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Tuesday 17 January 2017

Thumb Rule of Financial planning

1. 30 % of your income must be used for "monthly living expenses."

2. 30% of your income must be used for "Liabilities repayments", if any..

3. 30% of your income must be "SAVED" and "INVESTED" for your future LIVING.

4. 10% of your income must be spared for "entertainments, vacations".

5. 6 months expenses must be available for "emergency fund" (should be invested in LIQUID FUND, FD Etc)

6. "Home loan" must be registered and apply on both "husband and wife name". (Both can get benefits on Home loan Tax benefits)

7. Buying "second house for investment is not advisable" ( _Survey reports - it will fetch you only around 3% return_)

8. After 45 years of age, not supposed to enter into any "BIG LIABILITIES" (Higher education of children and wedding of children will happen around 45 to 50 only, so plan now for the same.)

9. Have joint Bank savings account.

10. Property must be "registered on both Husband and wife name". (As per legal act – after husband first legal heir is wife, after wife it will go to children only)

11. Regular check on "Nominations at all financial instruments". if not nominated, do it now..

12. Only in insurance policy, Claims payable to Nominee. In other financial instruments legal heirs certificate is must to get back the settlement

13. Must have "Term Insurance" to financially secure future of your dependants..

14. Don’t take any financial investment decisions EMOTIONALLY,  and also Avoid last minute tax saving investment decisions, plan well in advance..

15. Personal MEDICLAIM is must (in spite of Group mediclaim coverage given at office) (After retirement there is no mediclaim coverage, after 50-55 years of age, it's very tough and costly to enter into mediclaim)

16. For your jewelry LOCKER, Only one lakh is payable by bank, if theft or fire happen at bank. Provided insurance done.

17. Like same way Government guaranteed only one lakh for your FD also. (Fixed deposits with Banks upto Rs. 1 lakh only are backed by deposit insurance)

18. Must know all "Tax implications". You cannot avoid paying tax. But you can minimize by way of tax planning and investments..

19. All financial documents must be kept safely and keep family members informed of the same..

20.  Review your portfolio at every six month.

These are general suggestions, personal Finance and investment decisions depends upon case to case.

Monday 9 January 2017

How does inflation affect your investment?

Money Saved is money earned. This is an old saying. But thanks to inflation the real value i.e. purchasing power of that saved money would dropped day by day. We can't afford to ignore the corrosive effect rising prices or inflation can have on the value of our savings. In just 20 years, 4% inflation annually would drive the value of a 100 Rs. down to 44 RS. It means if you saved 100 Rs. to buy any good and you waited with your saving then you can’t afford it after some time. Thus, any benefit gained from higher saving and investment (due to increased inflation) is virtually erased by the reduced purchasing power..

Inflation works against our investments. When you calculate the return on an investment, you'll need to consider not just the interest rate you receive but also the real rate of return, which is determined by figuring in the effects of inflation. We as an investor should be concerned about the real return on our investment as inflation typically reduces the purchasing power of any currency. We need to understand the relationship between nominal interest rate, real interest rate and inflation.

Real interest rate = Nominal interest rate - Inflation

The interest rate quoted on any particular investment is generally the "nominal interest rate". Hence, the interest rate quoted on your fixed deposit of 8% is the nominal interest rate. And inflation is 10% then real rate is -2% means our 100rs can have value to 98rs after a year.

Clearly, if you plan to achieve long-term financial goals, such as college savings for your children or your own retirement, you'll need to create a portfolio of investments that will provide sufficient returns after factoring in the rate of inflation. An investor should ideally look at options that either generate positive real return for him or at least provide some natural hedge against inflation.

Saturday 7 January 2017


The annual percentage increase in the price of goods and services is termed as INFLATION. That means we have to pay inflated price for same good or service in future and you would be able to buy smaller percentage of good or service. Due to this the values of money decreases day by day and our purchasing power also.

Suppose if any good cost 100INR now and assume that we have 4% inflation then we have to pay 100+4=104 INR for same good next year.

In the same way if general level of prices are falling then we say there is DEFLATION.

Prices or inflation are mostly controlled by Demand and Supply. If the demand of particular good or service is more than its supply then people would like to pay more for the same. This cause inflation. Sometimes the company who is producing the goods or giving the service has to increase the cost to maintain the margin.

So is Inflation is bad, as it eats up the value to money? Inflation is sign of growing economy. If economy of any country grows it generate jobs and increases the purchasing power. People like to complain about prices going up, but they often ignore the fact that wages should be rising as well. The lack of inflation may be an indication that the economy is weakening. So the answer of the question is not easy, it depends on the economy as well as your personal situation.

Historic inflation India - CPI inflation


5.22 %

5.79 % 
5.88 %

4.25 % 
6.37 %

3.77 % 
10.92 %

3.81 % 
9.30 %

4.31 % 
8.87 %

3.77 % 
12.11 %

4.02 % 
10.83 %

4.84 % 
8.32 %

13.17 % 
6.39 %

7.25 % 

Real estate investments

 In India, our old people have only two options for investment. These are Real State (house or Plot) and Gold. We will talk about gold some ...