Author: Chillmaadi Admin

College is such an adjustment. Not only do you have the first year of college classes to plan for but you also have the adjustment of college dorm life, parties every night, roommate issues and so much more. You don’t want to fail but you will find it hard to succeed at times, if you aren’t prepared for everything.

One of the things that a college freshman must do, if they live away from home, is plan a budget to live on while attending school. Most college freshman never even think about this until they go away to school and suddenly they realize they can’t just run into the kitchen anymore and ask mom or dad for twenty bucks. This little fact will often come to mind when most college freshman hit broke for the first time.

In order to avoid the broke factor, you need to plan ahead for the rainy day that will have you feeling uneasy. You need to develop a budget.

If you are lucky enough to have your parents footing the bill for college and recognize the fact that your parents don’t want you working your way through college, you can discuss your college budget with your parents. What may come as a surprise to you will be the fact that your parents will pay for books, school and a meal ticket but no more than $20 or $40 will be sent to you for a week’s allowance. If this isn’t enough, and it probably won’t be, then you need to find a job.

A great place to work when you are in college, is on campus in one of the student-oriented jobs available on campus. You might want to work in the student book store or in the food court on campus or somewhere else on campus. The reasons these jobs work well for students, of course, is because of the fact the college will work around your class schedule.

Many college students will also get a job waiting tables. However, if you are going to do this then it would probably be a good idea to restrict your work schedule to weekends. You will also have to be careful not to get too involved with the mix of employees who often run around after work until all hours of the night and morning. Remember, keep your studies in focus and work only for a little extra spending money.

If you are lucky enough to have parents who will pay you an allowance, then you probably want to negotiate for so much every two weeks. Don’t be tempted to get this allowance for the entire month because in a weaker moment, you may find that you spend your entire budget in one day shopping or partying. Have your parents deposit the money into a front-load credit card or into your bank account every two weeks and learn how to budget the money they send you.

As a college student, plan to budget your allowance for school supplies, the occasional outing with friends, pizza night and other activities as well as gasoline and other necessities for your automobile. You will be surprised at how quickly you will need to learn to budget when you live on your own.

College students don’t plan for a quick need for a budget because they don’t think about it before heading off to school. However, before you know it, you will have the strong need for a budget and you will need to take care of your money. So take the time to set a budget you can live by while you are in college.

In the day of state-wide lotteries, students don’t realize it but more college funding and educational scholarships are available than ever before. There are a lot of reasons you won’t receive those and the main reason is because you won’t take the time to find out about them.

Students who carry at least a 3.0 in college, have the opportunity to qualify for many college scholarships and financial aid if they choose to attend an in-state college and if they choose an out of state college, there is still funding available. Financial planning for college starts with parents helping their student find the appropriate resources. However, if students are on their own in planning for their future then the schools will offer assistance.

Financial planning for college starts with the student taking the initiative or the parents helping the student take the initiative to find out what’s available. It may surprise you to know that there are lots of scholarships available based on needs, college aspirations, sports and participation in the area of sports, based on grades and many other college scholarships. There’s a scholarship that you can receive if you just take the time to find out what it is and how to get it.

Parents who can afford to send their kids to college will often fail to check out the scholarships available. After all, if they can afford to send their kids to college, why check on financial aid—right? However, even if you can afford to pay for college, it’s crazy to pay for it when you have a student who has earned the right to have a college scholarship.

Students across America will be introduced to more and more lottery-initiated scholarships and it is time your child used what was set aside for kids who earned these scholarships. In addition to lottery-sponsored scholarships, each year hundreds of scholarships go unused simply because no one took the time to find out about them. The money is there waiting to fund someone’s education. Isn’t it time someone spent it for its intended use?

I often read articles from financial gurus, such as Gail Vaz Oxlade, Dave Ramsey, and various others, who endorse budgeting by using the envelope system. For the most part, the envelope system involves using only cash, and dividing your cash into labeled envelopes according to your budget. The envelopes are assigned to typical spending areas including: groceries, gas/travel, entertainment etc.

I really like the envelope system… in theory. In practice I’ve never found the envelope system to be practical. I find myself short in one area so I slip a bit from a different envelope, and of course change almost never winds up back in the appropriate envelope. Two days I’ve failed miserably to maintain this system.

When I am being really “good” with my finances I use a modernized version of the envelope system. I purchase gift cards from the stores that I commonly buy my necessities from. I keep one for gas, groceries, entertainment, a calling card, pharmacy etc. I also keep a bit of cash on hand for incidentals. I have found this approach to be more practical. It eliminates my biggest problem of robbing Peter to pay Paul, and I also don’t need to worry about returning the change to proper envelopes. This approach also creates a mind frame of looking at these floating expenses as fixed monthly expenses. Load each card once a month with your budgeted amount. This also forces you to stay within that amount.

It is important that you keep an amount of cash on hand as well for incidentals. It is important to define what this can be used for ahead of time. Can you use it if a friend unexpectedly comes from out of town and you want to go out – or is it reserved for more emergency situations such as your car won’t start and you need a cab? Having these boundaries set will cut down on frivolous use of this fund. Keep a small amount on you but leave most of it at home to cut down temptation.

This system can be very helpful when trying to stick to a budget. The most important aspects to making your budget work are foresight, will power and realistic expectations!

Just like with dieting, don’t let one mistake end your whole journey!

AT THE HEART of sound investment theory is a simple calculus known as the Power of Compounding. I know – it sounds like the punch line to a joke you might overhear at a CPA convention. But believe me, there’s nothing nerdy about it.

What the bean counters know is this: If you put your money in an investment with a given return – and then reinvest those earnings as you receive them – the snowball effect can be astounding over the long term. This is particularly true in retirement accounts, where your principal is allowed to grow for years tax-deferred or even tax-free.

This is how it works. Suppose you have Rs. 10,000 in your bank account and decide to put it into an investment with an 8% annual return. Over the space of the first year, you earn Rs. 800 on your investment, giving you a total of Rs.10,800. If you leave those earnings alone, rather than pull them out to spend, the second year would deliver another Rs. 864, or 8% on both the original Rs. 10,000 and the Rs. 800 gain. Your two-year total: Rs.11,664 and climbing.

As you can see by playing with the numbers, compounding produces modest – if steady – gains over the first few years. But the longer you leave your money in, the faster it begins to grow. By year 20 in our example, your money would have quadrupled to more than Rs. 46,000. If you had invested Rs. 20,000, it would have soared to more than Rs. 93,000.

Of course, the power of compounding also works for cash accounts such as money-market funds. But if you adjust the interest rate downward to 4%, you’ll see what you’re giving up: Your 20-year return on that Rs. 10,000 drops to around Rs. 22,000. Now dial the interest rate up to 10%, the average historical return of the stock market. At that rate, your Rs. 10,000 investment balloons to a rich Rs. 67,275.

The lesson is this: The longer you leave your money invested and the higher the interest rate, the faster it will grow. That’s why stocks are the best long-term investment value. Of course, the stock market is also much more volatile than a savings account. But given enough time, the risk of losses is mitigated by the general upward momentum of the economy. We’ll show you why in the next lecture.

JUDGING BY THE FACT you’ve taken the trouble to find this Web page, our guess is you don’t need a lot of convincing about the wisdom of investing.

You’ve probably been beaten over the head with the notion that you need to start early to fund your retirement or send your kids to college. And you’ve likely heard your fill about the fortunes being made in the stock market — some of them by people you figured were severely challenged by mowing the lawn, let alone investing wisely.

But even if you are enthusiastic about getting started, jumping in can be daunting. That’s why this set of investing courses begins with a simple dose of encouragement: With enough time and a little discipline, you are all but guaranteed to make a considerable amount of money in the markets. You merely need patience and a willingness to put your savings to work in a balanced>portfolio of securities tailored to your age and circumstances.

To see why, you have to understand how investing works. It’s not about throwing all your money into the “next Infosys,” hoping to make a killing. And it has nothing to do with getting a stock tip from your brother-in-law and clicking over to your Demat account to buy as many shares as you can get.

Investing isn’t gambling or speculation. It’s taking reasonable risks to earn steady rewards. As we’ll see, it works because buying stocks and bonds allows you to take part in the relentless growth of the world’s economy, which hardly follows a straight line, but does trend up over time. It’s also true that the longer you stay invested, the faster your money will grow. This neat trick — called the Power of Compounding — is a mathematical certainty, something you can bank on.

Satish is a family man, with a spouse, two children and dependent parents. Although, he has no major medical expenses till now, Satish is confident that in case of a medical emergency, his corporate health insurance would help him. Nevertheless, Satish is making a mistake by relying completely on his workplace insurance. Although, his medical expenses may have been negligible so far, time will take a toll on his family’s health and more medical complications will crop up. The chances are high that his corporate insurance will become insufficient.

Like Satish, many people believe that their corporate health insurance is adequate and there is no need to buy a separate health insurance policy. However, what they fail to acknowledge in the entire process is that our changing lifestyle, exorbitant medical costs and inflation rate may make it necessary to have an individual health cover. Also, let’s not forget that buying a health insurance would cost high as we grow old. So, is it wise to rely only on corporate health cover? Does it make sense to buy an individual health plan? Let’s try to find answers of these questions.

What is included under corporate health insurance?

It is a group insurance that covers all employees of an organization under a single plan. Besides covering maternity and pre-existing ailments at nominal rates, your corporate health insurance can give you an option to expand health coverage with voluntary deductible.

What is included under individual health insurance plans?

It includes insurance policies which a person buys for themselves or for their family. It covers both personal and family floater health plans. Unlike corporate health insurance, here an insurer can increase the coverage by opting for some additional covers, such as top-up and super top-up, as per their current life-stage. Here, premium rates depend on age and current health state of the insurance applicant.

Corporate health insurance Vs Individual Health Plan

• Cost: Some organizations offer their corporate health plans at free of cost, while others charge a nominal amount of, say Rs 200 or 300/month. On the other hand, in individual health policy, your premium outgo can go anywhere between Rs 6000 and Rs 8000 for Rs 5 lakh coverage.

Further, premiums of group health policy are deducted from the salary itself as opposed to individual plans wherein premium is required to be paid separately.

• Waiting period: While corporate health policies cover illnesses or medical conditions right from day one, there is a waiting period of, say three or four years, before they are covered under individual health plans.

• Underwriting: For a corporate health plan, a company accepts all employees, irrespective of their age or health condition. However, in case of an individual health plan, insurers can accept or reject the policy application on the basis of an applicant’s age and medical condition.

• Customization: As corporate health policy is purchased by an organization, it is not possible to customize it. Your individual health plan, on the other hand, can be customized to suit your requirements.

• No claim bonus: With a corporate health policy, if you don’t make a claim throughout the policy tenure, you as an individual, do not get any no claim bonus. However, in case of an individual health plan, if there is no claim throughout the policy tenure, you are entitled to get a no claim bonus in the form of low premium or additional cover at free of cost.

• Tax benefits: In a corporate health plan, all premiums are paid by an employer, and therefore, you can’t claim for tax deductions. On the other hand, as you pay your premium on an individual policy, you become entitled to get tax benefits as per the prevailing Income Tax laws.

Is corporate health insurance sufficient?

According to BigDecisions.com, over 95% of middle-class Indians are underinsured. As per the study, most of the salaried professionals believe that their employer insurance cover is sufficient and doesn’t need to be supplemented.  However, chances are high that your corporate health insurance may prove to be futile due to the following reasons:

• Limited number of people covered: It is not necessary that your corporate health policy may cover your dependent parents and children also. This would create a huge financial gap because elder people usually need frequent medical attention.
• Low sum insured: Rising medical inflation leads to high hospitalization costs. However, corporate health plan may prove to be insufficient to meet your medical expenses. Further, there may be caps on various things, such as room’s rent, and surgeon’s fees.
• Out-of-pocket expenses: Many corporate insurance policies have additional clauses, such as co-payment, and deductible. In fact, according to an ICICI Lombard report, 76% of companies have incorporated co-pay and room-rent limit clauses. It means employees need to bear costs out of their own pocket.
• Job switch: If you change your job, it is not necessary that your new employer will also offer you health cover. As soon as you leave your current company, you are out of the insurance umbrella of the existing corporate health plan.
• Post retirement: Retirees are not covered by most of the corporate health schemes. However, medical costs rise with an increase in age due to the need for frequent medical care. Unless the person had foresight to buy an independent health cover earlier, he will be left with no cover at this age.
• Change in work policies: According to Marsh India, over 70% of employers surveyed in 2013 had modified their health insurance plans between 2011 and 2012 to manage high medical costs. They introduced changes, such as partial or full withdrawal of parental cover, high compulsory deductible and high rent restrictions. As a result, employees are left with low coverage.

Conclusion

It is strongly advised to buy a standalone health insurance which is like a safety net around you and your family. The cost of an individual health insurance is also reasonable which makes it an apt choice for most of the people. Please add that it is easy to buy a health cover online and you can also compare plans. Plus health insurance plans are portable.

We cant write about premiums, since they may vary by the time this article goes live. In addition, premium varies for people who smoke, it is always a good idea to mention smoker and non-smoker when giving such examples.

Also, over the last few years, medical inflation has increased at a rapid pace, both in urban and rural India. Hence, it is important to buy an individual health plan equivalent to your annual income.

One’s credit score is a pretty good indicator of his or her financial health. Without a good credit score, a person will not be able to take out a loan or get a mortgage. It is also important to note that many employers check their prospective employees credit history before hiding. Fortunately, there are things that people can do if their credit is less than perfect. Below are a few ways to improve your credit score.

*Check your credit*

– There are many people who walk around with bad credit for years and do not know it until they are denied credit. Experts recommend checking one’s credit score at least once a year. People who have had a history of bad credit are advised to chick theirs more frequently.

*Reduce Debt*

– Most people are in debt these days. Some people are in debt for a good reason such as student loans and mortgages. Others are in debt because they made the careless decision of spending more than they can afford. Regardless of the reason, excessive debt can ruin a person’s credit. Paying of that debt can improve a person’s credit.

*Pay Bills on Time*

– One of the worst things that a person can do to his or her credit is fail to make bill payments on time. When a person does not pay bills on time, he or she gets negative credit reports. On the other hand, people who make payments on time will get positive credit reports, which can improve a person’s credit score.

A person who has a good credit score will have the greatest chance of getting approved for a loan. They may also have an easier time finding a good job. Checking one’s credit score once a year, reducing debt and paying bills on time are the keys to improving credit score. Financial advisors are a great resource for people who need additional help improving their credit score.

Mutual fund is collection of stocks or bonds. It is a characterized by a financial relationship which exists between a company or fund manager who will handle all the trading for their clients and investors who provides their stocks, bonds and other securities and who are willing to trust their money’s worth to the company. Mutual funds are characterized depending on the type of investments they allow their fund manager to do transactions with. These include equity mutual funds, bond mutual funds, REIT mutual funds, balanced funds, and target date funds.

There are several reasons why people are attracted to mutual funds. The primary advantage it provides to its investors is the power to achieve broad diversification. Another benefit will be the reduced cost compared to direct investments. You still need to pay management fees but since it is a collection of bonds or stocks, these fees are widespread to all the investors. Lastly it also offers simplicity. You need not put much effort in learning the in and outs of this process. You simply buy particular number of shares of a company and you can simply sit back and relax. The professional money manager will do all the hard work for you.

This is especially true for money market mutual funds. It acts just like a normal savings account and allows its client to redeem their funds any time of the day. Nevertheless, these type of investments puts very little control on the part of the investor. It is the mutual fund manager who handles the major decisions and trading. Your yield also depends on the number of shares you bought or the amount of investment you put into it. You take the gamble of allowing your money to rest on the trading market does not protecting it from market losses. So before deciding to invest on anything, try to do thorough research on the pros and cons of different investments. It may indeed offer cheaper expenses on your part but the hazard may be higher.

When the future is uncertain, as it always is on Wall Street, the best defense for mutual fund investors is a broadly diversified portfolio. But sometimes people confuse the idea of diversity with owning many different funds, and they wind up with a hodgepodge of investments that don’t perform in harmony with one another.

Think of the care we take in mapping out our career paths. We seek advanced degrees, we plot our moves up the chain of command and have a vision of where we want to go. But when it comes to investing, we often end up shooting from the hip, making decisions based on tips we see in magazines or on TV, or suggestions from co-workers and friends, says Richard A. Ferri, in his book “All About Asset Allocation.”

If this describes the way you’ve accumulated your assets, chances are your portfolio is not working as hard as it could.

Right now, stop everything, develop a plan. A long-term plan that will work for you for the rest of your life. This is about reaching financial security. And that doesn’t mean getting rich. The right asset mix can help you achieve financial security, not only for yourself but maybe for your heirs.

If you allocate your assets wisely, you’ll be exposed to all parts of the market, and won’t be left scrambling after the herd when one area gets hot. Your portfolio would already hold real estate, commodities and international stocks, at levels appropriate for your risk tolerance. When these areas do well, all you’d have to do is collect your profits when you rebalance.

In short, asset allocation is the second-most important decision investors make. The most important decision is to invest in the first place.

It’s easy to get distracted by the complexities of securities selection — deciding which stocks, bonds and mutual funds to buy. There are so many available, and no shortage of people eager to sell them to you. But it’s a mistake to buy the ingredients of your portfolio before you’ve figured out your recipe for investing success. And ultimately, knowing what you need, and why you need it, will make buying the actual securities that much easier.

Too many people … have a portfolio that has no rhyme or reason, and their asset allocation was basically determined by individual security selection instead of the other way around. You should make the decision to invest, you should decide what assets you’ll invest in, and then you decide what to buy. That’s the top down approach.

A number of factors will go into your asset allocation decision, including your age, income level, total wealth and your tolerance for risk, which is a very personal decision. Another issue to consider is liquidity; if you need ready access to your invested funds, you could wind up with lower returns.

When developing your plan, avoid the trap of looking at the segments of your portfolio in isolation. All the things that comprise your total net worth should be considered as part of an integrated whole, including your home, (which really is an investment in real estate) any defined contribution plan you participate in at work, and your future earnings power. You may be very comfortable investing in the industry you work in because you understand it so well, but you should be wary of compounding your exposure to risk.

The most basic asset allocation involves distributing your risk among stocks and bonds, but to have a truly diversified portfolio, you’ll need exposure to more asset classes than these two, such as real estate and other alternative investments loosely correlated to the rest of the market. More sophisticated investors can look for deeper diversity: Instead of just owning a world fund, you can invest in European securities, Pacific Rim stocks and emerging markets. Choosing low-cost exchange traded funds and index funds can help boost your total return.

If you need reassurance that the plan you’ve come up with is a good one, consider running your ideas by a trusted investment professional. Go to someone who works on a fee-only basis, rather than someone who works on commission, so you’re assured of an unbiased opinion.

The main thing is to gain enough confidence in your portfolio’s structure that you’re not second-guessing yourself in downturns. The market’s gyrations can test even the most diversified portfolio. But if you have a clear understanding of what you own and why, you’re less likely to make a performance-damaging leap when things get rough.

But don’t try to be a perfectionist. It’s impossible to develop an asset allocation that will work every time, in all conditions. Wall Street professionals have tried, and their efforts have proven that the perfect portfolio does not exist.

The problem with all investing is you’ll go through periods of time when what you’re doing isn’t working. But that doesn’t mean you shouldn’t do it. Come up with a good plan with all the data you can gather, implement it and maintain it, and just hang in there. That’s the solution.