Have you bought lately a personal insurance which is currently taking a portion of your wage or income? Well, the following tips will guide you in view of this form of investment:
1. Split your Term Insurance: The first you should do is to split your Term Insurance for two reasons. Top most reason is flexibility in decreasing the cover later. So in case you need cover of 60 lacs , you can divide the cover into 30:30 or 20:40 and then in future whenever you need that your insurance requirement has gone down , you can just stop one of the policy . The second reason is that your risk of claim decline from insurance company goes down, but this is a secondary reason thus not that really important.
2. Invest in Tax Saving Products for long term goals: A lot of the people still invest in tax saving funds for their shot term financial goals. The fact that the money invested there will get locked for long term should be taken in positive way and hence you should invest in these for your Long term goals, so that you don’t feel bad about the lock in period because you anyways need money after many years for those goals. For example Child Education, Retirement, Holidays abroad after many years.
For short term goals like buying , saving for some short term commitment should not be taken care by Tax saving Instruments , You should use Fixed Deposit , Fixed Maturity Plans , Debt Funds , Balanced funds and Non Tax saving Equity Funds (Risky) for Short term goals . Once you think like this, the lock in period will not matter to you at all.
3. Use Top up’s in ULIP’s to minimize Cost: In view of those investors who are going to buy ULIP’s or using ULIP’s for their long term goals, should use Top up facility in ULIP to minimize the cost. The Allocation charges are generally linked to the regular premium your pay and not the Top up’s.
So if you are investing 60,000 per year as premium you should rather take a 20,000 policy and top up your policy with 40,000. This way you will save charges on top up money. You can decrease your cost (charges) by anywhere from 50% – 75% using Top ups.
4. Investing in GOLD ETF’s instead of physical GOLD: Common question asked to investors is this: Why do you want to invest in physical gold? The biggest reason is for your daughter’s wedding and simply for jewelry, But the underlying reason always is capital appreciation.
So why not always invest in gold ETF’s [ Understand what is ETF ] and whenever you need Physical gold , sell the ETF’s , take the money and buy the physical gold at that time. Most of the people invest in gold physically for your daughter’s education, But the better way would be to invest in ETF’s and when time comes you buy the physical gold by selling the ETF’s. That is a better way because it’s more flexible, safe and easy route.
5. Use your LTA, HRA and Medical Reimbursement: I wonder and am awed to see that many salaried employees especially youngsters do not care to take the benefit of LTA, medical reimbursements and HRA, just because of being lazy. So make sure you take advantages of these benefits, even if you partly use these things you will save couple of thousands in tax. All you have to do is, save the bills, take the xerox and walk couple of steps to your Finance department and submit them, don’t you think it’s worth if it can save you couple of thousands in tax saving.
6. Control your Credit taking Habit: Most of the people take debt more than they can actually afford to pay. One criterion for giving credit is mainly how much you earn. The company never knows your expenses and your future goals, your risk appetite and your future plans. People tend to buy things which they actually don’t need. This can have ill-effects later in your life. Thus, watch out your credit taking behavior . Don’t over-do it.
7. Don’t Over monitor your Portfolio: Stop checking your portfolio.But sometimes you may look at your shares, mutual funds, ULIP’s and the like. But overdoing it can be fatal sometimes. Some of us have this obsession of watching our shares, mutual funds NAV and ULIP’s NAV on daily or may be weekly basis.
See how much time you should invest in Personal Finance. This is not a good sign for long term investing especially for people like us who are into regular jobs and have no much time to contribute in your Finances. When you are a long term investor, why keep track of short term movements, these moves will have no much value in your all growth and short term movements will affect you mentally and tempt you take decisions in short term because your money is either going up or down fast.
More of anything is bad and the same thing is true for your involvement. Couple of hours per month or every quarter is good enough. Don’t get a feeling that successful financial life means more action.
8. Share your Financials with Family: What if you are dead in another 1 hour, do you think your family will be able to find out all your investments and Insurance documents and successfully claim them? Are they unaware of the fact that you took a huge Insurance cover for them or you invested 50,000 in a ULIP last month.
Most of us graduate from novice investors to a good investor but still are left behind in taking care of this extremely critical point of sharing each and every details of our finances and making sure that the documents are within reach . Let your wife, children have a good idea of where the documents are and where your investments are, have xerox copies of every document and have them at 2-3 different places and make sure people know about them. Emotional pain of losing someone and no idea of the finances which will take care of them is a kind of situation you never want you loved ones to be into.
9. Don’t compare your returns with others: Indeed, you are different, be proud of this fact. If your returns are less than your friend mutual funds, that’s fine. Don’t compare yourself with others, there are many things which determines what you get in life like knowledge, luck, skills, timing and others.
So just make sure that you are getting what you try for. Don’t lose focus from your goals, your main aim in life is to achieve your financial goals easily and smoothly , Financial Planning is a race where everyone who reaches their personal target is winner, Make sure you don’t hurt yourself by competing with others .
10. Investigate everything before you buy it: Before, you buy something, make sure you try to get information on Internet, ask on forums at different websites and make sure you find out maximum about thing product you are buying.
Spending 30 minutes investigating your product can save you from lot of trouble. One person I know recently took a home loan from HDFC and went for additional Life over from same bank for 30 lacs. He didn’t investigate much about the cost.
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As a conclusion, getting a personal insurance will be truly beneficial not only to you and your family but also your loved ones whom you will be leaving behind ones you pass away. Therefore, try your best to apply these great tips in investing with personal insurance so as to have a worth-living life now and in the future.
