Things you should know before buying endowment plan

Why Endowment Insurance Plans?

Guaranteed returns: These plans ensure that a stipulated amount is paid at the end of the term. If the policyholder lives until the maturity, he/she is given the assured amount. However, in case of the death of the insured, the amount is transferred to the nominee.

Additional Bonuses: The policyholders with with-profit plans are provided with some additional bonuses as well. Under this, additional amount is added to returns at the time of maturity of the policy or in case policyholder's death. Reversionary Bonus and 

Terminal Bonus are two types of bonuses.

Things to remember: It is advisable to take the endowment plan for a minimum period of 15-20 years. The amount policy holder receives at the time of maturity is directly related to the number of years of accumulation.

Twin Benefit

You get insurance + savings benefit. You get the money you invest with returns and also a periodic bonus at the maturity of the plan

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Advantage of endowment plans.

Dual benefit: 

Endowment plans offer the dual benefit of long-term investment and insurance. Apart from paying the sum assured (or accumulated amount minus outstanding premiums, whichever is higher) to the beneficiary in case of the policyholder’s demise, endowment plans also pay a lump sum maturity amount (adjusted after considering company performance and premium defaults) if the policyholder survives the policy tenure. This is a key advantage of endowment policies.

Safe:

Even though the returns on endowment plans may be lower, they are risk-free in terms of the sum assured.

Disciplined savings: Policyholders need to set aside a pre-determined amount towards the premium payment at a stipulated time interval, thus, encouraging a disciplined approach to saving.

Assured bonus: Endowment plans declare an annual bonus, typically paid out as a specific percentage of the sum assured. In case of the policyholder’s survival, additional bonuses accrued during the policy term are paid in addition to the sum assured. In case of death during the policy term, the death benefit is paid to the nominee, including the full sum assured along with the total accumulated bonus.

Compounding returns:

 A key advantage of endowment plans is that they fetch returns on a compounding basis during the policy term.

Loan facility: Policyholders can take a loan against an endowment policy as and when needed, and this is usually without the need to secure the loan against collateral.

Double tax benefits:

One major advantage of endowment plans is that they offer tax benefits as per the Income Tax Act, under Section 80C on the annual premium, and under Section 10 D on the death benefit.

High liquidity: 

Endowment policies are liquid in nature.

Premium flexibility: 

Another important advantage of endowment plansis that you can pay your premium over a short period and enjoy the policy benefits over a long term. In case premium payments stop after certain minimum years' premiums have been paid, a free paid-up policy for a lower sum assured can be secured - subject to certain conditions.

Additional benefits/riders:

Insurance companies offer additional benefits to policyholders, such as marriage/education endowment plans and double endowment plans. An endowment plan also lets policyholders add additional riders for major surgical assistance, critical illnesses etc., by paying a marginal premium.

Before you start investing check your risk profile

Before you start investing, the key is to understand your risk profile. Prima facie, you do have a risk capacity but what you need to check is your risk appetite. Risk appetite is more about understanding your actions in times of adverse situation, i.e., how will you react if your investments meant for six years starts showing negative returns after only three months of investing?

So, you are eager, about embarking on an investment strategy. You have decided that you will save money henceforth and invest it smartly to make it grow. You have consulted with your friends and family, have a fair idea on what all options that you plan to take.

Do you know what your risk profile is? Do you know that you cannot blindly invest without knowing how much risk you can take? 

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Before investing be clear of your investment objective.

Investment objectives can be broadly classified into:

1.Generating an additional source of income

2. Financing future needs

a. Buying a home

b. Building a retirement corpus

c. Child's education and marriage

d. Legacy Planning

3. Increasing savings/ Inducing savings

4. Reducing tax liability

5. Protecting your savings from inflation

Factors that determined Risk appetite 

Loans and Liabilities: 

The first and foremost facet to be considered before you embark on investing is to take stock of your loans and liabilities. Loans are simple. You have a track of them, even if you do not realise it! Generally, the EMI payment is deducted from your bank account. Just make a note of them.

Age: 

Obviously, the younger you are, the higher risk you can take (it includes those who are young at heart as well!). By age, what we are trying to say is, that when the age is lower, the investments have a longer time to reap rewards.

Income: 

Your income and its steadiness is another major factor which contributes to your risk profile. Are you in a good job which pays you enough to cover all your essential needs with ease? In case a couple of investments take a longer time to reap returns, will your day-today living take a hit?

Current Scenario : 

Your age, financial dependents, assets and liabilities, sources of income, level of engagement (active or passive investor) and investible capital

Past Experience: 

Knowledge about investment products, inclination to learn, nature and composition of the last held portfolio and its performance

Future Outlook : Time horizon available to fulfill the investment objectives, liquidity requirements in the near future, importance of tax savings vis-a-vis return on investment

Personal Finance Lessons From The Olympics

‘Citius Altius Fortius’ meaning Faster, Higher, Stronger is the motto of Olympics. The ultimate sporting event for athletes to do their best, win medals for their country and gain sporting glory. There is a lot of hard work, tears, sweat and blood behind qualifying for the Olympics & only few like PV Sindhu & Sakshi Malik got a chance to stand on Podium.

We can learn a few lessons from the Olympian athletes to use in personal finance management :

1) Set goals:

The basis for any venture is goal setting. You need to define in concrete terms your goals for different time frames. For example, a sprinter in the 100 m race will set different goals for different time frames. Short-term goals could be related to strength training and endurance. Medium term goals could be setting a personal best and winning medals in national events. Long term goals would be getting selected for the Olympics team or running the 100 m under 9.90 in the next Olympics. Similarly, you should set short term goals, medium term goals and long term goals that can be measured. Short term goals can be related to budgeting. Medium Term goals can be related to building a home and long term goals could be comfortable retirement, children’s education etc.

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2) The earlier you start the better it is:

To compete in a sporting event on an international level requires years of practice and training.

For example the legendary swimmer Michael Phelps took to swimming at the age of 8 and held a world record in swimming at the age of 15 years and 9 months. Usain Bolt was already winning all the races in his school by the time he was 12. The earlier you start, the more practice you have and the more time you have to rectify mistakes. You have time to experience more and compete more. This is applicable in every sense to personal finance.


3) Understand & Work around Circumstances:

While playing a sport, it is not enough to just do your best. You need to understand changes in rules, opponents, new training strategies, playing conditions etc. Similarly, you need to understand that Financial Life is dynamic so Financial Plan can’t be static. So what you have planned today may help you to take next step but if required you may have to change path later.

4) Get professional help

Athletes have different people around them to manage their sport. They get professional help from their coach. They take help from sports doctors and therapists to keep their physical & mental condition at the peak. They take help from nutritionists and diet experts to ensure they get the required nutrients from their diet. If personal finance overwhelms you, you can take the help of professional advice. Professional advisors will be able to give you expert, relevant and unemotional financial advise.

5) It is not over till it is over:

You will face hardships, downturns in personal finance. But you cannot lose heart. You have to rise above the struggles and try till you succeed. Sprinter Gail Devers suffered from a disease called Graves disease that threatened to end her career. She fought back, recovered and won gold medals in the 1992 and 1996 Olympics. Justin Gatlin (age 34) who came second in 100 mt race – has similar story of ups & downs. Many people feel it is the end of the world when they face financial crises. You should remember that financial hardships may not be as bad as life threatening circumstances and work towards reaching your goals.

What Should Women know About Retirement.

We all wish for a long healthy life. But if we want to live long, we will be spending many years in retirement and we need money to take us through those years fulfilling our needs and wants. In case of a woman, retirement is a whole new ball game as there are different challenges and issues to tackle.

A survey of over 7000 women across 15 countries was conducted by Transamerica Center for Retirement Studies (TCRS) and the financial services firm Aegon on the topics of career, financial security and managing home and work. One of the main results was that women are at greater risk of a financially insecure retirement.

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MONEYMINDZ DO NOT SELL ANY FINANCIAL PRODUCTS, WE ONLY PROVIDE UNBIASED, FREE, ON PHONE FINANCIAL ASSISTANCE.How retirement is different in the case of women

Longevity:

Women on an average live longer than men. In India, life expectancy for men is 65 years and for women is 68 years. This means, women live for more years post retirement and it is more important for them to plan their retirement well.

Take time off work:

Today women are earning income and are self-sufficient in many ways. But they are also the ones to leave their jobs or take a backseat in their career when it comes to family conditions like childbirth, medical emergency, caregiving to the young, the old and the sick. This means their earning potential is affected and if this happens too may times or for too long a period, their retirement funding can go awry.

Part-time work/ Freelancing:

Many women work in part-time jobs or freelancing assignments. These are good methods to earn money, do what interests you and have a balance between career and family. But these generally do not pay as much as a steady job or a running a business. Such assignments do not take care of pension or health insurance. It is important for women to be aware of the same and ensure that they plan finances to secure their retirement.

#Retirement is not at the top of their mind:

Women are not financially prepared for retirement due to many reasons. Some of them are not confident of planning their finances. Some of them are not interested in it and want to do it at a later point of time or depend on their spouse. Some believe they will work forever. Some of them are too busy with other things, that retirement planning is not a focus area.

Many feel they are not knowledgeable in these matters and invest just in bank deposits. But considering inflation, lifestyle changes and rising medical expenses, investing in bank deposits is not enough. They need to have a proper financial plan with investment allocation across different types of assets to earn better returns and risk management.

Social conditions:

Let’s face it, society treats women differently. Women get married earlier which can sometimes hamper their career growth. Women are expected to take up more family responsibilities which can also put their career on the backseat. In the corporate world, women on an average get paid less compared to their male counterparts for the same work, role or designation.

Over a long period, this is a significant loss. Women marry men who are older than them. Women’s longevity is also more than men. So when they are old, they are alone for a longer period of time which means they have to fund more for their retirement.

Looking to plan a hassle free and embalming summer holiday in 2017 in India?

From the mighty Himalayan peaks, pristine North East to the tropical beaches of the Andamans and Lakshadweep or even the Nilgiris - inscribed by UNESCO as World Heritage Site, there is no dearth of options when it comes to choosing summer holiday destinations in India.

However, there are still areas where you can be caught off-guard; such as ending up overspending on unplanned activities.

Want to save money during your summer holiday? We at Moneymindz.com will make it easy for you. Just give us a missed call on 022-62116588 to explore our India’s best Free Advisory Service.

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Plan your trip: For a entire trip you should have enough money. It’s important to have a budget. One should not planned at last moment for a trip. If it is a long vacation, one needs to plan his vacation mainly the finances well in advance.

• Use internet to help you find a great deal on hotels, plane tickets, rental cars, or whatever else you’ll need for your trip.

• Plan for food and drink costs including snacks.

• If traveling by car, allocate money for petrol. 

• If you plan to fly to your destination, budget for the cost of round trip plane tickets.

• Allocate money for a rental car, ride shares, taxis, or a personal driver to travel around the place you’re visiting.

• Budget for the place you’ll be staying during your trip. Hotels with free breakfast are a good budget friendly option. 

Get a Travel Insurance:

It is recommended to get a #travel_insurance on the day you book your tickets. An extra expense is also a way to save money, in case things go wrong. Travel insurance does more than cover unforeseen health emergencies or medical treatment as a result of accidents and specified illnesses while you are on a trip. There are also policies that cover emergency dental expenses, medical evacuation and repatriation of mortal remains.

Reduces used of credit card: 

Apart from planning the travel, also try to minimize the use of credit cards. “Planning in advance always helps to avoid overspending. Also, try to use the credit card less. When we have a credit card, we generally tend to overspend,”

.Keep in mind that the interest rate charged on your credit card spends is on a monthly basis and ends up in the range of 24-40% per annum. Also, while using credit cards during international travel, you would be paying a foreign transaction fee, which is usually in the range of 3% of the transaction value.

Think Outside the hotel box :

In a research it has been proven cost of hotel room is less costlier then the vacational rental property.

“When you’re in a hotel room with children and family, you have to get out to entertain them,” de Belloy says. “When you’re in a vacation rental, there are typically quite a few entertainment options on the property.”

Travelers can find additional ways to save money on their summer vacation, depending on where they plan to visit.

Do your family know about your finances?

Did you know that nearly 43% of women in India have no idea about their husband's financial, insurance, and personal details?

You should make sure that your family - definitely all adults but also older children - are on the same page when it comes to the family’s finances. This could come in handy if you fall ill or suffer an accident. Your family especially your children and wife should have knowledge of money, If they dnt have knowledge they are likely to live a hand-to-mouth existence or rely on other parties for financial help.

So, ensure your family does not fall into the same trap.

Here are the things your family should know about your finances.

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Bank account: Ideally should keep all the track records of your bank account and maintain one bank account for per family Member.

Investment accounts: Make a list of all your investment accounts.

Financial Physical Assets: Details of home ownership, bank lockers, large refundable deposits with institutions other than banks, as well as your provident funds' details.

Loans: If you have loans, the details of loans (car/home, etc.), such as EMI amount to be paid, time remaining to repay the loan, etc. should be informed to your family member.

Credit cards and debit cards: A list of all credit and debit cards, with their respective numbers (on the card), contact details of the card company. If in case a fraudulent event is reported, your family members can block the cards immediately.

Health Insurance Policy: Make a list of your health insurance policies – personal as well as provided by your employer and any top ups. List of network hospitals, co-pay amount, the process of informing the insurance company etc.

Life Insurance Policy: Make a list of your life insurance policies, amount, type of policy, beneficiary, nominee, riders, date of premium payment, date of maturity.

Will: keep your will in a safe place and let your family know where it is.

Is an IPO Investment Right for You?

One of the first questions new investors seem to want to ask is whether or not they should be looking at investing in initial public offerings, or IPOs, for their portfolio. An IPO, in case you haven't learned about the specifics, yet, occurs when a formerly private business decides to take on outside investors, either by having the founders sell some of their shares or by issuing new shares to raise money for expansion, while, at the same time, listing those shares on a stock exchange or an over-the-counter market. With the initial public offering (IPO) market the strongest it’s been since 2007, according to data provided by Thomson Reuters, and e-commerce giant Alibaba’s record-setting IPO still attracting attention, many average investors are picking up on these new-to-market, buzzworthy securities and wondering if they can (and should) get into the action.

Consider The Coca-Cola Company. A single share of Coke purchased for $40 in the IPO back in 1919 would have grown to more than $5,000,000 with dividends reinvested by the time this article was originally published on July 31st, 2006. Now its the figure stands at more than $15,000,000. The Coke IPO changed lives forever. (One small town, Quincy, Florida, became the per capita millionaire record holder in the United States because the local banker convinced everyone the company was one of the greatest businesses in operation. The banker realized that not only were the financial statements strong, but that the product was largely insulated from economic stress such as recessions and depressions because even if you lost your house, your job, and were waiting in a breadline, if you came across a nickel, you might spend it on a glass of Coca-Cola; an affordable luxury that provided momentary pleasure.

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The main advantages of IPO investing are listed below.

1. Access to capital to fund growth

Public placement of shares on a stock exchange allows the company to attract capital to fund both organic growth (modernization and upgrade of production facilities, implementation of capital-intensive projects) and acquisitive expansion.

2. Creation of liquidity and potential exit for the current owners

Formation of a public market for the company’s shares at fair price creates liquidity and provides an opportunity to sell the shares promptly with minimal transactional costs. The private owners of the company can dispose of their stakes in the business both during an IPO (this route is often taken by the minority financial investors such as venture or private capital funds) and at a later stage (this is often preferred by the majority shareholders).

3. Maximum value of the company

Normally, an IPO is an offer to a large number of institutional and retail investors to become shareholders of the company. The very multitude of large investors and their confidence in the liquidity of their investment in a public entity assure the current owners of a private company about achieving the maximum possible valuation of the business at the time of an IPO or afterwards.

4. Enhancement of the company’s public profile

Listing on a recognised stock exchange means that the business will receive wide media coverage, usually a very favourable one, thus increasing the company’s visibility and recognition of its products and services. The company’s activities will also be reflected in the reports by professional financial analysts.

5. Improvement in debt finance terms

For domestic financial institutions – used to working with the low-transparency businesses and often inadequate financial reporting – a company listed on a recognised stock exchange becomes a desirable and reliable partner. Banks are often ready to extend loans to public companies in larger amounts, under smaller collateral, for longer maturities and with lower interest rates.

6. Extra assurances for partners, suppliers and clients

Partners and contractors of a public company feel more confident about its financial state and organizational capabilities as compared to those of a non-transparent private business. Partners take additional comfort in the fact that the public company has gone through rigorous legal, financial and corporate due diligences – all of which are required for a successful completion of an IPO.

7. Enhanced loyalty of key personnel

Publicly available information about the share price of a public company allows development of employee motivation schemes based on partial remuneration of staff in the form of participation in the equity capital (for example, share options). Equity-based incentive schemes stimulate the key personnel to become more efficient in their work in order to support the company’s growth rates and profitable development – which in turn increase the operational and financial efficiency of the company and its market value.

8. Superior efficiency of the business

Conduct of various due diligences during the IPO process requires a thorough and comprehensive analysis of the company’s business model. During the IPO implementation process, certain internal changes take place, including modification of the organisational structure; selection of the key personnel and delegation of responsibilities; improvement of internal reporting and controls; as well as critical evaluation of the efficiency of the entire business.