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Have you managed your finances wisely?

Have you managed your finances wisely?
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First Published: Mon, Jan 05 2009. 01 15 AM IST

Updated: Sun, Aug 02 2009. 10 29 PM IST
Questions you should never forget to ask yourself -
In Your 20s: This is usually a decade of firsts—your first job, your first house, your first motor vehicle and getting married. If you have not already done some of the above, they may happen fairly soon. You are keen to accumulate wealth for the future. Some funds must be kept available for discretionary expenses such as entertainment, clothes, travel and enjoyment. The best way is to plan, save and invest for your financial goals. By starting early, you will greatly improve your chances of financial success.
Have you…
* Started budgeting your monthly expenses?
* Started a regular savings plan?
* Looked at tax-efficient savings such
as equity linked savings schemes?
* Understood why it is cheaper to get a home loan than to pay rent?
* Understood why it can be very expensive to use credit cards?
* Started saving through a pension—with your company plan or personal plan?
* Insured yourself against illness and accidents, if you’re unemployed?
* Got a vision and plan for your career
development?
* Written down what your long-term financial needs and goals are?
* Made an effort to improve your financial literacy and understand the difference between stocks, bonds and other asset classes?
* Understood what the gaps between your current situation and your financial goals are?
* Found a financial adviser you can trust and who understands your needs and goals?
In Your 30s As your job and career progress, you may be earning more money. However, if you have a family, you will have more responsibilities and new financial goals to achieve.
Many of you would seriously consider buying a home at this stage. You also are beginning to think about long-term growth of your capital. If you have some assets and dependants, now is an appropriate time to start thinking of making a will.
Have you…
* Understood the investments you hold—do they produce income or growth; do they result in higher taxes; what are they correlated to?
* Protected yourself and your family with adequate life insurance?
* Protected your income to safeguard against illness or disability?
* Reviewed your health insurance needs for emergency situations?
* Increased your regular savings for longer-term goals?
* Analysed which tax bracket you are in and how to minimize your tax liabilities when choosing investments?
* Considered tax-efficient savings such as children’s savings accounts?
* Guarded against the negative effects of inflation on your savings and investments?
* Reviewed your current home ownership needs and what you can afford?
* Calculated the inflation adjusted cost of your future expenses such as children’s education and wedding costs?
* Considered different asset classes, including mutual fund and stock market investments, for long-term growth?
* Analysed your approach to stock market fluctuations, portfolio diversification and risk tolerance (aggressive, moderate or conservative)?
* Made a will?
* Updated and written down your long-term financial needs and goals?
* Found a financial adviser you can trust and who understands your needs and goals?
In Your 40s By now, you are well-established in your career and may have accumulated some assets such as a house. It is critical that you protect these assets and ensure that your dependants benefit from them. This mid-point in your life is an important time for your finances. You should start to think about retirement, even though it might be many years away.
Have you…
* Understood the investments you hold—do they produce income or growth, do they result in higher taxes?
* Prioritized your financial goals and got a written plan on how to achieve them?
* Thought about how unexpected events might impact your family’s goals?
* Calculated the inflation-adjusted cost of your future expenses such as children’s education and weddings?
* Considered mutual fund and stock market investments for long-term growth?
* Analysed your approach to stock market fluctuations, portfolio diversification and risk tolerance (aggressive, moderate or conservative)?
* Increased your contributions to your pension if you want to retire early?
* Understood how the current tax laws apply to you?
* Reduced your tax bill through tax-efficient savings?
* Reviewed your home loan and its repayment scheme for current interest rates—could you save money by repaying your home loan early?
* Considered lump sum investments for capital growth?
* Guarded against the negative effects of inflation on your savings and investments?
* Thought about a date of retirement and about what kind of retirement you would like—active or inactive; which town you want to retire in?
* Calculated your after-tax retirement income needs in terms of today’s money to maintain your quality of life?
* Considered whether your investments and income will support your desired lifestyle in retirement?
* Updated your will?
In Your 50s For most people in their 50s, retirement is very close. By now, you may have paid off all your liabilities such as home loans and may be free of most financial commitments. Your children may also be settled or be on the verge of financial independence. You want to ensure that you can afford a comfortable retirement and transfer your assets in a tax-efficient way to your dependants. Many of you may use this opportunity to travel or for other recreational activities and self-education.
Have you…
* Considered last-minute pension planning?
* Checked the level of income you need when you give up work and checked the coverage that your present savings/pension gives you against that?
* Reviewed your short-term and long-term investments—which investments are maturing, where they can be redeployed, what your tax liability might be?
* Reviewed your matured insurance policies and ensured that your insurance coverage is adequate?
* Extended your life insurance to cover the remainder of your life?
* Analysed the opportunity to repay your home loan early?
* Updated your will for the additional assets you have and as well as for additional beneficiaries and dependants?
* Taken steps to reduce your tax, including inheritance tax?
* Maintained adequate health insurance and coverage at a time when most insurance companies will charge you a higher premium because of your age and risk?
* Planned for sufficient liquidity for lump sum needs related to your children’s education and weddings?
In Your 60s A well-deserved retirement lies ahead. No longer working, you must rely on existing funds and investments to maintain your lifestyle. You may be receiving a pension and are keen to enjoy life and maintain your health. You may also want to leave your assets to your dependants or give some away to charity. By now, you should have minimized the effect of taxes on your assets and their transfer to your beneficiaries.
Have you…
* Looked at the best retirement income from your pension?
* Considered what to do with any tax-free lump sum you receive from your company or personal pension plan?
* Planned for maturing insurance policies and savings schemes and how to redeploy this capital efficiently?
* Considered a reverse mortgage to release capital from your home?
* Consolidated your investments and avoided unnecessary risks?
* Taken steps to reduce your tax liabilities?
* Considered making tax-efficient gifts to your grandchildren for their education or weddings?
* Considered safe investments to supplement your pension income?
* Updated your will for additional assets you have and as well as for additional beneficiaries and dependants?
* Maintained adequate health insurance and coverage for your old age when most companies will charge you a higher premium because of your age and risk?
CONNECT
Invest
With the world slipping into recession and economic growth slowing fast even in India, central banks across the world are busy cutting interest rates in order to kick-start growth. How can ordinary investors benefit from falling interest rates? There’s one simple way—by investing in debt funds.
These are funds that invest their money in bonds. When interest rates fall, bond prices, which move inversely to interest rates, go up. That means if you invest in a debt fund at a particular NAV (net asset value) and interest rates come down further, the NAV of your fund will go up. And if you want to be absolutely certain there is no risk of default on these bonds, you should invest in gilt funds, which put their money in government bonds. As long as interest rates continue to go down, you will gain. - Manas Chakravarty
Know
The next time you need to pay your insurance premium, you can do it without visiting a bank or using the Internet. You can do it with the help of the interactive voice response facility which most insurance companies provide.
In this service, all you need to do is call up any of the company’s customer service helpline numbers and provide details of your policy number, the premium amount and credit card details to make the payment. Teena Jain
Do
Every time you invest your money, remember to nominate someone to claim it in the event of your death. You can ask
for the nomination form at your bank or post office when opening a savings account or a fixed deposit. This goes for your safe deposit locker too. In case of mutual funds, the process of nomination differs from company to company. For shares, the demat account application form carries a section on nomination.
Unlike a will, which is a personal document, a nomination is part of a bank document and is processed much faster for your family members to claim the money. Another way of ensuring that the right person can claim your assets is to have the beneficiary as a joint account holder. Make sure you tick the “either or survivor” box in the form. However, the public provident fund accepts only nominations. - Staff writer
Get
Collecting proofs of all your investments to get tax deduction has never been an easy task. But did you know you can download almost all important documents—including policy certificate, unit statement, fund values and premium certificate—from the concerned company’s website itself? So before running from post to pillar to collect those consolidated statements as investment proof, just furnish few of your policy details on the website and download all the required documents while sitting at home. - Teena Jain
Content provided by iTrust Financial Advisors
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First Published: Mon, Jan 05 2009. 01 15 AM IST