Monthly Archives: June 2018

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How to manage your finances before starting the Passion Plan

Starting your own business, becoming a travel / fashion blogger or a scuba diving instructor, all comes under our passion plan. Over the years most of us may have understood (in a hard or easy way) that passion is what drives us to success. Passion is something that sets people apart. And it’s the passion in you that’s probably driving you to leave your comfort job and live the life you always wanted to. But having said that one should give utmost importance to one’s personal finances even before pursuing the passion plan because the first steps of following your passion is usually a financial disaster. It usually means the cost of leaving a job or the cost of starting a business. These are critical costs that may stand as a roadblock between you and your plan. Secondly, passion is extremely hard to quantify and evaluate. You may have all the passion in the world, but it doesn’t guarantee you a dime. All this usually result in lack of a proper planning. Preparing to pursue your passion plan with a basic understanding of money management will give you a solid foundation to build from. Take note of these three essential finance management tips.

Save for your passion plan

Think about how you usually tick off a plan from your bucket list – be it buying a car, or going for that world tour. You set some serious saving goals before getting your hands on what you want. Starting a business or your passion plan is also one of those from your bucket list for which you need to set financial goals. Running a business or pursuing an expensive course may usually involve managing debt. So the more you save in advance, the less you will need to apply for as a loan. The more confident you get in setting and reaching your financial goals, the more responsible you will be when you actually go for your passion plan. Getting into the habit of saving forces you to become more aware of your actual financial position, rather than relying on credit, and will help you to live within your means.

Don’t cross the line

As we mentioned earlier how passion plan extremely hard to quantify and evaluate. So, whether you have started your own business or started freelancing as a blogger, it’s important to not go overboard with spending. It’s important to make sure that you aren’t stretching your budget too far and that you have a steady cash flow in your business or venture. Just don’t bleed it dry the moment you start to see the money coming in! It may seem like a fantastic idea to blow all of last month’s profit on a shiny new piece of equipment, but if next month isn’t as fruitful as you anticipated you may find yourself struggling to pay your bills. Because at initial stage, you just can’t predict. A great way to develop the habit (which most of you know out of your previous work experiences) of living within your means is to put aside money for all of your essentials first, then use the remainder as your disposable income. Saving and living within your means are great habits to adopt when thinking of going ahead with your passion plan, but to make them work together effectively you need to monitor your finances on a daily basis.

Monitor your finances

If you don’t closely keep track of your finances you may head into a dangerous territory. You can’t afford to exhaust all the income before the month ends. And if you are the one who is aiming to build a team of people then they will be depending on you financially. So, you cannot afford to go off-track. Hence monitoring your finances is so important. So make it a habit – set aside some time every week to review your financial position. A simple way to start off is by reviewing your previous bank statement. Group all of your expenses on the statement into relevant categories, such as rent, dining out, other expenses, etc. and add them to a spread sheet. Do this once a week and keep a tally of how much you’re spending in each category. Make sure you include any income you make to track that you’re living within your means and also include a category for savings, as this money won’t be available in your disposable income. This monitoring trick will not only help you to plan for the future, but will help you re-assess some of your ‘not required’ spending. Setting good financial habits before you execute your passion plan will make your journey smooth.
Learn to manage money first which will eventually be the wings to your dreams!

Are you also following your passion and need help in managing your finances then feel free to contact us.

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Here’s how to find the Best Child Education Investment and Saving Plan

For parents, their world revolves around their children. While they work really hard to provide their children the best of the comfort, what tops their priority list is education.
Every parent wants his/her child to get the best possible education without any financial hurdle. But unlike the earlier days when competition was low and education fee in institutions was modest. Now-a-days the cost of higher education is not only high; it’s rising at 10-12 per cent every year. And in order to provide the best education in the coming years, it becomes significant for parents to invest in best options to meet their educational expenses and secure their future. However, the big question is: how to find the Best Child Education Investment and Saving Plan? Well to get the right plan, you got to plan well in advance and take the right kind of steps. And you can take a cue and chalk out your plan from this post.

Pick the career option

The foremost step is to plan for a higher education program. This step comes even before you even think of start saving. It’s early to pick an education option at this stage, sure. But you can identify two or three good career options for your child based on your wish and your child interest. When you do this, you can even get the estimated year when you are likely to spend this savings on the selected program. For instance if you are planning for engineering, you know, you are likely to spend this money when your child would turn 18.

Do the cost calculation

Now that you have picked the tentative education option, figure out the current cost of the program. Going by the engineering option, you can pick any government institute or private college, and find out current education cost applicable. You can get this information from website or from the institute itself. It doesn’t stop here. You have to now calculate the future education cost (difficult to get the exact estimation). You can get a tentative figure though. Consider 8-10% inflation every year and find out future education cost.

Find the yearly/monthly investment amount

The next step is to calculate yearly or monthly investment amount required for reaching the target amount. This is the tricky step as it would need you to assume expected returns from investment options where you will be investing money. The simple way to look at it using the PMT formula (Google will help you understand this better). It is nothing but a financial function that calculates
investment required for an option based on constant payment and constant rate of return. Doing this would give you a fair idea about the amount required for investment.

Pick your investment option

Now the best part of all your hard work – Finding the investment option which can generate a return as per your expectation. Investment in fixed deposit, term plan or ULIP for child education is not suggested. Also if you have a time horizon of less than five years, you will have to rely primarily on fixed income instruments, which are likely to offer a lower rate of return.
However, these offer guaranteed returns and safety of capital. If you have time in hand, mutual fund is one of the best investment options to be considered for child education planning. You should select 2-3 good equity oriented mutual funds and start SIP. Make sure you select mix of a large-cap and mid-cap fund for investment. And with every passing year, keep on increasing SIP on your salary increment. For conservative investors, PPF (a 15-year scheme that helps you to generate tax –free corpus for your child education) is an option to look forward to. You can partially withdraw money from PPF account after the sixth year and you can close the account after 15 years. However, please note that expected return of PPF is lower compared to mutual funds. The bottom-line is you have to plan and start investment at an early stage. It would be easier to achieve the target if you start investing at an early stage. And your children can reap the benefits!

To know more about best Child Education Investment and Saving Plan connect with our financial planning expert for a better and secure future.

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