Is Retirement Planning a Must?

 Is Retirement Planning a Must?

• by Dinesh Randive

Retirement planning is quickly gaining speed and is certainly becoming a priority for many people. Based on a survey, nearly 25 percent of the urban customers are getting ready to act on their retirement planning. There has been a huge leap this year as nearly 140 percent increase in people claiming to consider that retirement is a key priority financially.

Retirement is often considered to be a complicated issue to look at in a young age; but as researchers suggest, keeping a good financial plan can help you gain confidence and create a smooth transition from on stage of your life to the other.

Many people who have been surveyed have opted out other investments, buying cars, secondary homes, etc. and have chosen retirement planning as their primary priority. The people among the age group of 28-33 are predominantly looking at retirement as the key and planning towards it. Based on a study, single women feel financially confident about their finances after planning than men.

A survey also found that single women (close to 70 percent) feel financially secure significantly than single men (56 percent). Women tend to invest at an earlier age that is around 25 years compared to men who begin to invest at 26. Although, marriage shifts the trend as men become more responsible and gain confidence about their finances while women begin to depend on their men for the same.

While women tend to consult and go for conservative mode of investment, men think of retirement as an immense financial priority based on a survey. Overall, while looking for financial retirement plans, both men and women have their ways of planning towards it.

The UNFPA report also suggests that the number of Indians above 60 years is predicted to rise to 55 percent by the year 2050. The common mindset among people who are young is to make enough money for their retirement and live peacefully. This not only makes them feel good, but it also brings the question of have you saved enough for as long as you live? There are many things which require your money after you retirement and one of the primary thing is medical expenses. Therefore, it is better to plan for your financial retirement considering all these facts.

Benefits of planning retirement early.

 Benefits of planning retirement early.

• by Dinesh Randive

The basic trait of good investor is start investing early. By investing early one gets two benefits, namely the time value of money and power of compounding. The earlier you start saving for your retirement lesser the burden. Let’s consider two people who starts saving for retirement at different age as mentioned below:

Person A, age 25, saves Rs.5000/- monthly for his retirement.

Let’s assume he invests in a financial instrument which fetches 15% per annum for next 25 years.

Person B, age 35, saves Rs.15000/- monthly for his retirement.

Let’s assume he invests in a same financial instrument which Person A has invested and gets 15% per annum for next 15 years.
Let the retirement age be 50 years.
Person A gets corpus of Rs.1,62,00,000/-
Person B gets corpus of Rs.1,00,00,000/-
The solution is simple the earlier you invest with little the amount more you reap.

Accommodate for inflation

With rising price, the purchase power of money will decrease. Let’s say you have Rs.100 today, and assume you keep the money safely for 5 years. What would be the purchasing power of Rs.100 after 5 years would be? Say it would be around Rs.90. Now imagine you invested in a financial scheme which is earning returns below inflation, and then you could lose money. Hence a typical investment scheme should accommodate for growing inflation.

Track you investment – don’t overdo it

It is better to track the performance of your investment scheme regularly, typically once in every 3 months. Never track your investment on a daily, monthly or weekly basis, because your emotions vary in line with the market trends. Hence invest in right schemes.

Diversify your investment

It’s always better to diversify your retirement investment rather than investing in a single financial scheme. By diversification you can reduce a risk of losing money considerably. This creates balance between under performing schemes and performing schemes.

Gradually increase your investment when you earning increases

With career growth and proper finance management, you can slowly increase your investment for retirement fund. This can be done whenever you’re earning increases. This has two advantages one is you get the power of compounding and also you are indirectly accommodating for growing inflation.

Buy a necessary medical insurance.

You should typically buy medical insurance, which should take care of your medical expenditures in case you fall ill. This will help you prevent erosion of your retirement savings.

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Visualize your retired life

 Visualize your retired life

• by Dinesh Randive

Visualize your retirement and create a budget for your retirement

Research reports say that only 15% of people are saving sufficiently for their retired life. This tells that a large number of individuals are not planning for their retirement which is a harsh reality. It is better to start planning early and put things in action than starting late and realizing the mistakes made later. Visualize your retired life and then start planning early.

Avoid or get rid of all your debts

Ensure that all your debts are completely re-paid on or before your retirement. Be it a home loan, car loan, personal loan or any other loan, make sure you choose the term of these loans before your retirement age and then repay them. Only then will you be able to enjoy your retired life with 100% financial freedom, not when you have to repay your loans.

Always have emergency funds and protect them

Emergency situations can happen at any time and the expenses can be very demanding, especially when you get older. So you will need to revise your emergency funds on a year by year basis and enhance them based on inflation and change in your expense levels. They will also give you a sense of security.

Have a budget plan for retirement too

It is good to have a vision in career life and it also good to have a vision for your retirement life also. You need to visualize your retirement goals and create a budget for that too. Retirement means that you will not be working anymore and will have to pay for your expenses. You may need to spend more on travel and medical expenses.

Grow your retirement money

Find out how much retirement corpus you will need when you retire. A good financial planner can help you in finding right answers to your questions and can be of great help in this regard.

Reduce taxes

Your retirement income and corpus need to be tax efficient. You need to pay taxes only for the interest accrued. You will need to carefully select your investment option that can help you in reducing tax in your retired life.

Have enough medical coverage

Plan you medical coverage well in advance because your employer will stop covering you under the group mediclaim. At old age, medical expenses can become inevitable and lack of proper planning in this aspect can create a lot of trouble.

Create a will

To avoid any relationship conflicts among your next generation, you will have to draft a will that will distribute your fixed and financial assets to your legal heirs.

Simple steps to plan for the New Financial Year

 Simple steps to plan for the New Financial Year

• by Dinesh Randive

The month of April marks the beginning of the New Financial Year. What better time could there be to take charge of your finances and make the right decisions with respect to your savings, investments, insurance cover and tax saving ideas? If you have not started your financial planning, then now is the right time to act on it so that you can complete this financial year well.

Create a budget set a goal

First step is to design your budget for this financial year. To make a budget, you need to note down the anticipated annual income for this year and the expected expenses such as existing loans, rent, medical expenses, and kids’ education and so on. You should also take into account other expenses such as travel, lifestyle expenses and entertainment expenses other than the priority expenses. By listing down your approximate expenses, you will get an idea as to where you are spending more. Once you know this, you can allocate funds to priority items and try to reduce other expenses. This will help in saving money which you can invest wisely to earn good returns. Another important part of creating a budget is to set a financial goal. Your financial goal for this financial year could be anything from opening new investments to buying a car or taking that long desired vacation.

Savings and investments

The next step is to plan your savings and investments. Once the budget has been framed, it makes it kind of easy to allocate funds for your short term needs in the form of savings and for your long term requirements in the form of investments. It is recommended that you contribute to your savings and investments on a monthly basis as you would do for your priority expenses. You should also first analyze your previous savings and investments, see where you stand with your financial goals and adjust your savings and investments for this financial year accordingly. If you are going steady with your investments, see if you could venture into any other new investments this year. By accelerating your financial goals, you could help yourself retire earlier or retire with an even better corpus. Apart from this, you should also concentrate on your emergency funds. You should always have an amount that would cover your expenses for a minimum of 6 months and you should never touch this amount.

Plan your taxes

Tax planning is also an important part of any financial planning. Rather than waiting until the financial year end, it is good to plan for your taxes at the beginning of the financial year. This will help you to avoid last minute hurried investments that you will be forced to make without much research. Planning your taxes in advance will help you to not only save more on taxes but will also help you to earn better returns on thoroughly researched investments. So, get in touch with your financial advisor/ tax consultant and plan your taxes now.

Try to clear your debts

Whether it is a home loan or a car loan, take account of all your debts at the beginning of the financial year. Clearing your debts should be your priority. You should try to clear the most expensive debts first and then move down the ladder. Apart from home loan, which would help you to save some taxes, you should make sure to clear all other loans as soon as possible. Never accumulate any loan on credit cards as their interest rates are astronomically high compared to all other loans.

Insurance cover

Take account of your current insurance covers including your health cover. If you do not have a proper life insurance cover already, sit with your financial advisor and find out the right amount of cover that you would need to protect your loved ones and buy a policy as soon as possible. You should also check the status and cover of the health insurance for yourself and your family members. Make sure that all your insurance policies are up to date without any dues and also have a sufficient amount to keep up with your current standard of living. If you find that your existing insurance cover lacks sufficient funds, then buy an appropriate top up for your policy.

By following these 5 simple steps you can start this financial year in a good way and you can be sure to gain more wealth at the end of it. These steps will also help you avoid the last minute tension and stress that you might have to face otherwise.

Tips for a clean start for this financial year

 Tips for a clean start for this financial year

• by Dinesh Randive

This April, take the time to start a fresh financial calendar by cleaning up your finances. You can achieve this by first clearing all the clogs, take account of your finances, check your debts and evaluate your investment portfolio. This is just similar to clearing the clutter in your kitchen or bedroom closet. Here are some simple tips to gear up for a better financial year.

Design the new financial calendar

As we know, the first step is to list your financial goals – both short term and long term goals. Next, you have to pick the right investment plans to fit these goals. Now design your new financial calendar that will prioritize your requirements according to your goals and timeline. Your calendar should also include the dates for tax filing, investment payment dates, policy premium dates, and any other EMI dates as well.

Take account of your finances

Take into account your income and expenses. Compare the data with your budget. Take into account all your utility and credit card bills. Make sure to set the room for checking your income/ expense report with your budget on a regular basis in your new financial calendar. Check if you are going overboard of your budget in any area and if there are any such cases; see how you can get them back on track.

Revisit your investments

We all know that in order to achieve better returns from your investments, you need to keep a regular watch on your investment portfolio. So, when you are starting your new financial calendar year, make sure to take the time to go through your current investments, your budget and requirements, and ways to compensate for the investments that are not doing well. There may be changes in your requirements this financial year compared to last year. So, you need to set your financial calendar such that you will have the arrangement to check your investment portfolio periodically.

Check all your outstanding loans

Loans/ debts are a very important element of your finances. By clearing your loans as quickly as possible, you can accomplish your financial goals easily. Too many outstanding loans and irregular repayment of loans can affect your credit score. Prioritize and clear the loans that have higher interest rates first. Any outstanding credit card bills will be your highest priority as they are the ones with exponential high-interest rates. Clearing home loans should be the last one as they help you to save taxes.

Look into your insurances

Last but not least, when starting a fresh financial calendar year; evaluate your existing life insurance and health insurance policies. Make sure that they are up to date and in accordance with your current standard of living. If you do not have adequate or no insurance cover so far, then now is a good time to purchase a top up or a new insurance cover respectively.

Investing for the first time? Consider these tips before you begin.

 Investing for the first time? Consider these tips before you begin.

• by Dinesh Randive

Getting that first salary from your first job in your hand is always a never forgettable moment. As you start earning, you get financial independence to spend as well as to save. Handling money differs from one individual to another, in other words, it means that the way one spends and saves money is quite different. However, what you should be careful about is not to take your financial independence that you have for granted and become a spendthrift neither become too concerned about saving money for future and cut short on the things that you need to enjoy now. You should grow a good savings routine, be it big or small and invest your money properly in a planned manner. Here are some tips that will help you if you are just starting to invest money.

Plan your financial goals

Planning is the first basic step for investment as with any other task in life. You should have clarity about your short term and long term requirements and plan to save for them accordingly. This will help you to decide the amount that you need to invest and the time period for each investment.

Do your homework

It is important to do proper research patiently about the various investments options available. You cannot skip this step as this will not only help you to reduce your loses but will also give you a clear picture of where to invest to get the maximum returns in the timeframe that you need it. If you think that you do not have the time to do the groundwork, you can always get help from professionals, your financial advisor on this.

Start early

You should always make sure that you start your savings/ investments as soon as you start earning. Though you might not be able to contribute a considerable amount initially, it is always good to start as early as possible to get yourself into that routine and most importantly to reap the benefits of compounding.

Maintain a balance

You should always aim at striking a proper balance between earnings, future income, and investment. You should neither spend all the money nor save/ invest everything depriving yourself of the small but meaningful treats. As years pass, your earnings, your expenses and your standard of living everything will slowly rise. You should make sure to take into account all these when you start investing and make room to accommodate all of them.

Calculate your risk capacity

Someone said, “The biggest risk is not taking any risk”. It is true and you might not be able to achieve bigger goals in life if you refrain from taking risks. The same applies when it comes to investments as well. You should have a good understanding of your risk-bearing capacity and take some efforts to take up some risks while investing. At the same time never go overboard with your risks taking capacity to earn more returns.