Saturday, January 16, 2010
As an employed person we have few limitations –
1.You don’t have time to plan investments.
2.Typically you run from pillar to post during Jan to March period so that you can somehow achieve 1 lack saving allowed under 80 c.
3. You do manage to save at least 20% of our salary monthly but don’t know what to do with the money. It keeps your bank happy.
There is a better way –
Happiness is not a function of the money you make; you can happy today and now. So choose to be happy make sure you buy some peace of mind as you go along enjoying life.what can you do to steer clear from these limitations and allow yourself to be happy.
1.Buy Term Life Insurance: Term insurance is the cheapest form of life insurance. If you the primary earner for your family you would want to secure your family in case the un-thinkable happens. This policy will protect them from this low probability but high impact event.
Typically for a 30 to 32 yr male it will cost about 25 to 27K for a 50-60 lack policy. SBI Life and Aviva have few policies whose sum insured keeps growing at 5% to 10% every year while the premium remains constant.
2.Buy a house : Housing is a basic need while people keep arguing that renting is better showing “cash flow” calculations. The current tax laws give you rebate under 80c for principal repayment of hosing loan and 80d gives rebate for interest repayment. This basically means you do not have to worry about the tax saving until the tenor of your house loan. You can rather invest that money saved into equity funds /shares which will give you a decent return in the long term.
Having a house of your own also works like an insurance policy since your family does not have to worry about accommodation or rent if the unthinkable happens.
(provided you have repaid the loan or your term insurance takes care of repaying the balance pending ). Keep the EMI in mind while deciding- use this sheet to determine yours.
3. Buy a index fund/ETF: I have discussed about ETF’s earlier. If you don’t have time to evaluate business and determine which is better than other then it’s prudent to buy a ETF or index fund. This basically means that you a buying a slice of India so you will at least keep pace with market returns.