Money Mantra - Money Matters

The phenomenal rise in higher education expenditure has forced everyone to pull up their socks to prepare for this liability well in advance. Being forced to compromise on your child's education because of financial trouble puts parents in a very tight spot indeed. Consequently, they prepare for most of their earning life to build out a pool of funds that they can withdraw from, despite financial adversity. However, this might or might not be enough for when the admission season rolls in. We shall be discussing here, how to avert this situation. When dealing with long-term financial goals, the most important aspect is to identify/ recognize and bridge gaps developed during the course of this journey. The pool of funds is not created just for the sake of achieving the fund value but also to ensure  financial adequacy to meet the goal.  To achieve this, we need to ensure the following 7- essentials. 1. Fund Size  –  Never go by intuition...

  To provide financial security to the family, earning member insures himself for his life. The insurance company compensates financially to his family on untimely death by discharging a lump sum fund to the dependents. The fund received by the family, against death benefit, depends upon the insurance coverage taken. Hence, the financial security of the family is decided by the insurance coverage adopted. In case of its inadequacy, the family might face financial discomfort. Therefore, determination of the adequacy of coverage value of any life insurance is very important. Normally the coverage value of life insurance is assessed in the following ways  – 1.        Just by gut-feeling 2.        Based on the suggestion by the insurance policy seller 3.         Advice from Relatives/ Friends The coverage values decided by any of these processes do not follow any structured process to determine...

  The basic objective to buy a Life insurance policy is to provide financial security in event of the demise of an insured member. This is achieved by insuring the financial liabilities that an earning member is expected to deliver over his/ her entire earning phase. The policy is expected to compensate the loss of earnings, in event of loss of life, during the policy tenor (against the death benefit). Therefore, it is a PROVISION (made against loss of futuristic income), and shall NOT be treated as an investment (which is to earn returns).   When trying to evaluate this, due to the expectation of direct returns, our selection tends to be biased. For example, Hybrid life insurance policies, offering returns in addition to life insurance, have become very popular because of such features. Our inclination to earn returns, under lucrative offers, easily diverts our focus from 'building a provision' to 'earn returns'. Since investment & insurance have different object...