Category Archives: Blog

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5 Tips to SAVE & INVEST for your Child’s EDUCATION & CAREER

What’s the most important duty of parents? Providing good education to the children we would say.
Education opens the doors to everything. Moral values, better upbringing and a secured future! But given the day to day rise of education expense, how often as parents do you think about saving as much and as early for your child’s education? That’s an important question that you need to find an answer to! Be it in India or overseas, education exhibits inflation on a year to year basis with the percent rising from 10 to 12 per cent annually.
This directs to:
Are you saving enough for your child’s future?
Where do you start saving for your child’s education?
How do you plan it all?
Where do you begin?
Let the post help you with all the answers!

Start saving early

Now a mammoth task like this needs early investments. The trick is to give your money the power of compounding. For those of you unaware of the term, it’s the process in which an asset’s earnings are reinvested to generate additional earnings over time. To elaborate, suppose you need a corpus of Rs 50 lakhs say 20 years down the line. The task may be daunting and seem impossible but it’s possible to save this amount with an SIP. Putting certain amount of money regularly in equity fund over a good period can help you with the desired return. That’s the power of compounding. And since the rate of education inflation is so high in India, you need compounding to work for you over a longer period. A delayed start will not only yield a smaller corpus but can also jeopardise your child’s education goals.

Prefer long term investment plans

Since your goal itself is of long term so should be the investment. The best option is to invest in Systematic Investment Plans (SIPs). An SIP is a mere tool that helps one to invest regularly in a mutual fund scheme. It imparts financial discipline and helps realise long term goals. Tax-free bonds, Public Provident Fund (PPF), bank deposits or even child plans offered by insurance companies could be an additional saving option. For instance, investing in PPF is a good option since it gives compounded interest (traditional investment option) where it locks the amount invested for 15 years. Bank deposits are tax inefficient, and if you are in the 30 per cent tax bracket, go for income funds. Instead of being taxed every year for the interest, you will be taxed only at the time of withdrawal. You could also invest in diversified equity funds and even buy stocks if you have the time and required skills.

Consider short term options

Now you may not have planned things in advance and you may have a time horizon of less than five years. In that case, 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. Much needed given the situation in hand. PPF is a good investment option but not advisable if you need the money within 5 years. Fixed income investments are fairly safe and advisable.

Review the portfolio

Once your investments are done and you have created a portfolio, make sure to review it at least once a year. You should also check whether the amount required for meeting the goal has changed (given the inflation). Next, check whether your portfolio is on track to meet the goal. While monitoring goals from time to time is important, monitoring your portfolio and see whether it is on track to meet your goal isn’t any less important. That way you can figure out whether you need to increase your investment or put your money to the funds working and performing better. Finally, rebalance your portfolio at the end of each year i.e. sell an outperforming asset and invest the proceeds in one that is underperforming.

A dedicated child’s savings account.

It’s very common these days to put an account for your child when he or she is barely 2-3 years old. Savings accounts although carry relatively low interest rates, but they come with multiple benefits the opportunity to teach children about money and savings as they get older, putting a dedicated sum into savings, etc. This savings account, in the child’s name or the parent’s name can supplement the other, more aggressive investing strategies we mentioned above.

With a well-planned savings and investment approach, you will be able to take care of the inflation in education fees and secure your child’s education and future goals.

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Financial habits for a Debt Free Life

Ramesh and Suresh, two software engineers. They went to the same college, hail from the same financial background and make the same salary. Yet Ramesh owns a house in Mumbai, has a stable balance to life whereas Suresh is finding it difficult to meet both ends meet on a regular basis. The difference in their financial picture could be night and day because they view or rather handle money matter very differently. One chooses to walk in the path of debt free life whereas the other doesn’t quite see the benefit of it. We aren’t saying Ramesh didn’t ever carry debt. He might have carried debt in the past or might have witnessed the havoc that carrying a large amount of debt has had on other people’s’ lives, vowing never to be in the same position. This may sound like unattainable, but debt free life is something you can achieve. It will take some time and you will need to put in the work to take the path of Ramesh. Start with the steps we suggest and then you decide where you can go from there!

Don’t be ignorant

Every penny of yours is hard earned so you can’t afford to ignore where it is going. At least debt-free people like Ramesh certainly won’t. Debt free people attach a high value to every penny , because they know how hard they had to work to make that money. Be watchful over your money and money your accounts regularly, so you know what’s the status. Tracking your spending — every rupee that comes in and every rupee that goes out — is one of the best ways to maintain control of your money and reduce how much you’re wasting or saving or investing each month.

Don’t go overboard with spending

This is one advice that is for everyone trying to get a debt free life or trying to have financial independence – don’t go overboard with spending. The trouble is that many of us have a hard time following it. We live in a world where we constantly hear about the things that we “should” buy. It’s very easy to spend money on extra things that we don’t need (you can list 20 things instantly). Debt- free people do not waste money on unnecessary items and they are always checking to make sure there are no hidden fees on their bills and there are no fraudulent chargers on their bank statements. Living below your means is key for your long-term financial success. If you regularly spend all of your money, or more money than you make, you can’t expect to grow any savings. To accomplish this make sure to chalk down a budget for each month. Then you can work with that number to make sure you don’t overspend.

Don’t neglect saving

People who are in debt generally carry a mentality of scarcity (mindset of never having enough). And very often this actually causes people to avoid saving and continue spending, because they associate cash flow with a sense of temporariness. You have to put your money to saving first and then workout your spending schedule accordingly. People who are debt-free make it a priority above anything else! According to experts, the rent/mortgage of an individual doesn’t make up more than 30% of his or her monthly spending. So leaving that aside one can easily get a buffer of 10% to 20% of the remaining money towards the future. That means your retirement account, emergency fund and other savings accounts. Workable!

Don’t overlook the power of “knowledge”

People who are debt-free take charge of their financial education. Being debt-free for them hasn’t happened by luck or through a trick — it’s because they’ve realized a thing or two about money, and they are committed to getting better at it. Start taking responsibility of your finances, and you can do so by gaining knowledge on how money works. If you’re truly committed to reaching financial freedom, you have to invest the energy required to make it happen. Take for instance home mortgage: Most people aren’t aware that by the time they finish paying on a 30-year loan, they will actually be paying over double the home’s original value — due to high interest! People who are free from debt understand the consequences of debt, and they understand why bad debt should be avoided whenever possible.

Wondering about your debt free life ?? Want to know more about financial management to get debt free life. Feel free to write us on contact@sbsfin.com

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Retirement Planning for Millennials

The millennial generation is known to plan ahead in life. Next summer vacation – booked. Latest gadget – ordered. International concert tickets – purchased. The generation works hard, works smart and knows the importance of planning and executing. So, if you are of the millennial generation, you should agree that the planning to a comfortable retirement should begin now. The days of getting a job for life with a secure pension are gone. Nowadays, one has to plan ways and take initiatives to create pension arrangements, especially if one is planning to retire early. The advantage of starting now or early is that you will have plenty of time to benefit from your early efforts. Here are few financial moves that will help you plan your retirement better.

Eliminate debt. Grow wealth.

First and foremost – reduce liabilities. Which means avoid spending money on things that will lose financial value or have no value in the coming years. Also, pay off other debts such as credit cards and consumer loans, otherwise you'll be paying unnecessary interest that could otherwise be put towards your savings. While you do so, you need to also focus on accumulating things that grow in value – investing and watching your money grow, through things like stocks and real estate. If you make this a regular thing, it will help you develop a high "net worth" calculated by how much your assets exceed your liabilities. You can't retire unless you have a high net worth, and you can’t get there unless you make the right financial choices – especially by starting now.

Assure yourself to get insured

This generally doesn’t come as a priority to most but trust me it should top your list. You may think that health insurance is a waste of money because you are young and in good health. But if you truly want to gain financial independence and work toward an early retirement, you must be properly insured. After all you don’t want to leave the power to the uncertainties of life. It's hard to save and invest regularly if you find yourself saddled with pocket burning medical bills. Even if you have insurance now, review your policies to make sure you're covered at the right levels. Not having apt insurance can send your financial future off track. Please review to keep it moving on track.

Don’t wait for an emergency, have a fund

Like we were talking about the importance of having insurance, it’s also important to have an emergency fund allotted for unexpected events in life. You never know how life might surprise you, and sometimes events can blow a hole in your budget unexpectedly. The car may need replacing, you fall in love with the home of your dreams, or a once-in-a-lifetime investment opportunity comes along. Now how would you say no to that! So, start putting some money aside so that you can take advantage of that opportunity at that point in time.

Diversify your investments

A broad range of investments is also an important component to your planning. Here you should think and act big. Sticking to a narrow portfolio of domestic investments could hamper your ability to turn a profit. Besides investing in diverse funds, consider owning real estate, whether that’s private rental units or commercial property. Most people doing well today either have a good pension or have passive income from investments in real estate. But it’s important to understand that real estate is a long-term investment opportunity, and people looking to retire soon should definitely explore the market!

Let your hobby, pay for you!

The passion for travelling, photography, the guitar classes, you took as a teenager, that’s worth something. Isn’t it? Cash it to accumulate enough money for an early retirement. Sometimes, your day job may not be enough, hence you can look for other ways to generate cash. And it can be a lot fun! This may mean freelance writing or playing guitar at local coffee shops. Maybe it's tutoring math, working as a DJ, or doing anything that your are good at. If you're young, you have energy and freedom, and the ability to make some cash on the side. Earn it, invest it, and watch it help you retire for good from work at an early age.

Wondering about setting your retirement plan ?? Want to know more about retirement plan. Feel free to write us on contact@sbsfin.com

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Bad Spending Habits and Ways to Break them

“The best way to break a bad habit is to drop it.” – Leo Aikman

Here’s the thing, habits either good or bad come naturally to us and can be got damn difficult to break until we really make an effort. Well there’s no question to put that effort for a good habit but the bad ones over time can prove to be fatal. Take bad spending habit for instance. The way you spend money has a huge impact on your financial wellness. Bad spending habits can keep you in debt and stop you from reaching your financial goals. But sometimes it may so happen that you may completely fail to assess what your bad spending practices are, forget about rectifying them.

That’s where this post will help you. We’ll show you some of the most common bad spending habits that you may be practicing without even realising. We will also help you with how to fix them. If you want financial success, go ahead and identify your bad spending practices and then you can create a plan to deal with them.

Are you going over budget?

Sticking to budget can be tricky but it’s so crucial for our financial well being. Are you constantly feeling broke within few days after you receive your paycheck or in the middle of the month? Then you probably have a bad spending habit (or no savings plan) that you need to fix. Because going over budget consistently isn’t good because it could mean you’re spending more money than you earn which can lead to debt. To fix this, you need to track your spending on a daily or weekly basis and readjust your budget accordingly. If you know you are spending too much money dining out or you are spending lots on lunch every day, you need to look for an alternate option (have a good cook instead). You can also try using the cash envelope system for specific budget categories as well to ensure you don’t overspend. The trick is to set aside budget for major activities of the day. Another trick is to automate your savings. It’s like saving first, spending later. You can check with your bank to have a portion of your paycheck automatically deducted and sent to your savings account instead of putting the entire sum in your checking account.

Are you wasting money on services you don’t use?

Paying for something you don’t use is just like taking your hard-earned money and throwing it into the garbage. And why would anyone continue to do that! That year-long gym membership (you
barely visited for a month), the newspaper subscription (aren’t you always on the internet), the cable subscription (when was the last time you watched television), all this is eating up your money.

Sometimes certain products and services sound nice or they’re a trend and everyone is paying for them. Or, you may think that one day you’re going to use them, but that one day never comes because you’re just too busy or it isn’t a priority. Identify them and get rid of them at once. Instead of these subscriptions you may enrol yourself to something that you enjoy and would attend on a daily basis. A trend is easy let go but not your favourite hobby! Just be honest to yourself.

Are you into impulse buying?

Impulse buying is bad news and it is hardest to break. Making unplanned purchases based on emotion instead of spending mindfully can pull your budget and finances way down. Making excuses to shop just that sale is on or filling your cart with stuff that you will probably never use or dropping buy at an ‘over-priced’ cafe to grab brunch are signs that you are an impulsive buyer. There’s
nothing wrong with spending money those ways, but if you regularly make unplanned purchases on impulse, they can really add up and affect your finances. If you don’t want to spend all your extra money on random knick knacks that you didn’t really even want or need to buy, you’ll have to stop spending on impulse and plan your spending better. You can create a miscellaneous budget category that you stick to for extra, unplanned purchases. You could cross check couple of times to the items in your cart to ensure that you actually need the items and don’t just want to buy it based on a temporary emotion that will leave you regretting the purchase later. All these are ways to curb your tempt of buying. And most importantly stop using your credit card. No seriously! Paying for everything you buy with a credit card can be good practice if you pay off your card every month. If you’re swiping your credit card for things you can’t afford to pay off by the next billing cycle, leave your card at home and use cash instead. That way you also save on paying interest charges.

Wondering about setting your financial goals ?? Want to know more about financial plan. Feel free to write us on contact@sbsfin.com

 

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Tips to curtail your expenses during festivals

Although we Indians celebrate festivals all year long, the important ones begin this time of the year i.e. with Ganesh Chaturthi. Festivities are times for revelry with family and friends. While you get all excited to spruce up your home during this time, you also expect to bring about a change in your own monotonous life.
And why not! After all festivals are believed to bring joy & prosperity in our lives. But what about the pocket-crunching expenses they bring along – gifts, baksheesh, mithai, and what not. All this is hard to avoid. And if you are extravagant and generous during the festive season, it may cost you dearly later. So, here are few tips to strike a balance between indulging in festivity and not burning a hole in your pocket.

Power of recycling

In the age of strong branding, festive sale and brands alluring you with all kinds of promise and discounts, there’s a bunch of new-age ‘janta’ or Instagrammars who are telling you to give importance to recycling. And what special occasion then Diwali or Navratri. Home-made drapes of beautiful old sarees can be a substitute for brand new curtains, repaint diyas from last Diwali to give them a new look, make paper lamps by colouring newspapers. Take help from friends or family or Google, even better to pick some innovative recycling ideas that can save your money, yet keep the festival spirit on.
You can apply the same trick while gifting someone – try the DIY ideas of homemade chocolates or handmade wall pieces or lamps. There are ready materials available which comes cheaper! All it needs is a little bit of your time and a lot of enthusiasm.

Shop online or off season –

Shopping is one of the major budget eaters during festival. Clothes for the family, furniture or appliances for the home, jewellery to mark the auspicious occasion and there’s no stopping. Now how does one place a budget for all this? We understand the sentiment of buying new clothes and all other stuff and we aren’t asking you to recycle this time. But what if we tell you to shop a while before the occasion. We all know the meaning of sale so let’s not fall for that and be shopping ready months before the festivals arrive.
Also, instead of going to the expensive stores in malls, you can also check out deals available online. With India going digital, e-tailers are competing among themselves to sweeten the deal for the customer. So don't miss out on this opportunity of getting some great deals on clothes and accessories online. And always, always have a fixed budget for your shopping!

Don’t make bonus part of the celebration

Bonus is a yearly thing and it’s meant to be put into good use. Most splurge away bonus they receive and that’s a mistake. Bonus is a lump sum amount and to avoid its use, one should put it immediately to fixed deposit or put it in a high-return investment vehicle like SIP investment and let it grow over a period of time.
This will in fact help loosen up your budget for next festive season. Carry this same cycle every year and your festival expenses can gradually come under control.

Organize parties / gatherings at home

Festivity is the time to relax, time to gather around friends and family and basically have a good time. Now instead of queuing up in front of expensive restaurants on Diwali night or other festive time, you can always plan for a house party where all your friends or relatives can get together and have fun together.
Since potluck is a trend these days, you can suggest the same during this time where all the party guests can bring in their own special dishes and make it a buffet treat for everyone. Sounds delicious!

By implementing these simple yet effective ideas you will not only save a lot of money, but also ensure that you haven’t gone overboard with your festive spends. Besides, festivity is all about spending quality time with your loved ones, so as long as they are around it’s always happy and merry celebration!

Looking for more ideas on festival budgeting speak to our financial fitness expert here or you can also mail us.

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Crucial Steps to Achieve Financial Independence

You save for a month to buy that latest mobile phone or you utilize your bonus to take a trip with your friends or family. And you pretty much feel satisfied about the fact that your goals and finances are kind of balanced. Now, these are your short term goals which you competently take care of very well. How about the long term goals? For instance taking care of your family’s dreams or funding your child’s education or funding your retirement. And what about the time if an uncertainty strikes.

Are your financial planning that strong to take care all your short and long term goals? Well the answer to this question would most certainly be ‘Not quite’. That’s because although we give priority to savings, we don’t quite explore the territory known as ‘Investment’. And even if we do, we start investing without acquiring enough knowledge about it. Now you don’t want to be in either of the boats. You cannot rush when investing and you cannot be laid back about the whole thing. Hence strike a balance. This post will help you achieve the same!

Think why you investing

What’s your goal? Are you doing it for a short term goal or a long term?
You cannot be aimless about it at all. We come across to so many people who declare that they want to invest but don’t have a goal! That’s like deciding to travel but don’t know where. So pick your goal first. Retirement is a goal by default and is the topmost in the priority list.

Think when you need the money

The time remaining is the single most important factor that determines whether a particular instrument is suitable or not. So it helps to be precise about the duration.

Think how much you need

This means you need to know the target corpus. If you are planning for your child’s education, you can estimate what it costs today. Then with a reasonable inflation percentage calculate the target corpus during the year you need the money. You most definitely get a tentative budget. It’s no rocket science!

Think of an appropriate benchmark

By this we mean for goals that are at least 10 years away,inflation is the benchmark. An investment or couple of investments should be able to beat inflation for such long-term goals (take cue of child’s education again). The amount we invest is also important to achieve the target corpus.

Think of the asset class

Now this is another vital step. You need to know the asset class you need to achieve the target corpus, given the time you have. Once the benchmarks are clear, the asset classes should be clear too. Like: Gold is a dud investment that offers risk more than stocks, but rewards like a fixed deposit. Whereas real estate requires a lot of knowledge and a lot more starting capital.

Think of the expected return

This would need a bit of knowledge gathering as to how asset classes operate.
For example in fixed income returns depending on the overall health of the economy, it’s hard to
predict over the long-term. Post-tax 6-7% is a reasonable expectation for the next 5-10 years.

Also it is reasonable to expect equity produces returns that are close to or even a bit lower than how the GDP has grown over 5,10,15 years (depending on the duration that we have in mind).

Calculate how much of each asset class should you choose

Now you have decided which asset classes to choose and how much return you would be expecting from them. The next step is to decide how to build a portfolio with this information.
Suppose we expect 10% (post-tax) from equity and 6% (post-tax) from fixed income, we can mix them up in different ways depending on the need.

For a 10+ year goal: 60%-70% can be in equity.

For a 5-10Y goal: Anywhere between 0%-40% equity depending on comfort level.

For a 0-5Y goal: 0%-20% equity.

Please note: This is a complete tentative calculation which may differ from person to person depending on the goals each one set. This is just to give you a fair idea.

Now decide investment categories

Since by now you will be done choosing the asset classes and their proportions would be decided, you can consider the categories available in each asset class.
This would completely depend on your comfort level, understanding of the product and associated taxation. Whether you choose equity mutual funds or stocks or debt mutual funds, it’s your choice. You can also take help from financial experts to help you with this.

Wondering about your financial independence ?? Want to know more about financial independence and plan. Feel free to write us on contact@sbsfin.com

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Financial Independence for women is paramount

From excelling in areas like the arts, sports, governance to pursuing the professions of their choice,from winning the world with the beauty and grace to landing in space and beyond, women have come a long way in empowering themselves. Yet when it comes to handling their finances, a lot of women still leave it to the men (if not entirely, partially) in their lives.

Although most women understand the importance of being financially independent some lack the confidence in their own ability to manage finances well. However, women should know and believe the fact that they are equally good if not better at making sensible money decisions (imagine your saving skills or purchase choice).

Just like financial independence is paramount, confidence to manage one’s own money is important too. No matter what stage of life, each phase has individual goals and objectives which ultimately strive for one thing – Financial Freedom. And the last thing they want is financial worry to overshadow their lives.

We have discussed, asked questions and gained clarity from women who have gone through circumstances that needed financial independence and they have learnt it the hard way how to have one. Through our post we will help you with few things that women must do to achieve greater financial independence.

Plan for your finances for life

You are single or married or about to get married, all this shouldn’t come in your way of having a strong financial plan. If you are single, either by choice or by circumstance, you need to create a master plan that provides a sense of direction of how to steer your finances. Married women too need to actively participate in any financial plan of the family,whether they are contributors or not, as they stand to be affected as beneficiaries. “Many married women, may seem happily settled, but, in fact, don’t have any financial freedom.

They trust their partner way too much and don’t find it necessary to build a savings basket to cater to their own needs. As a result, if they are unhappy in their married lives, nothing much can be done as they have nowhere to go with the children and have no means to support a separate life” said Mitra, a single mother.

And even if anything goes smooth, think of it this way, as women, you can bring in an element of discipline and focus in the family’s financial plan (skill sets). So, otherwise also seek active involvement in putting together a financial plan.

Switch to savings from spending

This is ultimate and irrespective of men or women, having a savings budget is an important step towards financial independence. The idea is to help you monitor whether expenses are overshooting in a particular month and to hopefully curb them in the following months.
However, such a budget doesn’t help to track your savings. So, what you need is a savings budget. Decide how much you wish to save from your family income month.

Ideally you should push yourself to save 25-30% of the household income (very crucial). Those who don’t get a monthly pay cheque can fix a percentage of saving from the yearly pay.

Don’t be ignorant in money matters. Never

This is especially for people who are married. The way you know the likes and dislikes of your family and have a good grip on household needs and requirement, you need to have a good grip on finances too. Even if you don’t have an income of your own, you must know what your family’s income and sources are (salary/business, income from investments, rent, etc.).

Know how much life and health insurance the family has. Know where to look for the documents and contacts in the event you need them. Additionally, as a good practice, have access to the family’s savings and investments through joint accounts. Mishra, a business woman, married with two kids, said “It’s most important for women to encourage their husbands to have term life insurance policies with them as a nominee. Any liabilities should also be covered through term policies so that if something should happen to him, at least the family is debt free.”
Smart move!

Seek advice

Not all of us are experts here. Taking sound advice from time to time isn’t a bad thing after all. So you can hire a good financial planner who can answer all your money questions and guide you on making a comprehensive financial plan.

Beware of free advice from your bank RM, or insurance agent who may not consider your goal in the first place. Always remember, a good planner will focus on your goals and risk behaviour to make a goal-based financial plan, and help you stay focused to achieve those goals on time. That’s basic.

Financial independence is not just about having funds in your individual and joint accounts and investments; it’s also about the ability to take strong decisions in times of need and uncertainty. It’s a big step and requires a shift in your attitude and lifelong beliefs; but it’s not unachievable and having achieved it will ensure a comfortable and meaningful life.

Our co-founder Rashi Bhargava advocates Financial Literacy and Financial Wellness in women, she believes a financially empowered women is not just more confident but also more productive and creates a perfect work-life balance. Her IAPs for women are all about the day-to-day financial issues and concerns of almost every Indian family and she works on creating a pathway solution devised out of your financial standing as per your life goals.

If you wish to enquire more about the programs or you wish to set up an appointment for a one on one discussion, write to us on contact@sbsfin.com or connect here.