Apr 07 2015 : The Times of India (Mumbai)

TO-DO LIST - Fin resolutions for new fiscal

Vishal Dhawan
While January may be the most popular time to make resolutions on the personal
front, April tends to be a good time to resolve to have a healthy financial life. This is the
time of the year when a large number of people refocus, after a very hectic quarter. It
is also an opportune time for us to embark on our financial planning for the year ahead.
So let's look at which financial resolutions you should take in this new financial year.
1. Reset your financial goals: Be realistic about how much time and money it will take
to accomplish each goal. Remember an estimate that is too low could disappoint you
in future.
2. Invest in yourself: Remember that your career and your profession is the driver of
your wealth creation. Ensure that you are investing in yourself
financially,
physically, mentally and spiritually.
3. Tax law changes need to be factored in: Keep taxes in mind while building your
investment portfolio. However, investments must not be solely guided by their tax
benefits. For example, the newly introduced tax benefit for investing in the NPS or
higher limits for deductions on medical insurance can be taken advantage of.
4. Start tax planning early: Start your tax planning from the beginning of the financial
year so that you have enough time to evaluate different tax savings instruments and
avoid the hustle bustle of last minute solutions.
5. Check if your insurance cover is adequate: It is important to evaluate whether your
life and health cover is adequate for yourself and for your family, and review
whether the policies you had bought, continue to be appropriate.
6. Top up your emergency fund: In case you have overspent or had to take a hit due to
higher taxes than anticipated, you may have a lower than ideal contingency fund.
Keep aside at least three months income for an emergency fund can help you and
your family if anything unexpected happens.
7. Ensure that you are keeping your loans for the right reasons: It is critical to
evaluate that the interest you will pay on your loan in the long term is less than the
earning on your investments, else consider prepaying.
8. Review your progress: Monitor your financial portfolio every six months on a specific
date written in your diary or calendar. When you achieve a goal, celebrate! Then set
yourself a new goal.
The writer is founder, Plan Ahead Wealth Advisors

Apr 07 2015 : The Times of India (Mumbai)

Failing to plan is planning to fail

Sanjeev Govila

To say that we should plan our finances well is just to state the obvious. However, in
spite of this knowledge, most of us do not put in even a little effort required to plan for
the financial future of self and for our families. How many people do you know who
have bought a house without a home loan or sent their children for expensive studies
without education loan by simply saving in advance? Most probably none. Or just one or
two. We are used to planning a weekend recreational trip more rigorously than most of
our major financial events of life.
Probably, it is the antici pated drudgery of planning or the fear of confronting
requirement of large financial sums that make us postpone any sort of long-term
planning till it is right in front of us and can no longer be postponed.However, if we put
in just a little bit of effort on a couple of lazy Sundays, we would be able to see the
merits of planning for our life's events in advance.
The table illustrates that if we plan in advance, we would not only save a lot of money
but be more confident to face the big events of life.
In the table above, we have assumed that you put your money in Systematic
Investment Plans (SIPs) of equity mutual funds which will grow at 12% per annum.
Remember that in equity MFs, such returns beyond just one year of investment are fully
tax-free.Thus, by a very preliminary planning in advance, choosing the right course of
action and executing it, you save on large amount of interest. In addition, by
systematically planning it you can witness the amount getting accumulated and
gradually gain confidence about meeting the commitment, thus reducing your anxi ety
and stress about the financial need.
Inherent in our above analysis is the need for an attitude change. Over time, we have
taken it as a fait accompli that on occurrence of a big financial event, we will go ahead
and take a loan and pay EMIs for a long period. Thus we commit ourselves to a
stressful life leading up to the event as we do not have the money ready .Thereafter, we
go through the stress of the EMIs for another long period due to the loan taken. It is
time we reversed the cycle by planning in advance and accumulating money through a
financial instrument we are comfortable with. Do you know that if you take a home loan
of Rs 50 lakh for 15 years at 10.15% rate of interest, you pay a total interest of Rs
47.26
lakh,
thus
actually
paying
back
Rs
97.26
lakh?
This inflates the real cost of your house. Even if you get the highest tax benefit (of
30%) on this loan on interest, you still pay Rs 33.08 lakh as net interest on this loan.
Probably , it is time you changed your way of meeting your financial goals by planning
in advance so that you plan to succeed rather than plan to fail.

The writer is CEO, Hum Fauji Initiatives