Tag: Early financial Planning benefits

26 Apr 2016
Add health to Wealth

Add health to Wealth

Dear Friends,

Resolutions are traditionally made at the beginning of a calendar year. Can you make resolutions to improve your financial health in the year? The article series started in Financial Express from today onwards deals with this subject.

It kicks off with my views on how to add health to your wealth NOW. The article can also be accessed at the link http://www.financialexpress.com/article/personal-finance/why-epf-sip-and-will-should-be-part-of-your-financial-planning/243077/


Why EPF, SIP and WILL should be part of your financial planning

 Besides planning for financial health, one should assess the whole year’s expenses and the various money taps through which they can be met.

Financial year 2016-17 is well and truly in. Among the many things you look forward to, is to improve your financial health. The annual salary increments would be round the corner. But along with that, there would be several expenses lined up, including home loan EMIs, insurance premium payments and education expenses for children, among others. So, how should you plan your finances for the year ahead. What are the many steps that you should take to ensure that you have enough for all expenses and some savings after that to invest? What financial resolutions you need to take to keep your financial health intact, if not better it.

FeMoney spoke to some leading financial advisors to ascertain their views on how to plan your financial calendar. We start the series with views of Sanjeev Govila, CEO, Hum Fauji Initiatives, a leading financial planning entity.

Govila says besides planning for financial health, one should assess the whole year’s expenses and the various money taps through which they can be met. Your earnings estimates would give you an idea of the tax liabilities and you can lay the foundation of your financial plan around it. Make your tax-saving investments at the beginning of the year, instead of waiting till next March, says Govila.

He advises putting savings and investments through the automatic route through ECS and higher provident fund outgo from the salary itself. Also, if you have not made your Will, that should take priority in your financial planning calendar. Plough back some money into social causes, if you can. That would make you a happier person!

Govila’s 6 resolutions for a better financial year is as follows:

Take a firm hold of what are you expecting to earn during the year: This will make it clear as to what your tax liabilities will be. For a change, instead of investing in March for tax saving for the dying financial year, do it in April for the new FY. It will be more comfortably done and in a better manner. Probably last minute bank 5-year Fixed Deposits or National Savings Certificate (NSC) will get replaced by a systematic investment plan (SIP) in equity linked savings schemes (ELSS) in your scheme of things, where money is invested every month and results in a E-E-E (exempt, exempt, exempt) taxation with better returns.

Taxation drudgery done, look at your savings equation: Try to make it ‘Income – Savings = Expenses’ instead of ‘Income – Expenses = Savings’. It’ll result in a fuller life and minimise those ‘lifestyle’ expenses which actually only result in wasteful and avoidable expenses. And such a lifestyle change can only be done at the beginning of the year rather than when there’s no time left to act.

Assess expenses for the year, at what time they come up and how you’ll meet them: Don’t forget the big-ticket expenses like the life and car insurance premiums. Any maturities of FDs, insurance and other investments be also considered. Workout on a simple excel sheet would do the trick on a lazy Sunday in April.

As far as possible, make your savings automatic without needing your intervention: SIPs going from bank account, healthy Employees Provident Fund (EPF) outgo from the salary itself, ECS for insurance premiums etc are the planned tricks which go a long way in converting your money to wealth without hassles.

Two important aspects – Will and charity: If you haven’t yet made a Will, get after it. Make it now yourself or seek professional help. Don’t ignore it. Similarly, when you earn well, give back something to the society which has given so much to you in plenty. Choose a cause close to your heart, make you contributions online and automated. Ultimately, this is what you will have to show when it counts and your children will know that you walk the talk.

– Lastly, life is about living it Don’t forget to live a lifestyle you seek but overdoing it beyond a limit not only is an active wealth destroyer but also shows sooner than later around your girth!


(Source: Sarbajeet K Sen, The Financial Express, 26 April 2016)

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10 Dec 2013
Early Start, Good Planning will result in Good Future Ahead- humfauji.in

Early Start, Good Planning will result in Good Future Ahead

Lt Col Jit Bahadur Chettri, a 39 year old Indian Army officer, is posted in a remote area in North-East India. His wife Ritu is also an officer in the Army Education Corps. They have two sons, Sparsh and Utkarsh, aged 9 and 7 years respectively. He represents that rare breed of officers who are financially well-aware of the need to meet their financial goals comfortably.

When he approached us for financial planning this year, they already had a well-diversified investment portfolio. With a gross monthly pay of around Rs 1.8 Lakhs and the family spread over two locations, they had kept their monthly expenses well under control at 48,000pm, including Rs 15,000pm support to their parents. Since they had already accumulated more than Rs 10 Lakhs combined in their DSOPF (Defence Services Officers’ Provident Fund), they had sensibly pared their further monthly contributions to Rs 12,000pm. They had Rs 8000pm of SIPs in equity mutual funds where they had accumulated Rs 5 Lakhs. They had a good real-estate portfolio worth Rs 180 Lakhs consisting of four residential houses and land, including a house where they finally wish to settle down. For this, they had home loans totalling Rs 68 Lakhs, with EMIs of Rs 66,000pm, which were being comfortably paid. We found his net worth to be a healthy Rs 130 Lakhs after considering all assets and liabilities. However, they had a multitude of insurance policies where they were paying premium of Rs 60,000 per year. There were some policies taken by their parents for them over a period of time of which they had no details.

In their SWOT analysis, we found their balanced exposure to debt, maintenance of some (though less) contingency funds, high net worth and investing in real estate at an early age, to be their Strengths. In Weaknesses, we listed purchase of expensive traditional insurance policies, over-exposure to real-estate, low exposure to equity instruments, non-monitoring of equity mutual funds and no structured planning for financial goals.

We listed Twelve life-time financial goals for them, relating to their children, retirement expenses (exceeding their projected Govt pensions), regular replacement of their two cars, regular vacations, purchase of commercial property and home renovation. As per our calculations, they were likely to meet almost all their goals except the last two. However, there was no cushion in these calculations and there were plenty of wastages, which if controlled, could easily give them a better financial life within the same resources. After extensive interaction with them, we prepared their financial plan with the following major course corrections:-

  • Comprehensive Will to be made for both at the earliest.
  • Three months worth of monthly expenses as contingency funds at all times.
  • Making two traditional insurance policies paid-up while surrendering a ULIP.
  • Taking online term insurance plan for Rs 30 Lakh for himself and Rs 10 Lakhs for wife.
  • After undertaking his Risk Profiling, suggestion to invest Rs 34,000pm through SIPs in a good mutual fund portfolio and to increase the contribution by 10% each year.
  • Purchase Gold upto 5% of his portfolio regularly.
  • Contribute regular amount to charity, online or offline.

Lt Col Chettri has started implementing all our suggestions very earnestly. He has already got a fresh mutual fund portfolio made, started the SIPs, and is in the process of sorting out his insurance policies. Other actions are also in various stages of implementations.

Col (Retd) Sanjeev Govila

CFPCM, CEO, Hum Fauji Initiatives

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