Author: Monika Halan
Managing your finances is not a luxury for the rich, it is hygiene for everyone.
(look in the policies you have and add up the figure under ‘sum assured’) you have in all your existing policies and see how much your life insurance cover is – not the value of the policy when it matures, but what the beneficiary gets if you die.
Rule of 72
Suppose the agent says: Your Rs 1 lakh will grow to Rs 2 lakhs in fifteen years, divide 72 by 15. Your return per year is 4.8 per cent, which is near the 4.73 number that
Your bank may offer you a reducing cover policy whose premium is bundled with your EMI.
Rule One: Get a cheap plan. Rule Two: When buying a term cover, check the claims experience of the insurance firm. Each financial product has a certain time period over which it works best. A product that is very safe in the long run becomes very risky in the short term. And a product that works in the short term becomes a drag on returns if you hold it too long.
There is a rule of thumb on how much equity you should hold: 100 minus your age. At age thirty, you should have 70 per cent of your holdings in equity and at age seventy, you should have 30 per cent of your holdings in equity. It is a good idea to do an annual audit of your money box to see if you are on track.
If you die without a will, your house, gold, car, mutual funds, jewellery will go to your legal heirs. Who the legal heirs are depend on your religion in India and which personal law applies to you. For example, if you are a Hindu, and die intestate (without a will), your assets will be divided equally among Class 1 heirs. There is a list of twelve relations that fall in this category, including sons, daughters, surviving spouse and mother.
Did you know that a nomination does not mean that the nominees get the assets? Look at the nominee as a caretaker of the asset, somebody to whom the money flows to for safekeeping till the legal heirs can stake a claim. In your head the nominee and the legal heir is the same person, but in the eyes of the law, the two could be different.
A couple should make individual wills and not a joint will.
Will the prodigal child contest your unequal will? Probably. To prevent that, you can include what is called an ‘in terrorem’ clause. This is usually put in a will when a contest of the will is anticipated. This means that if any of the beneficiaries contest the will, they could lose even what has been bequeathed to them.
At some point in our lives we need to step back to see why we’re doing what we are doing. I know peer pressure kills, but whatever you do, there will always be something that you don’t have. Better to be who you are rather than be somebody that you are not.
If you are not investing in mutual funds because of the risk, you are totally nuts to be investing in bitcoin.
I have not met a single person who has said: ‘You have made me rich overnight.’ The goal is empowerment and financial freedom and not being suddenly super rich.