this 3 years definition turned useless. As per the current rules, EPFO will credit the interest on such non-contributory accounts up to the age of 58 years. After 58 years, the account will be treated as INACTIVE (but not immediately after 3 years non-contributory period).

The retirement age for EPF is 55 years. Hence, EPFO will pay you the interest up to the age of 58 years (Retirement age+3 Yrs).

However, interest earned on such inactive accounts is taxable income for you. If you resign, retire, or get terminated from your job, but do not withdraw your EPF immediately then interest income earned on your EPF balance is taxable during this non-contributory period. The interest income earned during your employment remains tax-exempted though.

How much interest will you earn in an inoperative EPF account?

Unclaimed money from EPF accounts, as well as from small saving schemes, insurance companies, etc. was supposed to be transferred. As per the Senior Citizens Welfare Fund (SCWF) regulations, after an account has been classified as inoperative for ten years, the amount remaining in it is to be transferred to SCWF. If you do not withdraw the EPF account, then it will be moved to the SCWF account, where it will earn the interest rate of SCWF (declared by Govt on annual basis). The recently declared interest rate on Senior Citizen Welfare Fund interest rate for FY 2020-21 is 5.81%.

So if you keep your money in EPF accounts untouched after 10 years, it will only earn 5.81% (as of today). This interest is determined every year by the GOI.

Financial Conclusion: what you should do?

Your account will turn inactive only when you reach the age of 58 years and not withdraw the EPF balance (Earlier it was 3 years from the non-contributory period).
From the date of non-contributory EPF (i.e. the day you stop working and contributing to your EPF account) to the time of withdrawal, you are eligible to earn the interest. However, such interest is taxable.
If you keep your non-contributory EPF accounts for more than 10 years, then EPFO will move your account to SCWF.
Your EPF account will remain with SCWF for the next 25 years and earn the interest rate declared by Government on such SCWF
After the completion of 25 years with SCWF, if you still not withdraw your EPF account, then Government will forfeit the money. To get back the money, you have to knock the court.

Do remember that such a movement to SCWF will not happen automatically. Instead, EPFO will inform you through the contact details you linked to EPF accounts. If you still not respond and not withdraw, then they move to SCWF.

Hence, considering all these rules, it is always best to transfer your old EPF accounts to the existing active EPF account immediately. Otherwise, withdraw the EPF balance immediately after 2 months from the non-contributory period or unemployment.

 

Disclaimer: - The emails are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.

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How To Get Your Kids Started On Managing Finances

Hi there!

We have always firmly believed that money is a habit best developed as a child. Some concepts like Savings, spending smartly, and not borrowing for unnecessary things is best inculcated in our formative years.

For kids of ages 3 to 5

They've probably started collecting some decent pocket money from birthdays, holidays, or a small weekly allowance. This is when we can start to teach them the three basic things we can do with money: save it, spend it, and give it. You might set up three jars for them so they can more easily divide up their money into the save, spend, and give categories.

We’re not talking about a lot of money here, so as long as they’re putting something into each jar. Maybe the “spend” jar gets used to buy a candy bar in the grocery store or snacks for themselves. The “save” can be used for a special toy they want to splurge on. And the “give” money can be pulled out to give gifts to their parents/grandparents, buy something for your house help.

Introducing the idea of saving, spending, and giving money now, in its most basic form, will lay the foundation for how you talk to them about money in the years to come.

For kids of ages 6 to 10

By this age, kids are starting to develop a deeper understanding of how money works. They understand that grown-ups have jobs to make money and that much of what they see around them—their home, the car, their Friday night pizza dinner—is paid for with money. You can start to explain to them the difference between using cash, a debit card (cash that you keep at the bank and the bank then sends to the store), and a credit card (you borrowed that money and will have to pay it back to the bank later).

This is a good age to start letting them attempt to make their own simple purchases in a store. They’ll need your help with counting out the correct amount or with prompting when it’s the right time to hand over the money, but it’s good practice that will build their confidence about how the process works each time they do it.

If they don’t already have a bank account of their own, this is a great age to open one up. They may have some money they keep at home in their jars or piggy bank, but it’s also good for them to get accustomed to the idea of stashing some money away safely and watching it grow as they add to it over time. Take them to the actual bank to open the account (they will feel very grown up), and take them back, if you can, each time they want to make a deposit. (Actually depositing the money themselves really drives home the idea that they are adding to their own little pile of savings.)

For kids of ages 10 - 13

At this age, you should start talking to your kids about how you decide what you spend money on. “Being able to afford it” and “choosing to spend money on it” are two totally different things, and it’s at this age that kids can really start to grasp why you prioritize spending in one area over another. For their next birthday shopping trip, take them shopping with you and keep a fixed budget, let them decide if they want to buy that toy, or have a party.

This is also a good age to introduce the concept of long-term savings for bigger items. 

For kids of ages 13+

This is the perfect age to help them develop some different long-term savings goals, whether it be saving for a new gaming system, smartphone, computer, or even their first car. You should also be talking about what you can (or are willing) to pay for when it comes to college, so they’ll know what part they’ll need to plan for.

Eventually, our kids are going to graduate with debit cards and credit cards, but I’d suggest you keep them using cold, hard cash for as long as possible. They are more likely to develop good money habits if they feel that little bit of pain when they hand over all that hard cash for a pair of sneakers. You feel a purchase more when this type of exchange happens—I give you money, you give me shoes—and their wallet feels a bit slimmer afterward.

On the other hand, when you pay with a card—I give you a card, you give me shoes, and you give me the card back—the immediate impact isn’t felt, so the impulse purchases may soar.

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Teaching your children about money at any stage is going to take time on your part. But introducing them to money and imparting money management skills in these small ways mentioned above can go a long way in their future.

Kids will follow your lead. Remember kids are always observing adult behaviour and building their habits and worldview around your actions. Therefore, be slightly mindful about your relationship with money around your children so that you can set them up for financial wins and not woes.

 

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.

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10 Financial Lessons That You Must Know

These are basically the gospel truths of personal finance. It is a quick 3 min read but will definitely have more information than some long-form articles:

1. Time is a Scarcer resource than money - Invest in a way that you can have more control over your time.

2. Get rich quick and get poor quick are two sides of the same coin. As we always say: High Risk = High Returns and low Risk = Low Returns. Every time you look at returns, be prepared for the risk that comes with it.

3. A house that you live in is your consumption, not an investment. Your second house can be considered an investment.

4. Don’t pay interest to acquire something that loses value - Car & personal loans for weddings & travels must be avoided.

5. A rise in income shouldn’t mean a rise in lifestyle. Well as we reach the new financial year, many of us would be looking at bonuses and appraisals, plan to invest a part of it before we plan our expenses.

6. A penny saved is more than a penny earned. Save before you spend

7. Invest in your mind and skills first.

8. You don’t have to be rich to invest, but you have to invest to be rich.

9. Market corrections come more regularly than birthdays expect them. For those who have been investing from April 2020, be careful there is more to markets than just going up.

10. There is an inverse relationship between investment performance and time spent watching financial news. Only watching the news will not help you get high returns.

11. The more complicated the investment advice the less useful it is. Go for simple advice which can actually help you apply it.

12. Admire people who earn more money than you, not people who spend more money than you. Yes please, people who look rich are not always rich.
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We have our youtube videos live, where we are sharing highlights on investing in Equity this week - do check the videos to learn more here

 

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.

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Latest Post Office Interest Rates: April-June 2021

What are the Latest Post Office Interest Rates from April – June 2021? What are the latest Post Office interest rates on FDs, MIS, SCSS, NSC, KVP, PPF, and SSY Schemes?

Earlier the interest rates used to be announced yearly once. However, from 2016-17, the rate of interest will be fixed on a quarterly basis.

Below is the timetable for change in interest rates for all Post Office Savings Schemes.

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As per the schedule, Government announced the interest rate applicable to all Post Office Savings Schemes from 1st April 2021 to 30th June 2021.

On 31st March 2021, Government notified the interest rates which shocked many as the reduction was very high. 

As of now, the latest post office interest rates April – June 2021 will remain the same and they are as below.

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Let us see the trend of the pasty one year of Post Office Saving Schemes Interest Rates.

 

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8 Easy Ways To Reduce Your Expenses

Spend less than you earn. That’s the mantra of personal finance success. Every week, month, and year that you spend less than you earn, the more you save and the better your financial situation will be.

A big part of that solution is cutting back on spending, and for many people, the thought of cutting back on spending seems unpleasant. Losing out on the things that bring you pleasure in life seems like a pretty steep price to pay for a little financial success.

The secret is to intentionally target spending on the things you don’t care about and rarely use while holding steady on the things you do care about.

Scale back on entertainment costs
1. Cut cable: These days, streaming services and free over-the-air television provide more content than any one person could ever watch. Take advantage of the variety by eliminating cable service.
2. Focus your interests on finishing rather than collecting: Rather than collecting physical or digital items in a media collection, focus on actually finishing those things or enjoying them to completion. For example, instead of buying yet more books that go unread, aim instead to build a long list of books you have read. Make doing the center of your hobby, not buying. After all, isn’t that what you really love?
3. Don’t treat shopping as entertainment: It’s fine to go out in the town to be entertained but keep to a simple rule: don’t go into a store unless it’s for the purpose of buying something you’ve already decided you need before going in. Don’t go to stores just to browse for entertainment, as they’re designed to convince you to buy things you don’t need or even really want, but just react on impulse. Find other places to be entertained.

Reduce your food costs
4. Use a meal plan and make a grocery list: Instead of going to the grocery store whenever you feel like you need food, get into a routine of making a meal plan once a week, then constructing a grocery list from that plan. The time invested in making that plan is more than saved by spending less time in the store and having a list to stick to saves a ton of money on grocery store impulse buys that just sit in your pantry.
5. Learn how to cook: Cooking for yourself doesn’t have to involve three-course meals or Gordon Ramsey-level skills. Start by identifying things you enjoy eating, then look for how to easily prepare it from scratch and with basic ingredients.
6. Buy in bulk: The big bulk packages might seem like they have a high price, but they’re usually quite a bit cheaper per use, meaning you get more value for your dollar. If you frequently buy something at the store, look at the big bulk versions and save up for them. You’ll save over the long run. It's basically what our parents or grandparents did - buy - store and use efficiently.
Cut your monthly bills
7. Go through your bills: Sit down with every regular bill you have and go through it line by line, making sure you understand everything you’re being charged for. If something isn’t clear, Google it. If it doesn’t seem like something you should be charged for or is a service you don’t want, call the bill issuer and get it removed from future bills.
8. Cut your subscriptions down to just the things you actually use: If you have a subscription or membership that you haven’t used in the last month, cancel it. Turn off any auto-renew you have with that service and allow it to expire. You can always renew it in the future if you decide you have a need for it again.

What you should do with the money saved from trimming your budget?
The key to making frugal living tips really work for you is to not simply spend that money on something else fun. Keep your “fun” spending at the same level and use the money you save when you cut down your monthly budget on something smarter.  Cut un-fun things like your energy bill for something financially useful that can build a bright future for you.

One great option is to open an account and use your savings to create your emergency fund or you could save it up for your next trip. Whatever excites to reduce your unnecessary spending. These are just some of our suggestions. Do let us know what you had like to read and learn more about and we shall share more content on that.

 

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.



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