Chill Maadi

Financial planning to survive a recession begins well before the possibility of a recession. Not understanding that a recession can occur is like assuming that a sunny day will not possibly be followed by a rainy day. Not preparing for possible challenging financial times is akin to not wanting to grow up. There are several actions and plans that must be carried out to ensure survival during tough financial times:

1. Maintain your career: Have you kept yourself up to date professionally? Is your resume polished? You can’t wait for the writing to be on the wall to prepare for potential lay-offs. Is there education you need that you have been putting off? To effectively maintain your career and hope to grow professionally, it is imperative that one networks regularly. You never know when someone you know is able to lead you to a different opportunity at just the right time. Considering and developing side interests seriously is smart. Explore your hobbies to see what could result in possible additional funds (and enjoyment). There are also significant tax savings to take into account. And having several eggs in the basket of your career never hurts.

2. Maintain your savings: Think you want the latest new car? Think again! Now is the time to be conservative and be very picky about your purchases. If you have to make a big purchase such as an auto, can you think outside the box and think of alternatives that will have less financial impact? How about using public transportation, moving closer to work or buying a used vehicle? Do you really need that latte on your way to work? How about cooking more and taking your food to work rather than going out? Little expenditures can add up. If you received that much in interest in your bank account, wouldn’t that make you happier than caffeine could?

3. Cover yourself! Make sure you are covered in the case of any emergency. Make certain you have adequate insurance for any potential risks to your finances auto, homeowners, medical, etc. A medical emergency not well covered could result in bankruptcy. Have you created a will to take care of any dependents? Do not leave them vulnerable. Insure that any children are well aware of the need to manage finances at an early age. They must also understand about the value of education and its usual impact on a stable, financially secure future. Do not leave this to chance. Have a continuous dialogue with them to cover yourself. You never know when you might need their financial assistance during a future recession!

Having these areas taken care of should allow one to endure the rainy days of life so the sunny days can be even more pleasant.

• Public Provident Fund is a savings cum tax saving instrument in India, introduced by the National Savings Institute of the Ministry of Finance in 1968
• Only Resident Individuals can open an account. HUF & Non-resident are not allowed to open an account.
• Minimum 500 to Maximum 1,50,000. Any amount deposited over and above 1,50,000 won’t earn any interest.
• Minimum Duration is 15 years and thereafter it can be extended for 1 or more blocks of 5 years each.
• If account holders are in need of funds and wish to withdraw before 15 years, the scheme permits partial withdrawals from year 7 i.e. on completing 6 years.
• An account holder can withdraw prematurely, up to a maximum of 50% of the amount that is in the account at the end of the 4th year (preceding the year in which the amount is withdrawn or at the end of the preceding year, whichever is lower). Further, withdrawals can be made only once in a financial year.

Subscriber has 3 options once the maturity period of the PPF deposit is over.

1. Complete withdrawal.

2. Extend the PPF account with no contribution.

The PPF account can be extended after the completion of 15 years, the subscriber doesn’t need to put any amount after the maturity. This is the default option meaning if the subscriber doesn’t take any action within one year of his PPF account maturity this option activates automatically. Any amount can be withdrawn from the PPF account if the option of extension with no contribution is chosen. The only restriction is only one withdrawal is permitted in a financial year. Rest of the amount keeps earning interest.

3. Extend the PPF account with a contribution.

With this option, the subscriber can put money in his PPF account after extension. If the subscriber wants to choose this option, then he needs to submit Form in the bank where he is having a PPF account within one year from the date of maturity (before the completion of 16 years in PPF). With this option, the subscriber can only withdraw a maximum of 60% of his PPF amount (amount which was there in the PPF account at the beginning of the extended period) within the entire 5 years block. Every year only a single withdrawal is permitted.

Tax Benefits of Public Provident Fund: –

1. Interest Income earned on PPF is exempt under section 10(11).

2. Entire Maturity amount received is exempt.

3. Deduction u/s 80C every year for any amount deposited in PPF (maximum 1,50,000)

Premature closure of PPF account: –

Premature closure of PPF account is permitted after completion of 5 years for medical treatment of family members and for the higher education of PPF account holder. However, premature closure comes with an interest rate penalty of 1%.

Loan facility with Public Provident Fund account: –

• Loan facility available from 3rd financial year up to 6th financial year. Up to a maximum of 25 per cent of the balance (at the end of the 2nd year or immediately preceding the current year) would be allowed as loan. Such withdrawals are to be repaid within 36 months.
• A second loan could be availed as long as you are within the 3rd and before the 6th year, and only if the first one is fully repaid. Also note that once you become eligible for withdrawals, no loans would be permitted. Inactive accounts or discontinued accounts are not eligible for a loan.

Today we talk about how to prioritize your goals and organise your finances so that you can meet your targets in the easiest possible manner.

Check out these four steps that will help you budget your finances in the best possible way.

Identify Goals and Prioritize- The No 1 rule for financial planning

The goals can vary from higher education to marriage to buying a car. Once you have jotted down the list, prioritize and elimination the avoidable ones e.g. buying a car can be delayed by a few years if you are looking forward to getting married in the near term.

Create an Emergency Fund and Cover the Risks :

A typical emergency fund usually caters to situations like loss of a job. It should be sufficient to last around 6 months. So if you spend 15000 Rs a month, keep aside Rs 90000 for this fund. Apart from this cover the risks – risk against accident, disability, ill-health and death. This is important so as to take care of you and your dependents, in case, God forbid, something happens to you. You can cover yourself through an appropriate mix of term plans, mediclaim and health insurance.

Budgeting Finances – Create Goal-Based Funds :

A goal-based fund would look like –

Saving 2,00,000 in 2 yrs for a car
Saving 8,00,000 in 3 years for marriage, etc
Calculate the monthly savings accordingly. So instead of spending and then saving, first save and then spend.

Organize your Finances :

Cut out on leisurely expenses. It doesn’t mean cutting out on your leisure, but it simply means finding alternate sources of entertaining yourself. Instead of watching movies in a multiplex, opt for smaller, cheaper theatres, or better watch them on a rented DVD. Ladies can cut down their visits to beauty parlours and opt for self – do packages.

A friend of mine asked me to review a ULIP. My first question to him was why ULIP? Why not go for a combination of Mutual fund and Term Insurance? Yes, you heard me correct. It’s always better to separate insurance from investment. Hence investing in a mutual fund, term insurance combo can be more useful than ULIP investment. I did some googling and here are my findings. In the illustration below, I am comparing a ULIP with tax saving mutual funds.

ULIP from ABC Company Ltd.

Age (Yrs)	Term of policy (Yrs)	Premium paying term (Yrs)	Sum Assured (Rs)	Premium (Rs)	Maturity amount (Rs)
30	10	10	10,00,000	1,00,000	15,20,375

Assumed returns rate: 10%
The figures used in the illustration above are based on that of an existing life insurance company.

The returns could vary across life insurance companies.

The scenario above is that an individual, aged 30, decides to invest a sum of 10 lakhs for ten years. He chooses to invest in a ULIP, the premium for which comes out to be one lakhs annually. Assuming 10% returns annually, his corpus stands at 15,20,375 after ten years. However, this illustration is misleading. That is because the returns calculated by life insurance companies are often on that portion of the premium (i.e. premium paid – charges, charges include mortality charges, administration charges and fund management charges etc. and can vary from 5 to 40%), that is invested after deducting all the expenses. Therefore, the net return on Rs 100,000 works out to approximately 7.50 per cent only.

Now suppose that the individual, instead of investing in a ULIP, buys term insurance and invests surplus in tax saving mutual funds.

Term plan from XYZ Company Ltd.

Age (Yrs)	Sum Assured (Rs)	Premium (Rs)	Tenure (Yrs)	Death benefit (Rs)
30	15,00,000	3,600	10	15,00,000

The figures used in the illustration above are based on that of an existing life insurance company.

The returns could vary across life insurance companies.

A term plan of 15 lakhs costs 3600 Rs annually. Assuming the remaining amount of Rs 96,400 is invested in a Systematic Investment Plan, the maturity amount after 10 yrs is 15,34,993 (Assuming returns of 9%). We can see that the maturity value is still more than that of a ULIP.

Moreover, the best part about keeping one’s investment needs and insurance needs apart is that both work towards their respective goals separately. Therefore, in case of an eventuality, the individual’s nominees would stand to get not only the sum assured from the term plan (i.e. Rs 15,00,000) but also the amount that has been invested in a tax-saving fund.

Between the smartphone in your pocket and the laptop in your backpack, finding a side job as a college student has never been easier.

You can take the traditional route and work at a coffee shop or wait tables in a local restaurant. Or, you can start a side hustle and work right from the comfort of your own dorm.

Whichever route you go, the hardest thing about working a part-time job is finding the time to do it. If you’re ready to put some extra money in your pocket this semester, here’s our full guide on how to make time for a side job in college.

Be Realistic About Your Time

A side hustle is a great way to make extra money, but there’s one thing you can’t lose sight of:

You already have a full-time job: going to school.

You must do well in your classes and graduate on time so that you can begin your real career. Though making extra money might be a necessity, you can’t let in infringe upon your academics.

Be realistic about your schedule. Don’t take on a side job that requires you to work in the middle of the day if you have classes during that time.

Instead, look for a side hustle that offers extreme flexibility and affords you the option to work whenever you want.

Learn How to Say No

You probably have more free time in your schedule than you think. But in order to find and reclaim that time, you’ll need to learn how to say no.

Resist the urge to go out and party every night. Don’t accept every social invitation that comes your way. You don’t need to become a workaholic or a recluse, but you may need to pass up a party every once in a while.

It’s also important to cut out (or at least cut down on) drinking alcohol. A night of drinking can easily lead to a hangover and a day in bed. That’s wasted time that you could be working on your side job!

It may seem like you never have a free moment because you have a fully-packed social calendar. But if making extra money is that important to you, you may have to pass up a football game here or there or skip your weekly TV binge-fest with your roommates.

Schedule Your Classes Accordingly

Unlike high school kids, college students have ultimate control over their schedules.

Sure, there may be a required class that’s only offered at 10 am, but for the most part, you get to determine your own calendar.

To make more time for a side job, try scheduling all of your classes at the beginning or at the end of the day. Instead of having classes spaced out throughout the day with breaks in between, try to schedule your classes back to back. That way, you’ll have larger blocks of time to focus on work.

If you prefer to work in the morning, start your classes in the afternoon. If you’d rather work in the evening, take as many early morning classes as you can.

When it comes time to pick your classes for next semester, do so in a way that frees up some hours for making money.

Learn How to Organize Your Time

You’ll always accomplish more if you know how to organize your time. Learn to make the most of every hour and you’ll feel like you have more time to do the things you want to do.

If you’re not fully aware of how you spend your time, start analyzing it. Download a time tracker app to record your habits, study them, and see where you can make changes.

Are you wasting two or three hours a day watching TV? Try cutting that back to one hour.

Do you leave campus for dinner every night? You might be able to conserve some time by eating in your dorm or having dinner on campus.

Are you spending too much time on social media? Designate two or three specific times a day to check social pages rather than scrolling all day long.

The better you understand how you’re spending your time, the easier it will be to organize a schedule and stick to it.

Get Up Earlier or Stay Up Later

This is one tip that you probably don’t want to hear, but …

An easy way to make more time for work is to get up earlier or stay up later.

It’s important to get eight hours of sleep every night. Do NOT sacrifice sleep for working, studying, or anything else. But you can stop sleeping in on weekends if you leave the party early so you can get to bed sooner.

If possible, try to get in the habit of waking up one hour earlier or going to bed one hour later each day. That alone will give you seven extra hours a week that you can devote to focusing on your side job.

Conclusion

Part of college is learning how to balance your responsibilities.

You have to sleep, study, and eat. You need time to have fun and be social. You may also have to work so you can put some extra money in your pocket.

There are lots of things that college students have to do, so you must be selective in how you spend your time.

There will never be more than 24 hours in a day, so there’s no point in wishing for it.

In fact, what you can accomplish has nothing to do with how much time exists – it’s all about how you use it.

Author Bio: 

Cory Rose, new to Coronado Place and Towers, brings a new kind of experience to Coronado. He holds a BA from Michigan State and an MBA from Texas A&M and wants to take Coronado to a new level of student housing management. In a highly competitive and challenging market, Cory brings 8 years of multifamily and student housing experience to St. Louis to set a new bar for housing in the Midtown/Central West End/SLU/WashU areas.

Generally, term insurance cover is supposed to be taken till the age of 60 because 60 is considered to be the age of retirement in India. It is also presumed that by the time one turns 60, the person would have fulfilled all his responsibilities, saved enough to lead a contended retired life and acquired the necessary amount of wealth that he/she can pass on to his family as an inheritance.

Is there any harm if one decides to give out an additional inheritance to their family by taking term insurance till the age of 70/85/100 (as everyone seems to be sure that he/she will die by the age of 100), that too by paying some extra premium? This is a normal thought process when one thinks of buying term insurance beyond the age of 60.

Talk to any financial planner and you are made to realize that your insurance (including personal accidental insurance) need is much higher than what you are currently covered for and the first question that comes to mind is the exorbitant cost of the high insurance cover you need. On talking in detail you understand that a good part of the insurance need can be fulfilled by personal accidental insurance at a cost which is just 2% to 5% of the premium to be paid for a normal endowment type life insurance policy. To understand it with an illustration.

	Endowment Policy	Accident Policy
Coverage	5 lakhs	5 lakhs
Tenor	20 years	20 years
Premium	25000 p.a	560 p.a.
The personal accidental insurance premium is just 2.25% of the endowment policy premium

While both are not fully comparable, accidental insurance always comes handy when the high-risk cover is required and the cost involved under normal life insurance is exorbitant.

Why accidental insurance?

The probability of a young person dying of natural reasons is much lower as compared to the probability of accidental death. So if we have to buy insurance for a 30-year-old person earning 5 Lakh rupees a year, his insurance need would be close to One Crore Rupees which is certainly going to cost a lot of money, say around 4-5 Lakh rupees a year.

A good strategy would be to buy a combination of Term Insurance and personal accidental Insurance and a little bit of Endowment Insurance. Such a combo should cost around Rs. 50,000 which can be further brought down if the endowment is eliminated altogether till the income levels rise further. By removing endowment at this juncture, the cost will come close to Rs. 16-17,000, which is very much an affordable figure for a person who is earning five lakh a year.

Types of personal accidental Insurance:

	Death	Permanent Disability	Temporary Disability	Hospitalisation	Max coverage	Cost	Coverage	Cost
Death only cover	√				10 times annual income	Low	10 lacs	500
Death & Permanent Disability	√	√			10 times annual income	Twice of 1
Death, Permanent & Temporary disability	√	√	√		2-5 times annual income	1.5 times 2
Hospitalization				√	25% of type 3 cover	20%-25% of cost of 3

How to Buy Personal Accidental Insurance:

• Available with almost all general insurance companies
• Available without any medical tests of any kind
• Amount of insurance is restricted and is linked to the annual income of the person.
• Salaried people have to provide their salary slip and others are expected to provide their income tax returns by the help of which the insurance company can decide the amount of insurance cover to give.
• In most of the companies, there is also a provision of a cumulative bonus for every claim-free year.

Personal accidental insurance is the cheapest and smartest way of filling the insurance gap especially for the young who are aware of the importance of insurance and whose salaries are still not very high.