Investing becomes a daunting prospect without options that guarantee returns. In such a scenario, many of us would prefer to keep our surplus untouched at the end of the month. Fortunately, fixed deposits provide a reliable avenue for investment, ensuring:

1. Predetermined returns and the safety of the principal amount.
2. A secure way to park money without worrying about market volatility.
3. Flexible options to receive interest periodically or at maturity when banks offer fixed deposits.

For those seeking guaranteed returns and having a limited understanding of risk, fixed deposits emerge as a suitable and reassuring option.

Why do people choose Fixed Deposits?

1. Assured Returns: Fixed Deposits offer guaranteed returns on the invested amount. The interest rates are fixed at the time of deposit, providing investors with a clear idea of their earnings.
2. Safety of Principal: The invested principal amount in Fixed Deposits is not subject to market fluctuations. It remains secure, ensuring that investors get back their initial investment at the end of the maturity period.
3. Ease of Understanding: Fixed Deposits are simple and easy to understand. Individuals do not need advanced financial knowledge to invest in them, making them accessible to a wide range of investors.
4. Various Tenure Options: Fixed Deposits come with flexible tenure options, ranging from short-term to long-term. Investors can choose the duration that aligns with their financial goals and liquidity needs.
5. Regular Interest Payouts: Investors have the option to receive interest payouts at regular intervals, providing a steady income stream. This feature is particularly beneficial for retirees and those looking for a regular income.
6. Tax Benefits: Certain Fixed Deposits, such as Tax-Saving FDs, offer tax benefits under Section 80C of the Income Tax Act. This makes them an attractive choice for individuals looking to save on taxes.
7. Senior Citizen Benefits: Senior citizens often receive higher interest rates on Fixed Deposits, providing an additional incentive for this demographic to choose this investment option.
8. Liquidity: While Fixed Deposits are meant to be held until maturity for maximum returns, they still offer a degree of liquidity. Premature withdrawals are allowed, albeit with some penalty, in case of urgent financial requirements.
9. Low Risk: Fixed Deposits are considered low-risk investments compared to market-linked instruments like stocks. This makes them suitable for conservative investors who prioritize capital protection.
10. Bank Reputation: Many individuals prefer placing their money in Fixed Deposits with reputable banks, adding an element of trust and security to their investments.

The combination of guaranteed returns, safety of principal, simplicity, and flexibility makes Fixed Deposits a popular and enduring choice among Indian investors.

Congratulations! You have learned all about “Why Are Fixed Deposits a Popular Choice Among Indians?”

Disclaimers:
An investor education initiative By Findola Wealth Research Team.

This article is generated and published by Findola Wealth Research Team.

Investment in securities market are subject to market risks, read all the related documents carefully before investing.

This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

The post Why Are Fixed Deposits a Popular Choice Among Indians? first appeared on Nivesh Ka Pehla Kadam.

Why is Money Management Important?

Here are some of the reasons why money management is critical for everyone:

Develop Self Discipline.

Understanding how to manage your money isn’t just about numbers—it’s about cultivating self-discipline. By gaining insights into proper financial handling, you can steer clear of impulsive decisions that may harm your financial well-being.

Consider this: if you tend to use credit cards for unnecessary purchases, you might find yourself sinking into debt. On the flip side, if you embrace budgeting and prioritize spending on essentials, you’ll reduce the likelihood of encountering financial troubles.

Build Your Goals

Effective money management is all about establishing and accomplishing your financial goals. With the right financial skills, you can effortlessly allocate funds for short-term objectives and steadily invest in long-term aspirations.

Consider this scenario: if you dream of owning a new car or a house, you can initiate early savings for a substantial down payment. For those aiming at an early retirement, strategic investments in retirement accounts and passive income sources can be the key.

A practical financial goal breakdown may include:

1. Clearing outstanding debts
2. Building an emergency fund equivalent to three to six months of living expenses
3. Obtaining life insurance coverage
4. Initiating investments for future growth
5. Establishing retirement funds for a secure future

Empower Your Finances: Gain Control and Make Informed Decisions

An essential aspect of money management is empowering yourself with control over your finances. By mastering the art of financial management, you can seize command of your economic situation and make informed decisions that contribute to your overall financial well-being.

For instance, if you find yourself entangled in debt, you can craft a strategic debt repayment plan to expedite the process. If your goal is to save more money, creating a budget or exploring additional income sources, such as side hustles, can be transformative.

Many individuals are subject to the influence of spending habits and debt. Acquiring effective money management skills enables you to reverse the scenario, putting you in control of your finances rather than being controlled by them.

When you know how to manage your finances properly, you take calculated risks and minimize the chances of making financial mistakes.

Today we will know about JARS money management system which is describe in  Secrets of the Millionaire Mind book., its a popular money management method— designed specifically to get you to financial freedom.

Basically, using this system, you split your money up into six different accounts, and you have percentages of your money to put into each account. You can use bank accounts or actual jars.

So what are these jars and what percentage of your income goes into them?

Right now you may be thinking, “I’m not earning a lot of money” or “my expenses are too high.”

Am I saying you have to put Rs.1000 into your accounts every day? No, I didn’t say that.

How come I’m not suggesting a specific amount but certain percentages? It’s so that every single person, regardless if they’re earning Rs.10000 a month or 3000 rupees in a week, can follow this money management system.

Yes, if you are earning 3000 rupees in a week, you can do this system.

Jar 1: NECESSITIES A/c

55% of your income goes into the NECESSITIES jar.

Includes: Food, Mortgage, payments, bills, Gas, oil, Insurance premium etc.

Jar 2: Financial Freedom A/c

10% of your income goes into the Financial Freedom jar.

Includes: The money in this jar can only be used for investments (with returns or profits). This jar is used for building wealth for your future financial freedom. You must never spend this money.

Jar 3: Long Term Savings A/c

10% of your income goes into the Long Term Savings jar.

Includes: The objective of of this jar is to save money for future expenses (e.g. a new car, a vacation, a new couch, gifts, repaying debts….

Jar 4: Education A/c

10% of your income goes into the Education jar.

Includes: Use the money from this jar for personal or professional development (e.g. books, courses, seminars).

Rich people constantly learn and grow.  Poor people think they already know”. 
-T. Harv Eker

Jar 5: Play A/c

10% of your income goes into the Play jar.

Includes: indulge yourself with a nice massage, some new clothes, a fancy dinner… To avoid over-spending or under-spending, make sure you use up the money from this jar at least every few months. This allows you to spend without guilt, and to also gradually improve your standard of living as your income increases.

Jar 6: Give A/c

5% of your income goes into the Give jar.

Includes: Food, Mortgage, payments, bills, Gas, oil, Insurance premium etc.

The single biggest difference between financial success and financial failure is how well you manage your money.  It’s simple: to master money, you must manage money”. -T. Harv Eker

Do not fool yourself with statements like

” I would love to have this money management habit, but I cannot do it! “
” I don’t have enough money coming in to split it. “

or statements like
 
” My expenses are too high, there is no way I can afford to split my money into different accounts. “

Decide Right Now! Are you going to get 6 jars and start managing your money today? Or Not.

The post Effective Money Handling: A Guide to Efficient Money Management first appeared on Nivesh Ka Pehla Kadam.

When one’s income goes up, their expenditure rises with it. This is known as lifestyle inflation

Lifestyle inflation happens when we start splurging on non-essential things like dining out, travel, or luxury items because we believe we can afford it. This isn’t exclusive to the wealthy; it can affect anyone, irrespective of income levels. The problem with lifestyle inflation is that it often leads to overspending and accumulating debt. Once we get used to a certain lifestyle, it’s tough to cut back on expenses if our income drops or unexpected costs arise.

In your 30s and 40s, lifestyle inflation can sneak up on you. As your income grows, so do your expenses, creating a cycle where you feel the need for more money just to maintain your current way of life. The more you spend, the more accustomed you become to a higher standard of living. Consequently, you might find yourself continuously increasing spending, making it challenging to save and invest. This, in turn, can result in financial stress and anxiety over time.

Causes of Lifestyle Inflation

There are several factors that contribute to lifestyle inflation.

One common trigger is a raise or promotion, which often results in an increase in disposable income. This newfound financial freedom can lead to indulgences that may not have been afforded previously.

Simple Story to Understand What We Do.

He managed through college with a modest monthly allowance of Rs. 6,000, using a budget-friendly smartphone, owning just two pairs of shoes, and riding a used bike. Now earning Rs. 60,000 monthly, he moves into a two-bedroom apartment, purchases five pairs of premium shoes, a brand-new sports motorbike, and the latest iPhone. He significantly elevates his spending to sustain a more lavish lifestyle.

After a commendable performance, he receives a salary increment of Rs. 30,000 the following year. Taking advantage of the increase, he upgrades to a new iPhone, adopts a pet dog, acquires six more pairs of high-end shoes, purchases a pair of expensive sunglasses, and invests in a costly suit. Consequently, his living expenses rise once again.

A’s income consistently sees an upward trend over the years, maintaining this spending pattern. Gradually saving less, he struggles to achieve significant financial goals, eventually resorting to taking out loans.

Another cause of lifestyle inflation is peer pressure or social comparison. As friends and colleagues show off their material possessions and experiences, it’s easy to feel compelled to keep up with the Joneses and maintain a similar lifestyle.,  EMI is the biggest way enter into a big debt.

Impact of Lifestyle Inflation on Financial Goals

Lifestyle inflation can have a significant impact on an individual’s long-term financial goals. Like saving for retirement, paying off debt, or investing in other financial objectives.

It’s important to note that lifestyle inflation is not always a negative thing. In some cases, it can be a natural and healthy response to an increase in income. For example, an individual may choose to invest in their health and wellness by joining a gym or hiring a personal trainer.

Impact of Lifestyle Inflation Wealth?

Reduced Savings: One of the significant impacts is a decrease in savings. As individuals allocate more income to a higher lifestyle, they might save less, hindering their ability to build a robust financial foundation.

Financial Stress: Constantly chasing an elevated lifestyle can lead to financial stress. Increased expenses may result in a paycheck-to-paycheck situation, leaving little room for emergencies or future planning.

Ineffective Budgeting: Lifestyle inflation can make budgeting challenging. Without conscious financial planning, it’s easy to lose track of spending and end up with an inflated lifestyle that is unsustainable.

Lets Understand with Story

Situation:

Imagine you’re in your mid-30s, and a promotion at work brings a substantial boost in your salary. Excited about the increased income, you decide to make some changes like upgrading to a pricier car, moving into a larger house in an upscale area, and indulging more in dining at fancy restaurants. Additionally, you start acquiring expensive gadgets and take more frequent vacations.

Now, let’s look at the costs:

Luxury car: The monthly payment for an expensive car could be Rs. 50,000 or more, totaling Rs. 30 lakh over five years, depending on the model and financing terms.

Bigger house: Moving to a larger house in a posh locality can lead to higher rent or mortgage payments, increased maintenance costs, and utility bills. This might add an extra Rs. 50,000 or more per month, reaching Rs. 30 lakh over five years.

Dining out and gadgets: Regularly dining at upscale restaurants, buying costly gadgets, and taking more vacations could accumulate to several thousand rupees monthly, quickly amassing to tens of lakhs over five years.

When you sum up these expenses over time, you realize how lifestyle inflation can consume a significant part of your wealth. Instead of utilizing the extra income for savings and investments, it’s used to sustain a higher standard of living. This could leave you with minimal savings and limited financial security for the future, hindering the achievement of important financial goals like building an emergency fund, saving for retirement, or investing in assets such as real estate or stocks.

How to Avoid Lifestyle Inflation?

To steer clear of lifestyle inflation, it’s crucial to purposefully manage your spending and saving patterns.

Create a Realistic Budget: Develop a budget that aligns with your financial goals. Categorize your expenses, differentiating between needs and wants. This clarity can prevent unnecessary spending.

Set Clear Financial Goals: Establishing clear financial goals can help you stay focused on your priorities. Whether it’s saving for a house, education, or retirement, having defined objectives allows you to allocate your income more purposefully.

Automate Savings: Set up automatic transfers to your savings or investment accounts. This ensures that a portion of your income is saved before you have a chance to spend it.

Reassess Regularly: Periodically review your financial situation. Assess whether your spending aligns with your goals and make adjustments as necessary. This habit helps you stay on track and avoid unintentional lifestyle inflation.

Prioritize Investments: Rather than immediately upgrading your lifestyle with a salary increase, consider prioritizing investments. Allocating additional income toward investments can contribute to long-term financial growth.

To overcome lifestyle inflation, it’s critical to keep track of your expenditures.

Delay gratification: Instead of buying everything you want right away, try delaying your purchases. This can help you determine if the purchase is really necessary and avoid impulse buying. For example, if you see a new gadget that you want, try waiting a week or two to see if you still feel the same way about it.

Conclusion:

Lifestyle inflation is a common challenge, but with conscious effort and financial discipline, individuals can manage it effectively. By setting clear goals, budgeting wisely, and prioritizing savings and investments, one can avoid the pitfalls of lifestyle inflation and build a more secure financial future.

Congratulations! You have learned all about “Lifestyle Inflation: Understanding the Impact and Strategies to Avoid It.”

Conclusion:

Lifestyle inflation is a common challenge, but with conscious effort and financial discipline, individuals can manage it effectively. By setting clear goals, budgeting wisely, and prioritizing savings and investments, one can avoid the pitfalls of lifestyle inflation and build a more secure financial future.

Disclaimers:
An investor education initiative By Findola Wealth Research Team.

This article is generated and published by Findola Wealth Research Team.

Investment in securities market are subject to market risks, read all the related documents carefully before investing.

This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

The post Lifestyle Inflation: Understanding the Impact and Strategies to Avoid It. first appeared on Nivesh Ka Pehla Kadam.

The other day, I had a conversation with my employee, Swarup, who works as a 30-year-old digital marketer at Findola Capital in Raiganj. During our discussion, Swarup expressed feeling a bit overwhelmed when it comes to managing money. As our conversation unfolded, I discovered that Swarup’s uncle intended to gift a substantial amount from his retirement fund, and Swarup had been contemplating investing a portion of the monthly earnings.

Swarup is well aware of the benefits of mutual funds and understands the importance of starting a systematic investment plan (SIP) for regular salary-driven investments. However, there was a slight hesitation. “So what’s holding you back?” I inquired. Swarup responded, “I want to pick the ‘best fund’!” That was the stumbling block. The uncertainty of how to select the first mutual fund. So, here’s what I shared with Swarup.

I explained that there’s no one-size-fits-all approach to determining the ‘best’ mutual fund, and the process can be both intimidating and subjective. The key is to identify a few funds that align with individual needs and goals. I acknowledged that with numerous options and multiple factors to consider, the task might seem daunting, but with a systematic approach, Swarup can confidently embark on this investment journey.

Understanding your personal financial goals, risk tolerance, and investment timelines is crucial when selecting a mutual fund. To guide Swarup through this process, I introduced a simple framework that he could use to choose a fund that suits his needs.

1. Identifying Financial Goals:
   • Swarup, being 30, has both growth-oriented goals (like retirement and children’s education) and capital preservation goals (such as a house downpayment or emergency fund).
   • Recommended an equity-oriented mutual fund for growth-oriented goals due to their potential for better long-term returns.
   • Suggested a debt mutual fund for capital-preservation goals, offering lower risk and steady returns.
   • Calculated the appropriate allocation for each fund based on his financial goals.
2. Understanding Investment Comfort:
   • Acknowledged that Swarup is a first-time investor and somewhat risk-averse.
   • Advised starting with aggressive hybrid funds for long-term goals, which have a balanced mix of equity and debt.
   • For experienced investors with a higher risk appetite and a horizon of more than five years, recommended pure equity funds.
3. Determining Investment Horizon:
   • Emphasized the importance of the investment horizon, considering Swarup’s retirement goal in about 20 years.
   • Suggested equity mutual funds for long-term goals, as they allow for potential high returns and recovery from market fluctuations.
   • For short-term goals like a house downpayment within three years, advised safer, low-return funds.
4. The Decision:
   • Swarup opted for an ‘aggressive-hybrid’ fund for her long-term goals and a ‘short-duration’ fund for the short-term goal.
   • Recommended reviewing the portfolio after three years to make adjustments based on experience and market conditions.

Takeaway: This framework is applicable to new investors like Swarup, providing a structured approach to selecting the right mutual fund. By answering these three crucial questions and aligning them with the options, investors can confidently make informed decisions.

Mutual Fund Selection Framework:

To Conclude: Once you’ve shortlisted your initial investments, refer to our Analysts’ Choice feature, which helps in selecting top-performing funds in respective categories.

Disclaimers:
An investor education initiative By Findola Wealth Research Team.

This article is generated and published by Findola Wealth Research Team.

Investment in securities market are subject to market risks, read all the related documents carefully before investing.

This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

The post How Swarup selected his First Mutual Fund? first appeared on Nivesh Ka Pehla Kadam.

1. This time is different!

The point is no one has been able to predict these events, not even an astrologer. So my dear friend, no time is different unless you make it different. Focus on investing in the right stocks.or right funds. If required, hire a credible expert to guide you.

Every Dip is an Opportunity.

2. Will invest tomorrow. What’s the rush!

Rs. 10,000 invested every month at the age of 30 for the next 20 years aggregates to Rs. 75,75,332 at 10% interest p.a. compounded on a quarterly basis.The same amount sums up to Rs. 20,55,685 if invested for 10 years.

Numbers never lie! The sooner you start, the better the rewards. And, “anytime is a good time to start when the rewards are lucrative!”

3. How much return will you get in a year?

Yes, annualized returns and impressive CAGR are always the ultimate objectives of any investor. However, when you are investing in stocks, you are actually investing in businesses. Businesses take time to grow and definitely, that is not a chapter which will last just a year. With returns, the correct question to ask your advisor would be the strength of the fundamentals to stand the test of time in the long run.

4. Let’s buy this fund, if someone said it would be good

There are only three golden rules of investing. 1. Research 2. Research 3. Research. If your friend / relative / broker is recommending a particular stock, check the investment rationale before you put your hard-earned money in the stock.

Congratulations! You have learned all about 4 Common Phrases You Need To Stop Saying To Create Wealth!

Disclaimers:
An investor education initiative By Findola Wealth Research Team.
This article is generated and published by Findola Wealth Research Team.
Investment in securities market are subject to market risks, read all the related documents carefully before investing.

This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

The post 4 Common Phrases You Need To Stop Saying To Create Wealth! first appeared on Nivesh Ka Pehla Kadam.

 In my 15 years of experience of interacting with 8 to 10k investors, I find that if there is one thing missing among most investors, it is self-realization.

Self-realization is crucial for investors for several reasons:

• Understanding Personal Goals:
  • Self-realization helps investors identify and understand their financial goals. Knowing what you want to achieve with your investments is fundamental to developing an effective and personalized investment strategy.
• Risk Tolerance:
  • Investors have varying levels of comfort with risk. Self-realization allows individuals to assess their risk tolerance accurately. This, in turn, influences investment decisions, ensuring they align with the investor’s comfort level.
• Investment Time Horizon:
  • Knowing oneself helps in determining the investment time horizon. Different goals may have different timeframes, and understanding one’s own timeline allows for appropriate investment planning.
• Financial Situation:
  • Self-realization involves an honest evaluation of one’s current financial situation, including income, expenses, and debt. This awareness is essential for setting realistic investment goals and creating a budget for investment.
• Emotional Preparedness:
  • Investing can be emotional, especially during market fluctuations. Self-realization helps investors understand their emotional responses to financial decisions, enabling them to make more rational choices and avoid impulsive actions.
• Active vs. Passive Investing:
  • Some investors prefer a hands-on approach to managing their investments, while others may prefer a more passive strategy. Self-realization guides individuals toward the investment style that suits their preferences and lifestyle.
• Alignment with Values:
  • Understanding one’s values and principles is crucial for ethical or socially responsible investing. Investors who are self-aware can choose investments that align with their beliefs and values.
• Continuous Learning:
  • Self-realization encourages a mindset of continuous learning. Investors who are aware of their knowledge gaps are more likely to seek information, stay informed about market trends, and make informed investment decisions.
• Long-Term Discipline:
  • Awareness of one’s financial goals and risk tolerance contributes to long-term discipline. Investors who know themselves are more likely to stick to their investment plans even during market volatility, avoiding knee-jerk reactions.

According to a great Greek Philosopher Aristotle “Knowing yourself is the beginning of all wisdom”

In today’s story, let’s take a look at one of the most ignored aspects of investing; the need for knowing yourself before you start investing.

According to a great Greek Philosopher Aristotle “Knowing yourself is the beginning of all wisdom”

Well, investing is like marriage. Because both require a long term commitment.Now you must be wondering why this analogy between investing and marriage.

The reason is quite simple – when a person decides to get married, he/she looks for a person who matches their personality. So the entire quest for searching a life partner revolves around one’s one characteristic.

But sadly, the same approach is missing when it comes to investing. I see people asking more questions about the market, factors influencing the market and outlook of businesses. All questions are fine, no doubt. However, the starting point of investing should begin with knowing yourself.

So, which are the questions that you should ask yourself to understand yourself better?

 let’s break it down into simpler terms:

• What do I want to achieve with my money?
  • Think about what you want to do with your money, like buying a house, saving for your child’s education, or preparing for retirement.
• What is my risk tolerance?
  • Assess your comfort level with risk. Are you willing to take higher risks for potentially higher returns, or do you prefer more stable and conservative investments?The level of risk tolerance will also depend on factors like the number of earning members in the family. Along with this, your age, income, occupation, expenses expected in the future, etc. also should be considered. For example – if there is only one earning member in the family, the level of risk tolerance will be generally low, whereas if there are more earning members in the family, one can take more risks in their investment. Also, if you’re at the age of 30, earning modest and unmarried, you can take more risks as compared to an investor whose age is 60.
• What is my investment time horizon?
  • Determine the timeframe for achieving your financial goals. Different goals may have different time horizons, and this influences your investment strategy.
• What is my current financial situation?
  • Look at how much money you’re making, spending, and if you have any debts. This helps set the stage for your investment plan.
• What is my budget for investing?
  • Decide on a budget for investing. Think about how much you can invest without affecting your daily needs.
• Do I have some money saved up for emergencies?
  • Make sure you have some money saved for unexpected expenses before you start investing.
• How much do I want to be involved in managing my investments?
  • Consider if you want to actively manage your investments or if you’d rather have someone else do it for you.
• What is my knowledge about different investment options?
  • Gauge your understanding of various investment vehicles such as stocks, bonds, mutual funds, and real estate. Continuous learning is key to making informed decisions.
• Have I thought about how taxes might affect my investments?
  • Understand how taxes can impact your investments. It’s essential to know how much you’ll actually get back after taxes.
• How do I react when the stock market goes up or down?
  • Think about how you feel when the stock market goes through changes. This helps you understand your emotions and make better choices.
• Am I planning to invest for a short time or a long time?
  • Decide if you’re investing for something happening soon or for something in the future. Different goals need different plans.
• Do I care about investing in things that match my values?
  • Consider if it’s important for you to invest in things that align with what you believe in. This is called ethical or socially responsible investing.

Answering these questions in simpler terms can guide you toward making decisions that match your goals and how you feel about money.

Ultimately, self-realization contributes to financial success and satisfaction. When investors align their investment decisions with their values, goals, and risk tolerance, they are more likely to achieve the outcomes they desire.

In summary,

self-realization is the foundation for building a successful and personalized investment strategy. It ensures that investment decisions are aligned with individual preferences, goals, and values, leading to a more fulfilling and effective financial journey.

Disclaimers:
An investor education initiative By Findola Wealth Research Team.
This article is generated and published by Findola Wealth Research Team.
Investment in securities market are subject to market risks, read all the related documents carefully before investing.

This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

The post The First Step In Investing – Know Yourself First(KYF) first appeared on Nivesh Ka Pehla Kadam.

Introduction: Ensuring Financial Stability

you’re living your best life, relishing the freedom of being a young professional. But then, out of nowhere, life throws unexpected challenges your way. Whether it’s a sudden medical issue, a job loss you didn’t see coming, or a family crisis, these surprise events have the potential to create chaos in your financial world.

A. Real-Life Scenario: Dealing with a Sudden Crisis and Its Financial Impact

Let’s consider Nafisa, a young professional basking in the glow of her dream job. With a steady income, she indulged in the latest gadgets, dining out, and trendy outfits. One fateful day, she walked into her apartment to find it flooded due to a burst water pipe. Her living space turned into chaos, requiring urgent replacement of damaged belongings and arranging temporary accommodation. Without insurance or savings, Nafisa found herself overwhelmed, struggling to cope with unforeseen expenses. If only she had an emergency fund, Neha could have faced the financial challenge with greater ease, allowing her to concentrate on recovering from the crisis.

Meet Your Money Guardian: The Emergency Fund

Imagine your emergency fund as a money guardian, ready to rescue you in life’s surprising twists and turns. While saving might not be the most thrilling activity, having this fund can be a game-changer when the unexpected happens. Let’s explore the realm of emergency funds and discover how to craft one that suits your needs.

Cracking the Code of Emergency Funds

A. What exactly are emergency funds?

Emergency funds are like financial superheroes ready to tackle unexpected expenses. They serve as a safety cushion, ensuring you can weather unforeseen challenges without disrupting your financial stability. Keep these funds easily accessible, separate from regular savings or investments, and strictly reserved for genuine emergencies.

B. Why do young Indian professionals swear by them?

Financial independence: Your emergency fund empowers you to face financial crises independently, avoiding reliance on others or accumulating debt.

Peace of mind: Having a safety net in place alleviates stress and anxiety, providing a sense of security against unexpected expenses.

Flexibility: With an emergency fund at your disposal, you can navigate life’s uncertainties, like job changes or family emergencies, without compromising your financial goals.

Busting the Myths Surrounding Emergency Funds

Myth 1: “I’m young, I don’t need an emergency fund.” Reality: Emergencies spare no one, regardless of age or financial standing.

Myth 2: “I have insurance; I don’t need an emergency fund.” Reality: Insurance coverage may not address all expenses promptly, emphasising the need for emergency funds to meet immediate financial requirements.

Myth 3: “I can rely on my credit card or loans during emergencies.” Reality: Depending on credit cards or loans can lead to high-interest debt, making an emergency fund a wiser, more cost-effective solution.

Crafting Your Emergency Fund: Easy Steps

A. Take it slow: Reach the ‘one-month’ target

Start your emergency fund by saving an amount that covers one month of essential expenses like rent, groceries, and utilities. Achieving this first goal can boost your confidence and encourage further savings.

B. Enjoyable strategies for stress-free saving

The 50-30-20 rule: Allocate 50% of your income to necessities, 30% to things you want, and 20% to savings.

Automate savings: Schedule an automatic transfer from your salary account to a special emergency fund account.

The ‘no-spend’ challenge: Try a challenge by cutting non-essential spending for a week or month, putting the saved money into your emergency fund.

Use windfalls: Deposit unexpected bonuses, tax refunds, or gifts directly into your emergency fund.

C. Keep it real: Stick to the 3-6 month guideline

Aim for 3-6 months’ worth of living expenses in your emergency fund. This amount provides a comfortable buffer for most emergencies while allowing you to work towards other financial goals.

Smart Places to Park Your Emergency Fund

A. Balancing act: Liquidity vs. returns

Make sure your emergency fund is readily available while also earning a modest return. Balancing liquidity and returns ensures your fund is both accessible and growing.

B. Comparing options: Savings account, fixed deposits, and liquid funds

Savings account: Very liquid, lower returns.

Fixed deposits: Moderately liquid, moderate returns.

Liquid funds: Highly liquid, potentially higher returns.

Pro Tips: Selecting Your Best Fit

To boost returns and retain accessibility, think about dividing your emergency fund across various options. For example, allocate one month’s expenses to a savings account for quick access and stash the rest in a fixed deposit or liquid fund for potentially higher returns. Diversifying your approach is a smart move!

Final Thoughts: Embrace Financial Peace of Mind

To sum it up, having an emergency fund is like having a financial superhero by your side. It’s a crucial part of your money plan, providing a safety net for unexpected events. This fund gives you financial freedom, peace of mind, and the flexibility to handle life’s surprises with confidence.

Don’t wait for a crisis to hit. Start building your emergency fund today, step by step. Even small contributions can make a big difference in the long run. If you need guidance or have questions, call our Client Growth Manager today on 8100600300 With your financial superhero in place, enjoy the peace of mind that comes from being prepared for whatever life throws your way.

Congratulations! You have learned all about Prepare for Life’s Surprises: The Power of Emergency Funds for Young Professionals!

Disclaimers:
An investor education initiative By Findola Wealth Research Team.

This article is generated and published by Findola Wealth Research Team.

The post Get Ready for the Unexpected: The Strength of Rainy Day Funds for Young Professionals! first appeared on Nivesh Ka Pehla Kadam.

Imagine investing is like a tasty recipe. You wouldn’t just rely on one ingredient, right? It’s the same with your money! Instead of putting all your cash eggs in one basket, you spread them wisely.

What’s the Magic Word? Asset Allocation!

Asset allocation is the secret sauce in investing. It means dividing your money into different types of investments, like stocks (company shares), mutual funds, bonds, and even a bit in real estate. This smart move helps lower the chance of losing all your money if one investment doesn’t shine.

Why Mixing Up Your Money Matters: The Magic of Asset Allocation

Ever wondered why chefs don’t just cook with one ingredient? They mix it up for that perfect dish. Similarly, with your money, there’s a secret recipe called Asset Allocation, and here’s why it’s a game-changer:

1. Safety First – Risk Management:

• Imagine you have different ingredients in your cooking arsenal. If one goes bad, your entire meal isn’t ruined. Similarly, with asset allocation, spreading your investments across different types (like stocks, bonds, etc.) means less risk. Your money isn’t relying on just one thing – smart, right?

2. Earning More While Playing it Smart:

• Ever tried a dish that’s both delicious and not too spicy? Asset allocation is like that! By choosing the right mix for your money (considering your financial goals and how much risk you’re comfortable with), you’re aiming for better returns without going overboard on risk.

3. Goal Achiever – Turning Dreams into Reality:

• We all have dreams – a dream vacation, a new gadget, or maybe a house. Asset allocation is your strategic sidekick here. It helps tailor your investments to meet those goals. Want to travel? Save more in a particular ‘travel-friendly’ investment. It’s like cooking with purpose!

4. The Anti-Boring Strategy – Avoiding Concentration Risk:

• Imagine if you ate the same dish every day – boring, right? With asset allocation, you’re steering clear of investment boredom. By spreading your money across different types of investments, you’re not overly relying on one thing. This way, if something isn’t performing well, it won’t spoil your entire financial feast.

So, next time you’re in the ‘financial kitchen,’ remember the importance of asset allocation. It’s your recipe for a well-balanced and satisfying money menu!

Your Asset Allocation Strategy:

• Play It Safe (Conservative):
  • More focus on safer options like bonds. Slow and steady wins the race.
• A Balanced Mix (Moderate):
  • A bit of risk, a bit of safety – finding that tasty balance like a delicious recipe.
• Take Some Risks (Aggressive):
  • Ready for an adventure? More focus on stocks for potentially higher returns.

Different Money Games You Can Play: Asset Classes Unveiled

In the world of investments, there are four main types of money games you can play:

1. Equities (Stocks):

• Game Type: Thrilling Roller Coaster
• How to Play: Invest directly in listed companies and receive shares. Includes stocks and equity mutual funds.
• Risk Level: High (Hold on tight for the ride!)

2. Fixed Income:

• Game Type: Smooth Sailing
• How to Play: Low-risk investments offering regular income. Includes FDs, bonds, and money market instruments.
• Risk Level: Low (Enjoy a steady income flow)

3. Real Estate:

• Game Type: Real Monopoly
• How to Play: Invest in physical properties for potential returns through appreciation and rental income. Includes residential or commercial buildings, lands, and REITs (Real Estate Investment Trusts).
• Risk Level: Moderate to High (Requires a big buy-in)

4. Gold:

• Game Type: Your Portfolio’s Superhero
• How to Play: Lower risk through diversification. Acts as a hedge against stock market volatility.
• Risk Level: Low to Moderate (Keep it around 5-10% of your total investments)

Bonus Game: Mutual Funds

• Game Type: Team Player
• How to Play: Pool your money with others to invest in various assets. Managed by professional fund managers.
• Risk Level: Moderate (Get the best of different games without going all-in on one)

Remember, these aren’t the only games in town. You can explore international equities, infrastructure projects, or even commodities like silver. But, just like in any game, you need a strategy. Let’s briefly check out these strategies.

Balancing the Investment Act: Why Asset Rebalancing Matters

Imagine your investment portfolio as a well-mixed smoothie. Sometimes, the fruits settle, and you need to give it a good stir. That stirring in the world of investments is what we call Asset Rebalancing.

What’s Asset Rebalancing?

• It’s like ensuring each ingredient in your smoothie gets its fair share.

Why Do You Need It?

• Let’s say your portfolio has 45% in stocks, 45% in bonds, and 10% in gold.
• If stocks perform exceptionally well and now make up 52% of your portfolio, the balance is off.

The Magic of Rebalancing:

• Sell some of those winning stocks (at a profit!) and redistribute funds to bonds and gold.

Why is it Like a Smoothie?

• Without rebalancing, your portfolio becomes like a smoothie with only one dominant flavour—too much risk!

Why It Matters:

• If you don’t stir your investments, you might unknowingly take on more risk by favouring one type of asset.

Remember:

• Keep that investment smoothie well-mixed for a balanced and less risky sip of financial success! 

Rule of Thumb for Asset Allocation:

• Equity exposure should decrease with age.
• Use the rule of 100 minus age for equity allocation; e.g., at 25, allocate 75% to equity.

Transitioning with Age:

• Initiate systematic transfer plans (STP) to gradually move from equity to debt.
• Consider systematic withdrawal plans (SWP) for income needs during retirement.

Investment Tools:

• Explore expert-curated mutual fund plans through user-friendly apps like Findola.

Remember, just like a GPS guides your road trip, smart asset allocation guides your financial journey. Happy investing! 

Congratulations! You have learned all about Asset Allocation.

Disclaimers:
An investor education initiative By Findola Wealth Research Team.

This article is generated and published by Findola Wealth Research Team.

The post Making Your Money Work Smart: A Simple Guide to Asset Allocation first appeared on Nivesh Ka Pehla Kadam.

What is a short-term financial goal?

Going day to day without any financial goals in place can cause you to spend too much, then come up short when you need money for unexpected bills and have to rely on high interest credit cards. Short-term financial goals are generally things you want to achieve within roughly one to three years.

Quick Insights 

• Short-term financial goals: Achieve within a few years, like paying off debt or saving for a trip. 

• Emergency fund: Vital for unexpected expenses, preventing reliance on high-interest credit. 

• Track spending: Prioritise expenses, create a realistic budget for short-term goals. 

• Credit card debt: Paying it down is crucial to avoid hindering progress on other goals. 

Picking the Right Short-Term Investments: Your Guide to Selecting Investment Products:

Selecting Short-Term Investments: Focus on Safety, Liquidity, and Returns. Ensure your investment is secure, easily accessible, and offers competitive returns compared to other options.

Factor 1 – Safety First in Investments: 

Consider the Risk Factor. Whether it’s mutual funds or banks, every investment involves some risk. Understand the practicality and extent of the risk before making your investment choice.For the safest options, go for a bank savings account or fixed deposit. In mutual funds, choose an overnight or liquid fund for maximum safety.

Factor 2 – Liquidity Of Investments:

Consider how quickly you can access your money when selecting an investment. A bank savings account is the fastest option, allowing online transfers, ATM withdrawals, and more. Another quick option is a Liquid Fund, a type of Debt Fund that offers instant redemption up to a specific limit. However, keep in mind that redeeming units in other Debt Funds and receiving the money in your bank account typically takes 1-2 business days.

Factor 3 – Return Potential Of Investment Products

you need to be extra careful when anchoring on returns as a selection criterion because it’s pretty likely to get blindsided by it. Never forget that safety and liquidity have a higher role to play than returns while evaluating a debt fund. Moreover, don’t chase the best-performing fund as, more often than not, the funds that deliver the highest returns also take in the highest risk.And lastly, when evaluating returns of Debt Funds, always look at post-tax returns.

Therefore, these 3 aspects – safety, liquidity, and return ability – lay the foundation for our selection structure. Let’s now get into specifics on how one can set up their short-term investments.

Setting Up Short Term Investments: A Step-by-Step Guide

• Write Down Goals:
  • Enhances decision-making.
  • Provides a clear vision of required investments.
• Align Goals with Financial Products:
  • Important and immediate goals: Savings account, fixed deposit, overnight funds, or liquid funds.
  • Less urgent or future goals: Ultra short term fund, money market fund, low duration fund, or Arbitrage Fund (suitable for 6-18 months).
• Selecting Funds – The Easy Way:
  • Call to Clients Growth Manager – 8100600300.
• Selecting Funds – The Complex Way:
  • Incorporate manual checks and rules.
  • Check modified duration, average maturity, and YTM.
  • Prefer lower modified duration for less sensitivity to interest rate movements.
  • Ensure the average maturity aligns with the category’s average.
  • Aim for a YTM close to the category’s average, avoiding excessive risk for short-term goals.
• Remember:
  • Higher YTM may indicate higher risk, not suitable for short-term goals.
  • Conduct additional research for a comprehensive assessment.

Congratulations! You have learned about Investing in Mutual Funds for Short-Term Financial Goals.

The post Investing in Mutual Funds for Short-Term Financial Goals first appeared on Nivesh Ka Pehla Kadam.

Introduction

The money that you earn today, what is it used for? Most people will say- for present expenses, Yes, that’s true, almost everyone used their income for current expenses, but some people also used it to repay back some debt from their past. Most people do not get this fact in their mind that what they are earning today is the only money that they have to use in the future also – that’s retirement.

See that each year of your working life is mapped to each year of your retirement life.

A year lost = more pressure on retirement life.

Believe me, retirement is going to be a big crisis in India and people will have no idea how they can stretch their finances.

Why is retirement planning the most important in india?

Retirement planning is crucial in India for several reasons:

Lack of Comprehensive Social Security: India’s social security system is limited, and government-sponsored pensions cover only a fraction of the population. With a growing elderly population, relying solely on government benefits is not a secure retirement strategy.

Increasing Life Expectancy: Life expectancy in India is on the rise, which means that people are living longer in retirement. To maintain their standard of living and cover healthcare costs, individuals need a substantial nest egg.

Inflation: Inflation erodes the purchasing power of money over time. Without adequate retirement planning, savings can lose value, and retirees may struggle to meet their financial needs.

Changing Family Structures: Traditional joint family systems are giving way to nuclear families. This means that elderly individuals may not have the same level of family support in their retirement years, making financial independence more critical.

Healthcare Costs: As people age, healthcare expenses tend to increase. Without proper planning, retirees may find it challenging to afford healthcare and medical treatments.

Rising Costs of Living: The cost of living in urban areas in India has been steadily increasing. Without a retirement plan, retirees may find it difficult to afford housing, utilities, and daily expenses.

Desire for Financial Independence: Many individuals in India aspire to maintain financial independence during their retirement years, rather than being financially dependent on their children or family members.

Tax Benefits: The Indian government offers tax incentives and deductions for various retirement investment options, such as the Employees’ Provident Fund (EPF), Public Provident Fund (PPF), National Pension System (NPS), and others, which can help individuals save for retirement more efficiently.

Economic Uncertainty: Economic conditions can fluctuate, and individuals may face job loss or financial setbacks at various points in their career. A well-thought-out retirement plan can serve as a financial safety net in such situations.

Financial Goals and Aspirations: Many people have specific financial goals for retirement, such as traveling, starting a new business, or pursuing hobbies. Proper planning is essential to ensure that these goals can be met.

For all these reasons, retirement planning is of paramount importance in India. It empowers individuals to take control of their financial future, maintain their quality of life, and enjoy their retirement years with peace of mind.

Best investment option for retirement fund in india

The best investment options for a retirement fund in India will depend on your financial goals, risk tolerance, and the time horizon until your retirement. Here are some common investment choices for retirement planning in India:

Public Provident Fund (PPF): PPF is a long-term investment option that is safe and offers tax benefits. It has a lock-in period, making it a suitable choice for retirement planning.

National Pension System (NPS): NPS is a voluntary, long-term retirement savings scheme. It provides exposure to equity and debt markets and offers tax benefits. You can choose between two types of NPS accounts: Tier I (locked-in) and Tier II (more liquid).

Mutual Funds: Mutual funds offer a wide range of equity and debt funds suitable for different risk profiles. Equity mutual funds can provide higher returns over the long term, while debt mutual funds offer stability. Systematic Investment Plans (SIPs) are a popular way to invest in mutual funds.

Systematic Withdrawal Plan (SWP): As you approach retirement, consider setting up an SWP from mutual funds or other investments. It allows you to receive regular payouts to cover your expenses.

Diversification is key to managing risk. Your retirement portfolio should ideally include a mix of asset classes like equities, debt, and alternative investments to balance risk and return. Consult with a financial advisor to tailor your retirement portfolio to your specific needs and circumstances. Keep in mind that while returns are important, capital preservation and ensuring a steady stream of income in retirement are equally crucial.

While calculating my retirement corpus what are the points we should consider?

When calculating your retirement corpus, it’s crucial to consider various factors to ensure that you have saved enough to maintain your desired lifestyle during your retirement years. Here are the key points to consider:

Current Expenses: Start by assessing your current living expenses, including housing costs, utilities, groceries, transportation, insurance, healthcare, and discretionary spending.

Inflation: Factor in the expected rate of inflation, as it can erode the purchasing power of your money over time. Use a conservative estimate for long-term planning.

Desired Lifestyle: Consider the lifestyle you want to have during retirement. Are you planning for a frugal retirement or one with more luxuries and travel? Your lifestyle choices will impact your expenses.

Life Expectancy: Estimate how long you expect to live in retirement. Use average life expectancy figures, but keep in mind that you might live longer. Plan for a cushion in case of longevity.

Healthcare Expenses: Account for potential healthcare costs, which tend to increase with age. Consider insurance, premiums, deductibles, and out-of-pocket expenses.

Social Security and Pensions: Include any expected income from Social Security, employee provident fund (EPF), and other pensions or annuities in your calculations.

Investment Returns: Estimate the expected returns on your investments. Use realistic projections for different asset classes (stocks, bonds, real estate, etc.) based on your risk tolerance.

Emergency Fund: Ensure that you have an emergency fund separate from your retirement corpus to cover unexpected expenses.

Debts: Pay off high-interest debts before retiring. Consider any remaining mortgage, car loans, or credit card balances.

Children’s Education: Consider any financial obligations related to your children’s education if any and plan accordingly.

Regular and Extraordinary Expenses: Identify any regular expenses (e.g., utilities) and extraordinary expenses (e.g., vacations, home repairs) that you anticipate during retirement.

Downsizing: Evaluate if you plan to downsize your home or change your living arrangements in retirement. This can significantly impact your expenses.

Contingencies: Plan for unexpected expenses, such as medical emergencies or unforeseen financial challenges.

Milestone Goals: Consider any milestone goals you may have during retirement, such as starting a small business, traveling the world, or pursuing a new hobby.

By considering these factors, you can create a more accurate estimate of the retirement corpus you need to enjoy a comfortable and financially secure retirement.

Finally

Professional Advice: Consult with a financial advisor or planner to ensure your calculations are accurate and your investments align with your retirement goals.

Congratulations! You have learned about one special Goal – Retirement Planning, it will help you to understand Retirement planning.

Disclaimers:
An investor education initiative By Findola Wealth Research Team.

This article is generated and published by Findola Wealth Research Team.

The post My Favourite Topic is “ Meri Azadi Ki Tayari” first appeared on Nivesh Ka Pehla Kadam.