Money Mantra - Money Matters

  It’s a common problem; we invest with certain expectations, but, at maturity, we fail to achieve it. We wonder why does this happen and ask few questions to our-self – Have I over expected it? The option I selected was not correct? Did I fail to understand the risk involved with that investment? etc. We recognize that the actual growth of our investment has deviated from what we have expected. It's a common phenomenon if the expectations are not realistic. But when maturities are targeted to accomplish a liability, it becomes a concern. Let us discuss this in detail, why this happens – Our investments grow as a result of financial changes which are influenced by many factors. Predicting the implication of such factors on our investment growth is challenging. A better understanding can only help reduce the gap between expectation & the actual outcome. The gap goes wider on investing in high-risk options but you have higher growth potential for your investments. So ...

  Everyone creates a retirement corpus to get a regular flow of funds from the beginning to the end of the post-retirement phase. We estimate certain fixed fund flow from this corpus, as a replacement for our salary, supposing it to remain adequate throughout the post-retirement phase. But, we forget to notice the incremental rise in our salary, countering the inflation right from the beginning. This regular increase of funds had been protecting us from the heat of inflation. However, in the absence of incremental rises, the fund starts falling short as we move further in the post-retirement phase. But, we must recognize the fact that living expenses are bound to increase under inflation even after retirement. In the absence of an incremental rise, a steady stream of funds will slowly become insufficient. Initially, we carry a false impression of this being sufficient, but once the purchasing power drops substantially, it becomes difficult to manage. The situation becomes worst if ...

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...