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The How and Why of Physical Fitness for Financial Fitness

Physical Fitness for Financial Fitness! Does this rings any bells or led to a pondering frown?

People often ask me as to why I am so keen about Physical Fitness as one of the most significant part of Financial Fitness. Well, as a financial coach I take a huge role in your life as I am sharing the onus of money management for you in such a way that you are never under the financial pressures and always future ready.

Last 5 years, I have been touching lives closely as I plan not only your personal finances but also helping businesses in organizing their wealth to keep it churning and surplus too for the business challenges.

My definition of Physical Fitness is simple, the ability of your body to sustain your lifestyle, work culture and routine life challenges without any medication or if I put it like a financial fitness expert, without any spend on your body to keep it going for meeting your work-life expectations. And that is why I thought it is very important to understand the why Physical Fitness is for Financial Fitness.

Having said that, it makes it all the more important for me to embark physical fitness as the prime goal for my clients who are entrepreneurs, corporate goers, business owners and dreamers in one or the other way.

Significance of Physical Fitness  for Financial Fitness?

When I am working on a Financial Fitness Plan or managing wealth or organizing a portfolio, I am primarily touching the following aspects:

  • Retirement Planning
  • Wish list/Bucket list
  • Parallel Path
  • Business Goals
  • Family Plans
  • Child Education
  • Destination / Weddings
  • Educational Loans
  • Risk Management / Wealth Protection

The reason I listed the above set of areas I touch upon is to underline the fact that, all of the above set of life phases is Finance dependent and also health dependent. The proper allocation and functioning of all of the above is only possible if your fitness is taken care of properly.

There will be no fun in travel bucket lists, retirement plans, that passion driven parallel path past your corporate career, your child’s education or that dream destination wedding – you will not be able to enjoy any of it – if you are not physically fit and neither will you be able to attain financial fitness as you will end up shelling out a huge chunk of your savings and investments on your health.

Physical Fitness for financial fitness
Rashi speaking about Financial Fitness at a recent event conducted by SBS Fin. on the significance of Financial Fitness

How Physical Fitness is Financial Fitness?

To explain how physical fitness is directly proportional to your financial fitness, let me share the closest example, yes, it is about me and how controlling my physical fitness led to better control on my finances.

I am Rashi Bhargava, your Financial Fitness Coach, 39 years of age waging war with lower back pain for 6 years and 4 months. I have been part of this Corporate rat race for 15 years, running in life non-stop as if there was no tomorrow after completing my PGDBM.

If cancer is called the ‘emperor of all maladies’, back pain might as well be the empress. Back pain might not kill, but it doesn’t let one live either. It’s like being madly in love with someone but not being able to be with that person. It leads to a miserable life.

Fact I learnt hard way through: That Pain in the back and neck is by far the number one reason for Indians (and others too, worldwide) for the ‘years of life lived with disability’.  Lower back pain affects up to 80 per cent of people at some point in their life, and neck pain affects up to 50 per cent of the population.

21st Dec 2010, 8:45am is etched in my memory not because I won a million-dollar lottery but my battle with pain started. And I was naive enough to ignore this pain and importance. Visit to the doctor gave me temporary relief. Doctor prescribed me pain killers, handed me a sheet of paper with few images of stretching exercises to do and told me that these exercises I must do lifelong. Pain persisted and after 3 months I was recommended Physiotherapy. 15 sessions of physiotherapy gave me relief for few months and then the same story. This continued for next 3 years. Pain, Volini gel and hot water bottle became my friends at home and travel. I always use to smell of Volini.

3 years into back pain yet I had not learnt my lessons. I did not value money nor understood loss of productivity because of this. I use go to doctors or take physiotherapy sessions, simply put my life was working on a jugaad…a temporary one. Money was being spent like anything on these temporary reliefs. No doctor gave me guidance as to why exercises are must and back pains means muscles getting weak. Finally, one night 13th July 2014 I started having muscle spasms while sleeping. Initial few days I ignored them as one off small health issue. But when I started losing sleep and finding it difficult to lie on bed anytime of the day I got scared and rushed to my Orthopedic doctor. Since it was hot and humid and my morning walks were at peak initial diagnosis was loss of salts, vitamins. Supplements worked a bit but spasms persisted so much that I couldn’t sleep a wink and lying down in bed became a nightmare.

After a month of torture, I was recommended 12 sessions of physiotherapy. Unlike my previous experiences where I traveled far distances for my therapy, I was this time recommended to a physiotherapist who was at 5-minute walking distance from my home. I was in so much pain and discomfort that I would just not let my physiotherapist touch my back. It was testing times and 12 sessions also did not ease my pain. I once shared with a friend that I would give away all my money, wealth and trade for a pain free life.

With faith, encouragement of my therapist and little bit of reading on pain management, I started getting relief and during these painful 2 months I self-reflected a lot. Finally started understanding my body and it dawned on me that it is impossible to achieve financial fitness without physical fitness.My therapist Dr.Khan (Korperkraft) who is a certified TheraBand trainer and a fitness freak started encouraging me in my sales language…a language I understood 😊

In 6 years and 4 months I have spent close to 5 lacs on Doctor fees, physiotherapy sessions, medicines, X-ray and MRI…. Changed doctors, physiotherapists, taken treatment at the most expensive centers like Vardan (Times of India run center) and Back 2 Fitness. Had to dip into my investments for these treatments. Had I invested in health like SIP in Mutual Funds my story would have been different. The economic loss in terms of productivity cannot even be measured.

Somewhere at the back of my mind I have a lingering thought that my back pain also contributed to some extent to my lay-off from Taurus Mutual Fund in Oct 2012. In tough times organizations want nimble footed agile employees who can give more than 200 % to work. I was in a different zone during that period, consumed in pain, always asking my reporting manager for leave or reporting in late in the morning because I had to go for my physiotherapy session.

Most of us want to be physically fit, but very few of us are. The same holds true with financial security. Most of us want to be rich, but don’t want to sacrifice as needed or develop good financial habits. The relationship between health and wealth should be worth noting for all of us. If we want to have a luxurious home, nice car, annual vacations, we must first take care of our body.

“If you’re healthy, you’re not depleting your wealth to pay doctor bills or prescriptive drugs or treatments. You’re also going to be more productive because you aren’t going to have as many sick days, and if you’re a productive person you are going to get raises and a higher income.”

The partnership between health and wealth doesn’t end here; it’s a vicious cycle that can spin the other way as well. If you let yourself get in financial trouble you’re likely to endure headaches, stomachaches, stress, a lack of sleep and fluctuations in weight. Young people are usually in good physical condition, but that doesn’t mean they come out unscathed if they don’t take care of themselves.

“What you do at a younger age will influence how you fare later in life. Like in my case neglecting physical fitness in my 20’s. “If you have a bad diet in your twenties, you may not keel over in your twenties or thirties, but if you never develop good health habits; it will catch up with you.”

Breaking an unhealthy routine can be difficult but some simple changes will help you move in the right direction, whether your problems are health or wealth-related. Ever since I encountered my physiotherapist cum fitness trainer I have challenged myself to incorporate at least 60 minutes of exercises daily to strengthen my muscles, improve my stamina and endurance, however busy my schedule is. I have failed at times, but I have been persistent. It’s been one big struggle…in fact it’s been a war. But now I am confident of my win. This is reflected in my business growth and how people take me on.

The bottom line: In order to become an affluent financially fit individual, you must make smart investments and the smartest is an investment in your health. I hope I could strike a chord here on how of Physical Fitness for Financial Fitness.

This is the basic idea of keeping #collaboration as a theme for client engagement at #SBSFin for the year 2017, where in we will be touching different aspects of #FinancialFitness beginning the year with Physical Fitness. If you have any queries regarding your investments or financial fitness feel free to write to me, rashi.bhargava@sbsfin.com

 

Significance of Physical Fitness for Financial Fitness

Get Back 2 Fitness

 

The Economic impact of Non-Communicable Disease (NCD) on household in India’, the first nationally representative study in India on health spending associated with NCDs was published in 2012 in Globalization and Health. This study by Engelgau et al. came out with some startling data that is in alignment with my thought process. By 2004, the out of pocket health expenses for treating NCDs already accounted for 47.3 percent. About 40-50% of these expenditures are financed by household borrowing and sales of assets. The odds of incurring catastrophic hospitalization expenditures were nearly 160% higher with cancer, 30% greater for CVD or injuries than when hospitalization is due to a communicable disease.

A substantial proportion of expenditures are for medications, diagnostics and medical appliances. As much as these expenses are in private health sector because of public sector not being prepared to handle this workload and health insurance programs that need to cover them, we need to look at the grass-root solution. Being physically active, eating well and sleeping well help to reduce mortality by NCDs by more than half. It doesn’t simply improve quality of life but reduce the financial fitness burden on everyone around.

Its for nothing that sitting is called the new smoking. It is because physical inactivity is the fourth largest killer. We humans simply weren’t made to be stationary. We were made to move. As a matter of fact, as sperms we moved, rather ran to be born.

It was only 500 years ago that the masses started using chairs, up until then benches and stools were used in everyday living. With the Industrial Revolution a mere 260 years ago, human beings took the sedentary lifestyle to a whole new level. Computers have only been around for the last fifty years, as a middle class household gadget for less than half that time (25 years), but they have changed things way too quickly. In addition to that, the way we travel (cars) and eat (fast food) today has changed our lives for the worse. Half the patients I see today are in their sad painful conditions because of what has happened at the turn of this millennium, so called smartphones and tablets. This jet-set modern lifestyle is the primary cause for far higher rates of NCDs.

And then you have back pain.

If cancer is called the ‘emperor of all maladies’, back pain might as well be the empress. Back pain might not kill, but it doesn’t let one live either. It’s like being madly in love with someone but not being able to be with that person. It leads to a miserable life.

The societal cost of back pain is three times higher than the total cost of all types of cancers. That holds true for India too. Back pain takes its toll not only on the individual suffering from it, but also on the family, workplace and society.

To add to that, it’s not an individual who suffers with back pain, it’s the whole society. All of us are responsible for causing it and we all need to get pro-actively involved if we want to reduce it’s impact on the society. There is no one big magical trick to fix but multiple small triggers and weaknesses that we need to address.

Pain in the back and neck is by far the number one reason for Indians (and others too, worldwide) for the ‘years of life lived with disability’.  Lower back pain affects up to 80 per cent of people at some point in their life, and neck pain affects up to 50 per cent of the population.  As mentioned earlier, these numbers have risen tremendously in the last two decades courtesy drastic changes in our lifestyles.

Dr. Rajat Chauhan is MBBS, MSc Sports – Exercise Medicine (Nottingham), MLCOM: Osteopathic Medicine (London). He is running a Sports-Medicine & Muscuklo-Skeletal Medicine clinic for last 8 years in Sheikh Sarai, New Delhi. He is associated with Adidas India as Running Advisor. His book on Pain is published by Penguin Publications, The Handbook of Pain can be glimpsed on http://thepainhandbook.com/

Conflicting Legally: Tax Evasion, Tax Avoidance and Tax Planning

Tax Evasion, Tax Avoidance and Tax Planning are three legally conflicting tax terms which keep on creating confusions time and again in the minds of tax payers.

The last quarter of the year is always about tax planning and this is also the time when we are filled up practically with all kinds of tax terms and tax related confusions. The above mentioned terms hold great importance for understanding tax planning and tax management and that is why it is significant that we learn the difference in Tax Evasion, Tax Avoidance and Tax Planning.

We need experts to talk about and explain the basics so that we can take prudent decisions and it is also very important to understand tax related legal parlance for making the right investment decisions.
Let us understand the meaning and comparison between the terms which forms the basis of Legal provisions in Indian Tax laws. i.e. Tax Evasion, Tax Avoidance and Tax Planning.

TAX EVASION

It refers to a situation where a person tries to reduce his tax liability by deliberately suppressing the income or by inflating the expenditure showing the income lower than the actual income and resorting to various types of deliberate manipulations. An assessee guilty of tax evasion is punishable under the relevant laws. Tax evasion may involve stating an untrue statement knowingly, submitting misleading documents, suppression of facts in assessments. An assessee who dishonestly claims the benefit under the statute by making false statements, would be guilty of tax evasion.

For example, submitting of false financial statements, claiming false exemptions on the basis of fake documents, not reporting correct income and investing in various tax heaven countries in order to reduce there tax liabilities in India.

TAX AVOIDANCE

The line of demarcation between tax planning and tax avoidance is very thin and blurred. There could be elements of malafide motive involved in tax avoidance also. Any planning which, though done strictly according to legal requirements defeats the basic intent of Legislature behind the statute could be termed as instance of tax avoidance. It is usually done by adjusting the affairs in such a manner that there is no infringement of taxation laws and by taking full advantage of the loopholes therein so as to attract the least incidence of tax. Earlier tax avoidance was considered completely legitimate, but at present it may be illegitimate in certain situations.

For example, entering into transactions for the purpose of avoidance of taxes in order to defeat the intent of the legislation, such as forming of shell companies outside India to avoid tax here.

TAX PLANNING

It means arranging the financial activities in such a way that maximum tax benefits are enjoyed by making use of all beneficial provisions in the tax laws which entitle the assesse to get certain rebates and reliefs. This is permitted and not frowned upon by law. Thus, tax planning would imply compliance with the taxation provisions in such a manner that full advantage is taken of all tax exemptions, deductions, concessions, rebates and reliefs permissible under the Income-tax Act so that the tax incidence is the least. Tax planning can neither be equated to tax evasion nor to tax avoidance with reference to a company, it is the scientific planning of the company’s operations in such a way so as to attract minimum liability to tax or postponement or for the matter of deferment of the tax liability for the subsequent period by availing various incentives, concessions, allowances, rebates and relief’s provided for in the tax laws. They are meant to be availed of and they have certain clear objectives to achieve. Tax planning may, therefore, be regarded as a method of intelligent application of expert knowledge of planning corporate affairs with a view to securing consciously provided tax benefits on the basis of the national priorities in consonance with the interests of the state and the public at large.

For Example, taking benefits of deductions provided specifically under section 80C of the Income tax Act, claiming exemptions, investing in Special Economic Zones (SEZs), etc.

At a Glance Comparison:

Tax Evasion Tax Avoidance Tax Planning
It is done by adopting dishonest means like falsification of accounts, concealment of income, etc. It is done in such a manner by which the tax liability is avoided by the use of artifice or device, defeating the basic intent of the legislature. It is done by availing maximum benefit of deductions, exemptions, rebates, etc. which are expressly provided by the government.
It is unlawful, unethical and illegal. It takes advantages of loopholes of law. It is acceptable to the judiciaries.
If attracts heavy penalties. It can only be curbed by amendments and circulars as is quite difficult to prove in court of law. It is justifiable and a rewarding concept for professionals.

We chose to share this post now, to help you with the upcoming tax season. For more clarity and to seek investment advice in pursuit of tax planning and tax saving, feel free to write to us, contact@sbsfin.com

Tax Planning through Deductions Under Section 80C

All of us engage in some economic activity and work hard to make a living. But as you start doing so you tend to attract the attention of the Income Tax Department, as they too are doing their task of taxing your income, as you earn. Our Government earns its revenue from the direct and indirect taxes we pay. Without which they will not be able to spend on infrastructure, education, health care etc.

And thus as responsible citizens it’s our duty to pay our taxes on time and also as we work hard to make a living, it becomes imperative for us to work a little more harder and smarter to save our taxes (the legal way-Government has given us enough incentives to save on taxes and invest in order to create wealth for ourselves ), so that it can help us make our dreams come true.

This is the time of the year when you start getting mails and calls from your Human Resource Department, a department you thought did not exist 😉 The threatening mails and calls make you scramble here and there.The task you’ve been avoiding now stares at you. It’s tax saving time and your deadline is approaching.

Amazing coincidence, your Banker happens to call just then. Luck, by chance. And you find yourself signing a new policy document. One more policy to keep with the several others you already own. But did you know that there are several other—non-insurance—products that can get the same tax benefit that an insurance policy does. Even within insurance, there are plans that get tax deduction and work better as a life cover. But these remain the financial world’s best kept secrets.

Here’s a run-down of products that get you the Rs1.5 lakh deduction u/s of 80 C of the Income Tax Act 1961.(Under section 80C, a deduction of Rs 1,50,000 can be claimed from your total income. In simple terms, you can reduce up to Rs 1,50,000 from your total taxable income through section 80C. This deduction is allowed to an Individual or a HUF?

Zero Risk Products for you Tax Planning

These carries either a government guarantee or have a fixed interest payout. The first two products should form the core of your 80C investments. And if you exhaust the entire limit in this, no need to buy more.

1. Employees’ Provident Fund (EPF): The first scheme that you get to buy the minute you begin work as an employee. Under this,12% of your basic (including dearness allowance and retaining allowance, if any) goes to this fund and your employer matches this by 12% of his contribution. From your employer’s contribution, 8.33% goes towards the Employees’ Pension Scheme (EPS) and 3.67% to EPF.

PF is automatically deducted from your salary. Both you and your employer contribute to it. While employer’s contribution is exempt from tax, your contribution is counted towards section 80 C investments.

Return:8.65%
Duration: Working Life
Safety: Zero Risk

2. Public Provident Fund (PPF): A 15-year cumulative recurring deposit that is fairly illiquid and is good to use as a long-term corpus building tool. Risk- and tax-free today, maximize your contribution to this.

Return 8.7%
Duration 15 years
Safety: Zero risk

3. National Savings Certificate (NSC): NSC is a tax-saving instrument with a maturity period of five years. A person can purchase an NSC for as low as Rs 100. Any investments in NSC are eligible for deduction under Section 80C. At present, the interest rate is 8.10 per cent p.a. This interest is compounded half yearly and is taxable. However, this being a cumulative scheme (i.e., interest is not paid to the investor but instead accumulates in the account), each year’s interest is considered reinvested in the NSC.  One of the preferred tax planning tool being recommended by financial advisors.

4. Fixed deposits for a duration of five years with banks and post offices. Though not very popular but these are mostly picked in the urgent tax planning schemes for people who do not set timely financial goals.

5. Senior Citizens Savings Scheme (SCSS): This scheme, as the name suggests, is meant only for senior citizens.

Any individual in the 60 or above age group can open an account under this scheme. An individual above 55 but less than 60, and having retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme, can also open an account under this scheme, but such an account must be opened within three months of the retirement date.

If you are retired defense personnel, then you can open this account without any age limit, provided you fulfill other specified conditions.

Any investment in this account would be eligible as deduction under Section 80C. The current annual rate of interest offered under this scheme is 8.6 per cent payable quarterly. Please note that the interest is payable quarterly instead of compounded quarterly. Thus, unclaimed interest on these deposits won’t earn any further interest.

6. Sukanya Samriddhi Account: In this scheme, you can open an account on behalf of your minor daughter. Any amount deposited in this account would be eligible for deduction under Section 80C. Further, this account can be opened for a maximum of two girls and in case of twins this facility will be extended to the third child as well.

The amount has to be deposited in this account for 15 years. The account will be mature after 21 years, which means that you don’t have to deposit anything between the 16th and 21st year.

The minimum annual deposit is Rs. 1000, which can go up to Rs. 150000.

Interest rates on the deposit keep on changing every year. For FY2014-15 it was 9.1 per cent per annum, for FY2015-16 it was 9.2 per cent p.a. and for FY2016-17 it is 8.6 per cent p.a. The interest earned here is also tax-free.

7. Life Insurance Premiums Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction. Please note that the premium paid by you for your parents (father/ mother/ both) or your in-laws is not eligible for deduction under Section 80C. If you are paying premium for more than one insurance policy, all the premiums can be included.

Market-linked products

8. Equity-linked savings schemes (ELSS): These are diversified equity mutual funds that allow investors with risk taking ability to target a higher return. You are locked into the investment for three years, but the long-term capital gains are zero tax. You can choose a lump sum investment route or a systematic investment plan.

This is one of the best ways to grow your money and enjoy tax benefit simultaneously as the return generated by ELSS is much more than those generated by other investment products.

9. Unit linked Insurance Plan (ULIP) An insurance product which covers life insurance and also provides the benefits of equity investments, ULIPs have attracted the attention of investors and tax-savers because of their multiple advantages -life cover, tax-saving and also helping you grow your money by giving decent returns in the long-term.

10. New Pension System (NPS): This is relatively new, market linked vehicle for those who do not have an EPF facility to target long-term retirement planning.

Other Deductions

Tuition fee: School fees of up to two kids. This is one deduction which will make you feel good about having kids. Pay by cheque and keep the receipts to file along with your return.

Home loan: The Equated Monthly Installment (EMI) that you pay to repay your home loan consists of two components – Principal and Interest. The principal qualifies for deduction under Section 80C. Even the interest can save you significant income tax, but that would be under Section 24 and section 80EE of the Income Tax Act.

So if you have an outstanding home loan in your name, then the repayment of the principal amount made by you in a financial year can be claimed as deduction under Section 80C and you need not invest in other products specifically to avail tax benefits.

Further, any payment made to development authorities like Delhi Development Authority (DDA) in order to purchase a house (which has been allotted to you in a scheme made in this regard) also qualifies as deduction under section 80C.

“All men make mistakes, but only wise men learn from their mistakes.”- Sir Winston Churchill. The above proverb is very much relevant to our daily lives – be it handling finances or even in
any other facets of life.

Moreover, the famous author John C. Maxwell has also quoted “A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them.” But again this is conveniently forgotten by most, which often leads to failure to learn from mistakes, the arrogance to admit it and which thus leads you to repeat the same mistakes again.

While undertaking your tax planning exercise too, you tend to repeat the same mistake of waiting till the eleventh hour and are arrogant enough to admit it. As the financial year draws to a close, we all start feeling the heat and realize that yes, now we have to invest in order to save tax. But have you ever wondered whether it is the prudent way for tax planning?

Remember, waiting till the eleventh hour to undertake your tax planning exercise will often drive it towards mere “tax saving” rather than “tax planning”; which in our opinion is a sub optimal way to undertake a tax planning exercise.

Unlike “tax saving” which is generally done through investments in tax saving instruments/products, under “tax planning” we take into consideration one’s larger financial plan after accounting for one’s age, financial goals, ability to take risk and investment horizon (including nearness to financial goals). And by adapting to such a method of “tax planning”, you not only ensure long-term wealth creation but also protection of capital.

Hence, please remember to commence your “tax planning” exercise well in advance by complementing it with your overall investment planning exercise.

Above mentioned are few options on investments under section 80C. However, which one applies best to you depends on your financial goals and investment plan. If you find any of the mentioned products/schemes beneficial for your tax planning give us a shout and we are happy to help. You can write to contact@sbsfin.com

Source: Economic Times, Mint, PersonalFn

Health Insurance-If you are in the pink of health

If you are in the pink of health, it is difficult to imagine an illness, could make you pauper. The escalating cost of medical treatment is becoming beyond the reach of common man. The oft quoted rate of inflation in health care is between 15-20% per annum, as compared to overall inflation of 6-7%, making medical treatment very expenses for common man.

The idea of making/earning money can make a man move mountains. If you tell a man to stop smoking because it will damage his lungs, he will not stop. But offer him a rupee for every cigarette, he will give up and get cured for life. So, it’s no wonder that when well-wishers ask you to take medical insurance you ‘ll smile and ignore them as if there were insane.

My father too was living in such a dream world. He thought he or my Mom will never get sick. Newly retired from a PSU where medical reimbursement was actuals my father was spoilt and as a result he did not buy health insurance during his younger days… till my Uncle threatened and cajoled him to buy one for my Mom and himself.

Within 6 months of buying health insurance at the age of 59 my mom had emergency hernia surgery late in the night. Blissfully unaware of pre-existing disease clause in the policy my father cried fouled when Mom’s claim was rejected as hernia is not covered in the first year of policy. He had never bothered to read policy document. Substantial sum of money was spent on Mom’s 8-day hospitalization and after care. It dented my father’s savings at a time when he was still grappling with his post retirement issues of regular income etc.

All this taught me few lessons on importance of health insurance and care to be taken while buying health cover. Using my own personal experiences, I will try to decode and simplify health insurance in this blog by answering some common questions and myths which more than often deters us from buying health cover.

Why do I need?

Health care is a serious concern for majority of us. Escalating costs accompanied by increase in life style diseases, dreaded disease like cancer becoming common make us want to run for cover. This is where Mediclaim steps in. It is an insurance that takes care of your medical expenses or treatment expenses.

Remember: Healthcare costs are ‘inelastic’ because demand doesn’t go down as prices go up.

The icing on the cake is tax benefit u/s 80 D of Income Tax Act,1961

I am too young and healthy

At times, certain ailments remain unknown to us until their symptoms are visible. As per regulations, such pre-existing ailments are covered after at least 48 months of holding a health policy. Therefore, buying early, before one develops any diseases, would help ensure that one’s health is insured without any such exclusions.

By and large, a health insurance policy bought at an early age and renewed regularly for several years without any claim should lead to a better claim experience.

Remember: The best time to get enough health insurance is when you need it the least

In my experience with people over 45 I have seen insurance companies refusing cover or loading premium because client is taking medicine for BP/Thyroid or is overweight or has anxiety problem which is so common for us, in this cut throat competitive world.

Remember: The more you delay and the older you get, the heftier will be your premium.

I have a group cover by my employers,so I don’t need a separate policy

If your employer provides an option for group health coverage, grab it even if you have to pay a portion of the premium. The coverage amount may be restrictive so check if it is sufficient. Also, remember, especially if you are in the private sector that this group cover will continue only as long as you are in the job. The period between switching jobs may leave you unprotected. Moreover, few insurers are calling off their contract with employers and thus leaving several employees stranded with.

How much Mediclaim do I need?

This depends on several factors such as age, health condition, lifestyle, family history, etc. Ideally,you should cover the cost of big surgeries and operations. Give due consideration to your medical history, family health history before deciding on the amount of cover. We get use to certain standard of living, this also plays a very imp factor while deciding on the amount of cover.

Bottom line: Affordability of the premium. One must consider the amount of premium which is to be paid by him. The amount of premium is directly proportional to the sum assured.

Should I go for individual or family floater?

If you have a family and are looking to buy health insurance, the common dilemma is between buying an individual health insurance policy and a family floater policy. Individual policies, as the name suggests, cover a single person. Whereas, the floater policy covers the entire family under a single policy.

Keep the following points into consideration in order to choose between the two:

PRICE

If your family is young or the age gap between the spouses is not much, then a floater plan will be cheaper.

Floater: good

Individual: bad

HIGHER COVER

Being cheaper than the individual health plan, the floater health insurance plan makes a higher value cover more affordable.

Floater: good

Individual: bad

BAD YEAR

However, the flip side is that while in an individual plan each individual has a dedicated sum insured, in a floater plan the insurance cover is shared. So if one family member makes a claim, the cover reduces on the rest by that much. In the event of a bad year, when all members need to use the policy, the floater may not be sufficient.

Floater: bad

Individual: good

(But please note that there are products available in the market, where your health cover is automatically restored in the event of one family members using the entire cover in 1 year)

AGE GAP

Individual plans are expensive compared to a floater policy. But the cost advantage of a family floater insurance plan diminishes if the age gap between the spouses, or the eldest member, is huge. It could also become financially unviable if one individual is not in good health and poses the risk of using up the entire sum insured.

Floater: bad

Individual: good

Affordability

Bottom line is if you can afford have separate covers.

What are the benefits of Mediclaim?

Medical insurance covers almost everything right from the time you step into the hospital till the time you are discharged including Ambulance charges. The normal costs that are covered are room and boarding expenses, nursing expenses, fees for the surgeon, anesthetist, medical practitioner, consultant, fees for specialists, blood, oxygen and the operation theatre, charges for surgical appliances, medicines, diagnostics materials and charges for X-rays, dialysis, chemotherapy and so on. Even medicines are covered.

(Please read the product brochure and policy wordings carefully)

What are the limitations of Mediclaim?

*Most important limitation is pre-existing health conditions. If a person has had a heart attack previously or has been operated upon for some other condition, then cover will not be available for those conditions.

*Some day care medical procedures are not covered (refer to product brochure or policy wordings)

*Dental surgeries, cosmetic surgeries for aesthetic purpose, HIV related conditions etc. are not covered.

*There is a waiting/cooling period of 30 days to 90 days from the date of inception of the policy, when you take the policy for the first time

*Disease wise capping in many cases. For example, cataract surgeries there is a sub-limit of Rs. 40,000

*High premium with age. Premium tends to jump when there is a change in age band.The cost can sometimes so expensive that the person may not able to pay the premiums

Health insurance is very useful and everyone should have adequate cover.Hospital bills for very small to considerably large ailments can be a pain. It’s difficult to meet such costs on our own without burning a hole in our savings. Also, with medical costs escalating, we may have to compromise on quality healthcare, because of affordability. It is then that the importance of health insurance comes into the picture. Health Insurance provides us with the ability to afford better healthcare facilities for ourselves and our loved ones. What’s more, Govt give us tax benefits. That’s enough incentive to gift ourselves and our loved ones a peaceful sleep this Christmas.

For please feel free to call/write for more details on Health Insurance. You can write to, contact@sbsfin.com

How to Pick Winning Mutual Funds?

Stephen Covey says.’ Begin with an end to mind’-a principle that cannot be emphasized enough, especially investing.

Why do you want to invest? Is it because of exuberance in the Equity Markets or colleagues in Office making investments so you don’t want to left behind. Once we answer this WHY, our job is half done.

So, the first question we need to ask yourself is Why are we investing?

1. I want to save up for my higher education
2. I want to save for my marriage
3. I want to travel around the world on 80 days
4. I want to save to buy home
5. I want to save for my children’s education
6. I want to be financially free by 50 years of age

mutual-fund-smart-goals-in-financial-planningGet Set Goal

Like any other goals, Financial goals need to be SMART

S- Specific
M-Measurable
A- Achievable
R- Realistic
T- Time Based

While listing down your goals, aspire for goals that are well within your means (realistic too). Don’t expect your money to double in a year. Wishful thinking and unrealistic goals will not help our cause. Also, remember that all of us are unique individuals and our needs and aspirations are different from our friends/peers. So, our goals are not same as our friends.

Financial goals are important and significant for financial planning. A good investment plan is the one which has got products against each goal and which doesn’t lead to any sort of present or future confusion for the investor.

Mutual Fund offers something for every kind of investor. Investment is a function of the time horizon and risk tolerance of an individual.

One must know if a mutual fund investment is being done for higher education, retirement which will essentially be long term or if some liquidity concerns are anticipated.

On line risk profiling tools are available-It will be good if before investing we could use them and find what type of investor we are. Are we the ones who will constantly be worried about our Principal money, or are we risk takers or we love the S-safety part of the investment that we don’t mind ignoring L-Liquidity and R-Return

Once we are clear with our financial goals, time horizon, risk appetite the next step is to pick the right mutual fund which fits in our Investment Plan. There is plethora of options with more than 1000 plus MF schemes to choose from. So how so we choose the right fund?

Many a times we just look at the top performing funds or go by references our friends/colleagues have given and we go ahead with the investments. Is that the way? ‘No’. Investing in mutual funds requires as much strategic inputs as any other investment option.

Identify funds whose investment objectives match your financial goals and asset allocation

Just as you would buy a car that fits your needs and budget, you should choose a mutual fund that meets your investing objectives. So, if your financial goal like children’s higher education is more than 10 years away you could look at an equity fund.

Fund House Pedigree

Even Before zeroing down on a scheme, you must select the fund houses on which you have enough faith to invest your money. Try to identify fund houses that have a strong presence in the financial world and provide funds that have a reasonably long and consistent track records.

A strong parentage would ensure efficient processes and the capability to build a strong business. In turn, these processes, which are a combination of investment processes, risk measures and operational efficiency, would ensure a sustained performance over a longer period.

Evaluate past performance, look for consistency

Although past performance is no guarantee for the future, it is a useful reference point to assess how well or badly a fund has performed in comparison.

Consistency is key: Will you invest in an equity fund that gave over 100% returns at a time when the equity markets were witnessing a secular bull run but showed a sharp drop in net asset value (NAV) when the markets were volatile? You don’t want a fair-weather friend, do you? A good mutual fund scheme is one that consistently manages to outperform its benchmark over 3-5 years.

Look for consistency in performance over longer tenures like 3, 5 and 10 years, if that is available, rather than the short-term returns. Select schemes that have consistently beaten their benchmark indices (index to which a fund’s returns are compared) and compare reasonably with their peer set over the above time frames.

Risk-Return Trade-Off

Investments in financial products come with a degree of risk and if returns are not in proportion to the risks taken, it is not worth going for such investments

A good mutual fund is one which gives better returns than others for the same kind of risk taken.

Risk-adjusted returns are evaluated against return given by a risk-free instrument- usually government-backed debt papers or term deposits of banks.

Portfolio Diversification

By its very nature, mutual funds are supposed to provide diversification across different asset classes, stocks, sectors and even geographies. A diversified portfolio has lower risk than a portfolio biased towards a particular stock, an asset class or a sector.

You can check the portfolio history of a particular scheme and see if the fund has been historically maintaining a well-diversified portfolio. Look at the monthly portfolio of a particular scheme on the website of a fund house.

Expense Ratio

The cost of investing through a mutual fund is not insignificant and warrants our due attention.

The ratio is the annual expenses incurred by the funds expressed in percentage of their average net asset. To make the choice between two similar funds, you should consider the expenses charged by them. Lower expenses benefit you in the longer term. Usually, schemes with higher assets have lower expense ratio than that of a smallsized fund.

As the funds grow larger in size, the fixed expenses associated with the fund get spread out over more investors, reducing the expenses and leaving more funds for investment.

Mutual Fund and Financial Planning

There is a Mutual Fund for all your Financial Goals

• For contingencies, liquid funds will meet our objective since they don’t have no lock-in period
• For goals, which are 1 to 3 years away, and we are looking for low risk option, income funds will be more suited
• For goals, which are 5 years away, and where we are okay with slightly higher risk, invest in hybrid funds
• For goals, which are likely to happen between 3-6 years, combination of debt and equity funds can be chosen
• When goals are long term and risk taking, ability is highest, equity based fund is one of the best options. Over the long-term, equity has usually outperformed all other asset classes.

Many a times, we find our investors perplexed with little or half information. They find financial markets complex as the clarity on funds is not available and that which is there is complex to understand and comprehend. However, at SBS Fin, we follow due diligence in selecting a fund for a particular portfolio as it should be as per the financial goals and shall be adherent to the investment plan of an investor.

If you are looking for a mutual fund and need an expert opinion on the same, feel free to write to us on contact@sbsfin.com

Lessons from Diwali

This is in continuance to our last newsletter on festival budgeting. Many of you appreciated it, many new subscribers found sense in that post. And I am so happy to share that few actually implemented on it and stick to their Festival Budget. I am glad as we together took some steps to financial freedom.

Going further, let us relook at Diwali season and see if there are some lessons as take away.

Diwali marks a new year, it suggests FUTURE

Future Planning is a first take away from Diwali. For traders and business people, Diwali is a new year and that is why significance of planning multi-folds here. Even on Diwali we must keep the future in mind and spend wisely.

You can do it in simple ways –

  • Choose an SIP over Shagun
  • Invest in gold then in jewelry
  • Gift kindness and not exuberantly pompous gifts

PROTECTION is better than loss.

Since childhood we are always told to burst crackers safely. To protect ourselves from accidents. Now as a grown up, I advise young kids and youngsters to protect environment because that is how we are protecting life.

In financial terms, protection is life and health insurance. As a lesson from Diwali, we must indulge in risk management practices to meet the forever increasing medical expenditures. You can also top-up your insurances as a symbol of investments on Diwali.

GOALS and investments

The reason I am associating goals with Diwali is because, I have grown up seeing my family & friends making financial goals for Diwali. Be it a new refrigerator, a sofa, a car or a house. We must learn the lesson of Financial Goals and how the same process can derive us maximum profits.

Every goal during Diwali lays an impact on our personal cash flow- be it the salary or bonus. Goal based investing helps us in keeping the cash flow healthy without affecting our financial plans and also leads to benefits as planned and sought.

We all love NEW THINGS

Every year Diwali introduces some great new things. I love how the Rangoli has evolved or the beautifully done lights – we feel like keeping them lit throughout the year. It happens when we try these new arrivals – be it the crackers, lights, décor options or sweets for that matter.

This very aspect of Diwali inspired a take away in my Diwali lessons – portfolio diversification. Many a times – the new is better and variety doubles the joy of celebration. Be it the new cracker or new mutual fund – the variety in your basket reduces the amount of risk.

CELEBRATION helps us reach out

Diwali Celebrations also bring together friends and acquaintances – even those who are usually not in touch throughout the year. That is the beautiful take away, we shall reach out, reconnect and revisit our portfolio’s and exchange some ideas. A reach out not only helps our portfolio grow bigger & better, it also opens up avenues for further celebrations in the future.

These are my take away points for Diwali 2016 with certainly some wisdom points as your financial fitness expert. Apart from the above, let us also do our bit for Environment- let us pledge for clean & green festivals from now on.