Category: General

So the topic of debate today is “Is Cryptocurrency like Bitcoin be considered as an asset class?”

Till now we all know that there are many asset classes like Equity, Fixed Income, Real Estate, Cash and Commodities. Some people also argue if “Art” is an asset class or not.

And now, there is this new debate is crypto is the new asset class in itself or just an alternate currency or at best a speculative instrument?

Does Cryptocurrency fall under the definition of “Asset Class”?

Investopedia defines Asset Class as follows :

An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset classes are made up of instruments which often behave similarly to one another in the marketplace.

If you look at “fixed income” asset class and see various instruments under it like Fixed Deposit, PPF, EPF, Senior Citizen Saving Scheme, NSC, Debt mutual funds etc. you will see that they have common characteristics (As they all are basically a loan given to someone) and various laws and regulations are similar across the country and globally (though the names of products can be different)

The same thing can be said to the Real estate asset class where Land, bungalow, REIT, Commercial shops all are physical spaces and their prices go up and down mainly due to similar reasons.

Can this be said for various cryptocurrencies also?

While all of the cryptocurrencies are basically a digital payment alternative based on blockchain technology, we are not very sure if it can also be considered a “store of value” unlike other asset classes. Also, there is no common agreement on how various countries want to see cryptocurrency? While there are various countries that have legalized crypto, there are many that have not done that.

At the same time, a large chunk of crypto investors is buying it mainly for speculative reasons and not as a fundamental investment instrument where they want it to grow in value due to some fundamental reason linked to the economy or its usage.

Here is an excerpt from a paper, which gives more idea on what I am saying!

Why I personally don’t want to consider Crypto as an asset class?

Cryptocurrencies have gained extreme popularity in the last 3-4 yrs and major crypto’s like Bitcoin, Ethereum, Tether etc has seen its market cap go into billions. It’s a complex world based on a very complex technology, which is again not like other asset classes which are quite easy to explain and understand for a common man.

Try explaining Real Estate or Equity to someone against the Crypto mining process and you will understand what I am trying to say.

Another reason why I personally don’t consider Crypto as an asset class is that cryptocurrency is in the end purely a software code. While it’s widely accepted and used, Are we saying that something which is so much dependent on a computer and electricity is considered as an asset class? What will happen if one day the world runs out of energy or all computers crash?

In the same case, things like equity, debt, real estate, cash (in any form), commodities, art all will survive and be there in some form.

When I asked this question on our telegram group and on Twitter, here were the responses.

Do you consider Crypto as another asset class or just a new-age online payment technology?

Coming to you, it’s also a matter of perception if you want to consider it as an asset class or not. Can you please share your thought process around it? What do you consider it?

Disclaimer: I am not saying that cryptocurrencies will not rise in value? All I am debating is if it shall fall under the definition of asset class or not?

Dear readers

Today we are releasing a FREE, very exhaustive and detailed google sheet for everyone which can act as a single point of information for your family to access all your data and information related to your financial life.

In this COVID Pandemic, a lot of families lost a family member and in many cases, it was the main breadwinner of the family. This left them in a situation where they had no idea about the insurance and investments made. They had to literally find each and every small piece of information from scratch and it was a very frustrating experience.

A lot of this be avoided if one just creates a master document file (also called as BlackBox file) and save all the information in that and share that file with their family.

We released it on Twitter platform, which has the link to COPY it on your google drive.

Here is a FREE Gift from Jagoinvestor to all investors

Download this amazing master document template for all your financial information, ID, passwords and important contacts

Link to copy: https://t.co/fEZCJAx5pu

Took me 2 days to prepare this..

Please RT to amplify pic.twitter.com/UP5TirobDb

— Manish Chauhan (@jagoinvestor_) June 3, 2021

Can I request you to like the tweet and also retweet the same so that it can reach more and more people.

What all does this BlackBox file has?

• Various Investments Details
• Various Insurance Details
• Various Contact Details
• Various Important ID
• Assets and Liabilities Section
• Checklist of what to do after the death of account holder
• Term Insurance Claim Process
• Banking Claim Process
• Mutual Funds Claim Process
• PPF & EPF Claim Process
• NPS Claim Process
• Property Claim Process
• Demat Claim Process
• Video on 20 things to do post-death of a family member (English & Hindi)
• Intro video on about this Sheet

Please copy the master file in your google account and fill it up and then share it with your spouse/family members. Do share this link in your office platform or other WhatsApp groups you are part of.

Also, do share your feedback about the sheet and if you liked it?

This is a guest post by our reader Phani Kiran, who has tried to see personal finance from the software industry perspective. It will be more clear to software people but I think the way its written, everyone can understand it. Over to Phani Kiran

—

Hi All

DevOps needs no introduction to people working in the Software industry.

It is a set of best practices where Developers (Dev) and IT Operations (Ops) work together in delivering Software faster, cheaper and with better quality. This article tries to explain how DevOps can be applied to the world of “Personal Finance”.

For those who are hearing the term ‘DevOps’ for the first time, a rough analogy can be made with the FIRE (Financial Independence, Retire Early) movement. Both are best practices where we need to change our thinking, behaviour and tools but at the same time there’s nothing cast in stone and no one size fits all approach.

DevOps is needed as old software methodologies are no more relevant in a world where innovation needs to happen faster. Same with personal finance habits and practices – we need change as we move towards a lower PPF, EPF and Savings rate regime.

DevOps is frequently explained by CAMS Model (not your CAMSOnline :)). CAMS stands for

• Culture
• Automation
• Measurement
• Sharing.

Let’s see how each of these can be applied to Personal Finance.

C – Culture

• Investors need to start moving away from the culture of only investing in ‘fixed’ income investments. As Warren Buffet, mentioned in his recent annual letter – “fixed-income investors face bleak future”.
• Culture of treating tax saving as a separate and as a year-end only activity needs to be done away with.
• Need to stop combining insurance and investment needs and start saying ‘No’ when resorted to pressure tactics from a so-called relative or a well-wisher selling ULIPs.
• Start focusing on goal setting, risk profiling and asset allocation.

A – Automation

• SIP (Systematic Investment Plan) is the automation you can make to your personal finance. In her book – ‘Let’s Talk Money’, Monika Halan talks about keeping investments on an auto-pilot mode using 3 different bank accounts. (Salary, Investment & Spending accounts)
• Automating SIP or RD instalments inculcate discipline and removes personal biases. This can be your first step towards ‘passive investing’ as you no longer will be focusing on – if Market is High or Low.
• For those who are prone to more discretionary spending, SIPs can be scheduled in the first half of the month so that you will establish a ‘Culture’ of Saving before Spending.

M – Measurement

• The portfolio needs a periodic (quarterly or half-yearly depending on one’s perspective) review of performance. This is possible only when you have a target goal – ie. ‘target corpus’.
• As they say about your year-end KPI (Key Performance Indicator) goals, equally personal goals like retirement, child’s education need to be SMART – Specific, Measurable, Achievable, Realistic and Timely.
• Investment deductions on Auto-Pilot mode need course-correction as and when required. This doesn’t mean too much ‘Action’ (churning) though.
• Measuring and monitoring returns and tracking whether you are on the path to achieving the desired goal or not needs more emphasis as equity returns can be volatile.
• As SIPs automate the corpus-building phase, you can use SWPs (Systematic Withdrawal Plan) to move accrued investments to safer avenues once you are nearing a target goal.

S – Sharing

• Keep your family in the loop about your financial and insurance decisions and documents.
• Be a life-long learner and don’t hesitate to learn and talk in ‘numbers’ (compounding, inflation etc)
• Read good blogs and attend personal finance workshops (Even DIY (Do It Yourself) needs some framework and strategy).

Just like DevOps improved software delivery productivity and reliability, following these principles should lead to a ‘virtuous cycle’ of prosperity. Keep your corpus build-up ‘flow’ by following a CI (Continuous Investment) strategy and let your periodic portfolio reviews provide the required ‘feedback loop’.

Happy Coding. I mean Happy Investing 🙂

–

So share if you liked this article or not in the comments section. And I thank Phani Kiran to give an attempt in writing this article.

 

Do you have a daughter? Saving in gold for her marriage?

Nice! .. Nothing wrong with it.

Just that I wanted to tell you what your daughter wants?!

Yes, that’s exactly what we did. We ran a survey with around 1,996 people which was a mix of men and women and tried to get a perspective of how women (and men also) see the gold which is given in our Indian marriages.

Check out this 20 min video below where I have shared the results of the survey in detail and also gave my commentary.

Indian marriages are not complete without GOLD.

Every parent tries to give enough gold to their daughters in form of jewelry which is worn by the bride in marriage and it also kind of becomes a scorecard for others to compete. But do daughters really want gold from parents to that extent?

Here is what females replied to our question when we asked them “What is the main reason why you want GOLD for your wedding?”

Check our more survey results in our video above..

There is enough for me to talk on this on this topic, but I would save that for another day and rather point you to this excellent article which talks about GOLD, Dowry and what women have to go through in our country

My parents, however, decided to give me — a person who does not wear any jewelry, not even a wedding ring — a pound or two of gold jewelry. A matter of pride.

“Your father is a doctor and mother is a professor; people will expect you to wear some gold,” an aunt explained.

“What you do today will reflect on your sister and will affect her wedding,” another aunt said.

Weddings are hard, and I had no fight left in me. So I went along with it. I wore an armor of gold. The numerous chains were stitched onto my sari to keep them in place. I never saw that jewelry again after the wedding. My mother-in-law has it safe in a bank locker somewhere.

One of the first conversations I had with my mother-in-law was when she told me that her son had certain responsibilities to his sister. She then asked me to not stop him from fulfilling those.

Years later, I decoded that cryptic message.

She was trying to tell me that when the time came, I should support my husband in paying his sister’s dowry.

But I don’t think I can support a system that turns women into bargaining chips.

I would really love to get your comments and opinion about this topic. Please share that in the comments section.

Disclaimer: The survey results don’t claim to showcase what the whole of India thinks. The survey was taken by only 1,996 people and its not a very big same size as such, however it’s not very small though.

We recently had an opportunity to conduct a personal finance session for the millennial.

For those who don’t know this word, millennial means the people who are just reaching their adulthood. They are quite young, and may be just out of college and recently started earning money. I am writing the article so that we can inspire other young professionals to kick start their journey as an investor.

This was my first experience leading a session ONLY for the millennial

It was done for an organization called Squareboat based out in Gurgaon and the experience was awesome. I was amazed to see a high level of energy, participation, and hunger to learn from each participant.

I started with a statement, “I am leading the session to my Younger Self and not to an audience”.

I covered things which if someone would have shared with me at the start of my career, my financial life would have been very different. At the start of my career, I was not at all serious about managing money. I was extremely casual and would only focus on spending.

I was also having some junk financial products in my financial life which later discarded. I was candid with them, it was a casual chat with personal finance as a theme.

10 important lessons and realizations from the session

Here are the 10 things which I realized from the session and I am putting them up here. You can forward this for your young brother or sister or any other person you know can benefit.

1. The first 10 years of our career are CRUCIAL

All the major Mistakes happen in the first 10 years of our working life. We taste the blood called “salary” and start spending money on things we love the most. The first few years set the tone of our entire financial journey and so it is important to manage money well at the start.

In the first few years, people are so busy in establishing their career that they end up buying many financial products without doing the homework. The participants learned an important lesson to avoid common mistakes and to keep their financial life on track.

2. The Unit System

I shared my Unit system theory with them.

After I got serious about my financial life I decided to work on my net worth. Now, I was always scared of the word “Crore” and so I use to call “10 Lakh” as one Unit. I started playing for the units so that I can stay relaxed in the area of money and the word crore does not put pressure on me.

In the session, I invited the participants to play for their first unit. It can be 10 Lakh or 5 Lakh or even 1 Lakh. Many liked my Unit System and they started sharing about their first Unit.

3. Learn to think small

I invited participants to think small.

Everyone wants to directly become Warren Buffet. Well, first you have to learn to become better in any area and then great. The world always teaches us to think BIG and almost all of us have bought the idea of thinking BIG.

There is nothing wrong with thinking big, but to think small can also be equally powerful. I invited the group to go very slow and to set a very simple and easy goal as an investor. I wanted them to have a sense of winning and the idea was to help them to experience winning.

We took examples of the power of starting small, we saw what Rs. 5000/-. Rs. 10000/- and Rs. 20000/- can help them to create in the next 20-30 years of time frame. They loved the idea of starting small and then continue to expand their game of wealth creation.

4. Become Rich Slowly

I was sharing with them the conversation between Jeff Bezos and Warren Buffet in which Jeff asked Warren, “You have shared all your secrets around wealth creation with the world through your talks, videos, and books but then why not many people are RICH”, the answer by Warren buffet was, ” Because not many people want to become rich slowly”.

Yes, everyone wants to become RICH quickly and that is where all the problem starts.

I invited the millennial to focus more on the word “CREATION” than the word ” WEALTH”. It takes time and there are no short cuts. No stock or 1-2 actions will make you a millionaire quickly. Wealth creation is always like a plant it grows slowly, row by row, Inch by inch.

Well, that is exactly how wealth grows.

5. Goals are always a by-product

We did an interesting and insightful conversation on giving and serving. The song which is being played in our mind is the “want” song.

• I want a car
• I want a house
• I want an iPhone

Our want list occupies 99% of our Mind’s bandwidth and in that, we forget to serve our financial life, we forget to serve people, we forget to serve our organization.

The participants learned the biggest lesson of their life and decided to give time, commitment, consistency, and discipline to their financial life and if they do so the goals will automatically start entering their world. I wish someone would have given this learning or insight at the start of my career, for many years I was finding wealth on the wrong side of the river.

6. One action at a time

I made a statement at the start, “only action products WEALTH”– It is not the thinking, worrying, planning, imagining, visualizing that helps to create wealth.

The book called, “Think and Grow Rich”, is a great book but the title is totally misleading. The participants learned the most important personal finance lesson that, “Only action Produces WEALTH”- One action at a time, I asked them to find their first personal finance action and encouraged them to complete the action in the next few days.

7. Cost of Delay

I did not want the session to be preachy and so instead of asking them to start investing, I showed them two different scenarios, what if they start now and what if they delay and I left for them to decide. After seeing the example and calculation they decided not to delay their investment journey anymore and they made a commitment to start their monthly Investments.

I was happy to see the session was helping them to give a new direction to their financial life. It was more like a wake-up call for many and was making them a confident investor.

8. Power of HABITS

Our Habits have the power to make or break our financial life/future. Habits are Powerful, they are brutal and they are our invisible enemies to create wealth. It is absolutely normal to have habits but the problem starts when habits start to have us. That is from where the real disconnect happens between you and your financial life.

Almost all participants admitted some habits they need to work on to improve their financial life. I think it is a very important realization and it takes courage to accept your disempowering habits. At the start of the session, I invited every participant to bring in a lot of honesty and they did so, I appreciate them for their honesty.

9: Compounding is the way of Life:

Again a very powerful conversation learned by the participants. Personal finance is not about money, it is about YOU. We all have learned compounding as a concept and we all know the formula of compounding but it is about practicing compounding as a way of life.

I invited them to practice compounding beyond personal finance, maybe in the area of health, learning a new skill, or doing some activity on a regular basis. No Break. We took the example of being overweight, calories compounds, good work you do in your Organization compounds, efforts compound, and money also compounds- In Life everything compounds and we need to build a strong relationship with compounding.

10 The One-page action Plan

I wanted the session to end with a simple and easy action plan. I gifted a one-page simple action plan to all the participants, I am sure the actions listed will help them to kick start their journey as an investor. I promised them at the start, if they complete the training you won’t be the same person in the area of money.

The participants shared their results and actions before ending the program and it filled by heart with a lot of happiness.

Are you an HR or Entrepreneur?

I invite all the HR Professionals, entrepreneurs, and everyone to join hands with us in spreading financial awareness. You can become our partner in spreading financial awareness.

Let’s GIFT financial wellbeing to others, trust me there are many who are waiting for a helping hand and you and I can become their helping hand. The conversations we do helps an investor to reset their mind and personal finance actions and it saves them to create wealth, avoid the debt trap, and have a smooth financial journey.

If you are an HR of any company or someone who can help us conduct the sessions for investors. Do fill up the form below.

We have already done programs for several Companies like HPCL, Wabtec, Tata communications, Airbnb, IAS officers Academy, BSF, symbiosis, and many other institutions and Organizations. I invite you to join hands with us to make a difference in someone’s financial journey.

Today we will discuss an interesting topic – How many times of your annual expenses do you need as your retirement corpus to retire comfortably?

For example, if someone has an annual expenses of Rs 6 lacs per year, then can they retire with Rs. 1.8 crores (30 times)? This is the focus of the article today!

The current state of “Retirement” Advertisements

From last 4-5 yrs, I can see a lot of conversations, articles and YouTube videos which talk about retirement and its importance.

There are many retirement plans and pension plans also launched these days which talk about importance of retiring with enough money and a secured way of generating pension once you stop working.

There is no doubt that retirement is top most financial goal (and the longest one) for any investor. We all will probably have a much longer retirement life than we imagine today. Our parents also have retired just few years back (or going to retire soon).

A 60 yrs old person can expect to live anywhere up to 85 – 105 yrs in future. With changing life style, less dependence of kids, increasing expenses at retirement – planning for retirement has become much more important than any time in history.

The problem is that we don’t know when we will die. You CANT plan for just 20 yrs of retirement, because what if you die at 100 yrs? It’s quite a tough thing to predict when you will die, and almost impossible to plan for it.

Hence the best you can do is take the worst case, and plan for a very long retirement.

Retirement Planning is very tough

First thing you should know is, that there are many variables when it comes to retirement. There are things like

• Inflation
• Returns
• Taxation
• When will you die
• When will you retire

When you do any retirement calculations, you make some assumptions and you get an answer.

One big problem is that in reality there can be a lot of changes in these numbers, and your planning can go for a toss. Hence you need to look at things realistically and plan in such a way that takes care of worst scenarios.

Next 40 yrs cash flow

So let me start with asking how your expenses will look into future? If someone wants to retire today, how will their next 30-40 yrs of cashflow may look like.

Assuming that you want to retire at some point of time and your annual expenses at retirement is 1 unit. Then how this will change over time?

Can you see how drastic the expenses can vary in your retirement life due to various inflation rates? Note that in reality, the expenses might come down a bit once you are old enough like 80-90 yrs, but I have still not considered it because there can be other types of expenses like medical costs which will shoot up.

Is 30x corpus enough for retirement?

Now let’s dive deeper into the main question and focus on this article – “Is a corpus of 30 times yearly expenses enough to lead a long retired life?”

The short answer is YES, but before I go deeper into the answer – let me show you a case study

Imagine a person retires with following numbers

• Per month expenses in the start of retirement = Rs 12 lacs (1 lac per month)
• Corpus = 3.6 Cr (30x)
• Inflation Assumed = 7%
• Post Tax Returns = 9%

How long will the retirement corpus last in this case?

The answer is 43 yrs as per excel calculations. For simplicity purpose, for now we have taken a case where inflation, returns are all fixed and the person only needs the monthly expenses as per increasing inflation and no other withdrawals are done till end. In which case, the corpus change will be very smooth.

Here is how it looks like

What if your assumptions are wrong by 10% margin?

Most of the calculators just give you an answer like above graph, but does not ask a question – “What if things go wrong?”

• What is the inflation is more than what you assumed?
• What if you needed more income in future than you planned?
• What if you were not able to generate the returns you assumed?
• What if you had less corpus than you originally planned?

How different will be the result now if you are wrong by 10% margin on all 4 variables?

So, lets see that case too.

• Corpus is 10% less = 3.24 cr (instead of 3.6 cr)
• Monthly Expenses are 10% more = 1.1 lacs per month (instead of 1 lacs)
• Inflation is 10% higher than assumed = 7.7% (instead of 7%)
• Returns are 10% lower than assumed = 8.1% (instead of 9%)

So instead of 43 yrs, how fast the corpus will finish now?

The answer now changes to 27 yrs

Yes, from 43 yrs .. it now changes to 27 yrs, which is 16 yrs earlier.

However in real life, either all 4 things can go wrong by some margin, or just 1 or 2 or 3 things may go wrong.. so there are various scenarios here..

• Nothing goes wrong
• One variable goes wrong
• Two variable goes wrong
• Three variables goes wrong
• All four variables go wrong

This in total makes 16 different combination.. We have seen the best case (when nothing goes wrong) and worst case (when all 4 variables go wrong) ..

But when we see all 16 variables together .. it looks like below

Note that these calculations above are assuming an inflation of 7% and post-tax returns of 9%. If you take lower returns or higher inflation, then the results will be different ..

Testing the data for 250 iterations

I assumed that Inflation and Returns will come down slowly over long term as we move towards a more developed economy. We might reach to a 2-4% inflation (starting with 7% today) and 4-6% returns post tax (starting with 9% today). I added a variation in calculations and plotted 250 variations of the same chart and here is the results.

As you can see from above graph, the results can vary a lot depending on inflation and returns combination. On an average the corpus lasts for 41 yrs.

I also took 5000 iterations to see how long the money finishes and here is the plot.

What we observed was that 98% of the times the money lasted in range of 35 yrs to 47 yrs, which is a decent enough planning, but the assumption is that all our assumptions about inflation and returns hold true.

Investing in Fixed Deposits for Income Generation

A lot of investors are extremely conservative and don’t want to invest in anything other than bank fixed deposits. We know that bank fixed deposits are highly secure, but at the same time – they are extremely inefficient in taxation and also provide below inflation returns.

But let’s test that case as well.

Let’s assume that a person is putting all their money in fixed deposits only. In which case the returns can be taken as 4% post tax (30% tax deducted from 5.5% returns)

Below I have shown how long the retirement money will last when a person has 60x, 50x, 40x, 30x, 20x and 10x corpus. I have done 250 scenarios and plotted them to see how the corpus ends.

As you can see, when the returns are lower – you need much more than 30x corpus if you want to last it for a very long term.

With just 30x, it will last for just 22 -24 yrs. The frustration of seeing your money finishing while you are still don’t see your death coming your way might be very horrible experience.

So conclude, Yes 30x corpus is good enough to retire, but the assumption is that you will not be dipping into that corpus to withdraw any big amounts like for buying house, or for your kids’ education or any large medical emergencies.

Better to have those things separate than your 30x corpus.

What if my corpus is less than 30x?

It’s going to be an issue if you are retiring with less corpus like 20x or 10x or 15x. In which case, you will have to make sure that you also have some decent equity exposure to bump up your returns so that your corpus can last longer. We at Jagoinvestor are working on various strategies which can be used to make sure that the corpus last longer using an equity exposure and generating a regular stream of income for our clients.

Do let me know what your thoughts about this article are.

Also, if you are interested in the topic of retirement planning and want to listen to a casual but very detailed talk on this topic, do listen to my talk with P V Subramanyam where we have discussed various aspects about retirement

Disclaimer : Note that these calculations are highly complex at times and there are lots of things which contribute to the calculation. I don’t claim to have done things perfectly from statistical point of view. This article is only a basic calculation with some high level assumptions. Do talk to your financial advisor before creating your retirement strategy.

Most of the Indians are obsessed with gold. But are you aware of the restriction on how much gold can you hold even the worth of gold does not match your income status?

In this article I will exactly touch base on that.

How much gold can you have without receipts?

Have you ever wondered what will happen if govt starts raiding all households in India and demands the proof of how you bought all that gold you have?

Often we do not keep a track of receipts and proof of how we paid for that gold bought very long ago. In that case, how much gold can you hold without any proof, even if it does not match your income status?

As per Central Board of Direct Taxes (CBDT), this limit is different for a married woman, unmarried women and a man. This might sound strange, but here is the limit

[su_table responsive=”yes”]

A Married woman	500 gms
Unmarried woman	250 gms
A Man	100 gms

[/su_table]

What type of proofs is required in case of any enquiry?

These above limits include both the inherited and the self-bought gold jewelry. In case of inherited gold also, you need to have the receipts in the name of original owner.

In case you are holding very high amount of gold, just make sure that you have all the valid tax receipts and invoices saved at your end.

The WILL can also act as proof of inheritance, in case the gold you inherited is mentioned in the WILL. Alternatively, one can also submit a family settlement deed, will, or a gift deed stating the transfer of such commodity to you.

On contrary, if there is no such document available, then the officer will analyze your family’s social status, customs, and traditions to come to a conclusion on whether your statement is valid or not and whether to confiscate the amount of gold you are holding or not.

Do let us know what you think about this limit in the comments section.

Register for Cafemutual Confluence 2020

I would like to share with you about an online FREE event which is coming up tomorrow by Cafemutual. It will be a wonderful event with a great line up of industry experts who will be talking about variety of topics.

Do register for the event and benefit from it

 

 

We all are in lockdown from last 70+ days & this is probably a once in a life event. The whole world is fighting coronavirus and some form of lockdown is there in every part of the world.

People are losing jobs, seeing salary cuts and we all are wondering how the future will be from here. I think that while in short term all these problems will happen, but once things get normal and life is back to same point, things will be back in action. But it will take some time.. It can take 1-2 yrs.

8 Learning’s from this Lockdown

While there is so much of negativity and bad news all around. I want to admit that this lockdown was an experience in itself. It tested our patience. It forced us to do things we didn’t like and also opened new ideas for us. We saw many new creative ways people do business and how even in this crisis, our Jugaad attitude worked well for many things.

The lockdown has also given us a good opportunity to reflect back on many things in our finances and life in general. I want to share some of the things in this post.

1. We need a higher Emergency Fund

One clear lesson from this pandemic is that we need much higher emergency fund. Before the pandemic, I have often said that 4-6 months of emergency fund is ok to have, but I feel that needs to be revised to 12 months now.

Keep a year worth of expenses in a combination of liquid mutual funds and Fixed deposit and earn a near-inflation return.

• You may lose the job and not get it for 9 months
• Your employer might not be able to pay you.
• You might want to take a long break to take care of someone in family.
• You may meet an accident followed by a long bed rest.
• You might be shifting your industry and might be looking at new job
• We may see another pandemic and things can close down again!

2. Count your blessings – we have enough to live a good life

It was shocking to see how millions of people especially migrant workers suffered so much after they were stuck in various cities. They had no food, no money, and no roof over their head. They walked hundreds and thousands of KM on foot with small kids with them. We can’t ever understand how it feels when someone is in that state.

At the same time, we were comfortable at our home with everything stocked up. We had groceries, money in bank, and a nice home. Many of us also participated in dalgona coffee challenge and some also posted (including me) pictures of the various nice dishes on social media to showcase our achievements.

Image Source : Deccan Herald

It’s time to acknowledge that we are blessed.

• We are blessed to have food on table
• We are blessed to have a good sleep
• We are blessed to be with our family
• We are blessed to not worry about the next meal
• We are blessed to still be employed or employable

In short, while we can point to salary cuts/loss and boredom we faced sitting at home, we have to not forget that we are doing extremely well compared to millions. We are extremely blessed and we need to acknowledge it. We need to be grateful that many seek a life which we are already living.

3. We were spending more than required

Over the last 75 days, I spend ZERO on amazon, swiggy, zomato, uber, flipkart, eating out, any outings ..

I think I am doing fine and nothing has happened to me.

That does not mean that spending on those things is a problem, Infact I will restart it again.

But I think we have got a clear message that we were over-doing it. We can survive fine with less online shopping, less outing, less parties, less eating out and what not.

4. We can surely save much more than we think

So we were spending more .. we just saw.

Which means that we can potentially save much more than we think we can, if we control our self and carefully utilize our resources.

By how much can you increase your investments?

• 10%
• 20%
• 30%
• 50%
• 100%

Pick your number .. But I am sure you can invest a little more than what you are doing currently! . Here is a one small trick to drastically increase your saving rate

5. It helps to have an additional source of income

Imagine for a second that you lost your job and there is no active income coming in

Now imagine another case

Imagine you lost your job, and no active income coming in.. but you also have another income source which brings in some money. So you know at least the food will be on table.

The current pandemic has seen many people lose their jobs and many of them who had alternate income or another person earning income in house knows the importance of it. Before it happens again with you, its time you get serious about creating it.

It can happen in many ways..

• A side business
• Rent from property
• Interest from your investments
• Dividends from stocks

Here are some ideas to make extra income other than your regular job

Please make a start ..

6. Respect for housemaid has gone up 100 times

I always get this feeling that maids in India are paid extremely poorly. After I have been involved in the household work in this lockdown, my respect for maids has gone up to whole new level.

It’s not just time to acknowledge their contribution in our life and making our life easy, but also to pay them their dues well.

A maid in my society gets Rs 600 per task on an average. That’s Rs 20-22 per day given to them assuming 2 holidays. Even if it takes 30 min to do dishes, we are talking about Rs 40-50 per hour wage here which is one of the lowest in the world.

NRI’s or people who have returned back from US or other countries know very well what I am talking about.
It’s time we appreciate them more, don’t be so nosy about their salaries we pay. I know many maids are over smart and try to extract money out of you and don’t do their work properly, but overall I feel they are not paid well enough.

7. Things can do wrong anytime – RISK is always there

Let’s not forget one thing. RISK is always there .. ALWAYS !

• Your company may be doing great
• Your industry is booming
• Your performance has been amazing.

Still, you can be without the job the next day

You may be healthy, never smoked, never ate oily .. you can still get heart attack. The risk is always there!

This pandemic has shown many people that risk can suddenly turn up and show its ugly face.

As Subra says – “Risk is always there, unless the event is complete”

8. It’s time we learn new skills and become more “useful”

The current coronavirus crisis should act like a final warning to all those, who are just dragging in their jobs without contributing much. Get up and acquire the skills. Go upgrade yourself

I know many people from IT sector who are working with old skills. When they apply for other jobs, there are no takers.
If you are not “useful”, you will be OUT very soon. If not today, may be tomorrow – but it will happen for sure

It also helps if you have additional expertise which can help you change your jobs/sectors if situation arises. Borden your skill set and hone your skills.

Stop moving towards the “Obsolete zone”

What was your biggest learning from Lockdown and coronavirus crisis?

So that was all I had to share today.

Can I ask you to share your own biggest learning from this whole crisis and lockdown episode? Also share what you feel about my learning’s?

We just entered 2020, and I thought let me pen down some observations of the last decade.

I had started blogging from the last 12 yrs and it’s been quite a long and amazing journey. From a small blog, we are now one of the biggest personal finance websites in India with millions of readers benefitting from our work.

We had conducted dozens of workshops, interacted with thousands of investors and provided paid services to tons of investors across India and abroad.

So I thought that I will share what changes I have seen in the last 10 yrs in the personal finance industry and what are some changes I am expecting in the coming decade.

1. People want to buy “term plan” now

Back in 2009-2010, the concept of the term plan was just launched. Aegon Religare was the first entrant in the space and very few people had heard about term plan. A lot of my time and energy went into convincing people in the comments section to buy a term plan and not a money-back plan.

Unlike today, the advertisements on TV also didn’t mention the word “term plan”.

In the last 10 yrs, term plans have become quite famous and the default choice for evolved investors for their insurance needs. Now everyone “knows” that term plan has to be bought for insurance purposes.

Same is true for Health insurance also

2. Huge awareness about “Mutual funds”

It’s been around 25 yrs when mutual funds were properly launched in India (not considering UTI-64), so even in 2009-10, mutual funds were quite old products, but even during those times, they were not very famous products. It was a big PUSH Product, which means that various advisors and distributors had to spend a lot of energy into sharing about mutual funds and the way it worked.

No TV ads ever mentioned about mutual funds. Even the use of technology was quite slow, so there was no concept of online investing, online redemptions, etc, and processing of KYC used to take months.

With the “Mutual fund Sahi hai” campaign for the past few years, mutual funds have become a buzz word and everyone has at least heard about “mutual funds”. Now investors flock to online apps and are willing to invest in mutual funds. From Rs 5 lacs crore AUM in 2010, the current AUM is 27 lacs crore in mutual funds. That’s an impressive 18% CAGR growth.

3. Trust issues with ULIPS

Back in 2010, there were horror stories of ULIP misselling. I used to get so many comments about how people were missold ULIPs product and they were not getting back their money.

Somewhere in 2014-15 that episode ended and investors just stopped even touching ULIPS. Now ULIPS have made a comeback with much better structures and they are way better than what they were used to be.

Now if you buy ULIPS, they are not that bad, however, I still do not buy the argument that ULIPS are great products now (more on that later). Subra has done a wonderful write up on ULIP’s here

4. Dependence on Loans has increased

Compared to the last decade, we can clearly see the usage of credit for various things in life. Start from vacations, cars, houses, furniture, and even mobile phones. You name it and it’s all available on credit.

You can even buy a Rs 4,000 saree in Varanasi shops and pay in 6 easy installments. Bajaj finance has made sure that it’s possible now. You can clearly see the trend of over-dependence on credit in such a way that the stock prices of Bajaj finance have gone up.

5. Financial Planning + Goals Planning becoming famous

The buzz about “financial goals” and “financial planning” is more now. Back in 2010, financial planning was an alien word. It looked like someone is trying to cheat you and make money without providing anything valuable. But the financial planning community has made sure that the word “Financial planning” reaches more and more people.

Today’s urban investors are thinking of various goals and now to “plan” for it. It’s very common to hear people saying that they want to invest for the future education of their children” and “retirement”.

6. More Choices and confusion for investors

Compared to the last 10 yrs, now we have too many products and services, and many people claiming to work for investor’s interests. We have advanced products like Robo advisory, small case, and whatnot.

The world of personal finance has become more complex now compared to the past which also increases the chances of an investor making more mistakes and at the same time also pick better options for themselves if they have proper understanding.

7. More spending on lifestyle

I remember, in 2010 I was in Bangalore and I saved close to 60% of my income. There were very few avenues to spend and the maximum, I did watch movies in the theatre and went on treks.

Investors have also moved from the category of “savers” to “spender’s first, then savers later”. We now have online shopping, food on delivery, international vacations on EMI’s, etc ..

Literally everything is available to you if you can afford to pay the “EMI” (not the product). Do read my article 7 Incredible reasons why you spend more money each month & how you can control it related to spending.

8. Moving from Physical assets to Financial Assets

While the pace is slow now and we still have a long way to go. People are moving from physical assets (gold + real estate) to Financial assets (equity mutual funds, stocks, PPF, FD). As per a Karvy report, in 2014 around 48% of assets held by Indians were physical, but in 2018, it came down to 40%.

The mutual funds itself has gained from 3% to 6%, and direct equity went up from 21% to 24%, however, we still have a long way to go in this space

9. Online Wallets + Cash backs are a way of life

In the last 10 yrs, I saw the emergence of online shopping websites like Amazon and homegrown Flipkart. We saw uber and ola in our lives and are also seeing how swiggy and Zomato are changing the way we are having our food.

All these apps brought the concept of online wallets and cashback which in my opinion is doing more harm to us than helping us. It’s more of a marketing tactic and making sure that clients are always in the maze of collecting points/cash back to spend it for the next order.

Most of the websites have stopped giving “discounts” and instead give “cashbacks” which is nothing but a future discount. This means that you will have to again spend and in total, the amount of benefit for you is often less than what your mind perceives. And stop thinking that you “found” an awesome coupon, it’s actually given to you by companies to make sure you feel better while transactions. It’s just pampering!

10. Online Frauds and Scams have increased manifold

Online transactions like net banking, mobile payments, and use of debit and credit card has increased in many folds in India in the last decade. Which also gave rise to online frauds and scams. The most vulnerable were the senior citizens and those people who had very less understanding of how banks and insurance companies work.

Many people got a call in the name of RBI, IRDA and SBI bank where the fraudster tried to gain access to their OTP and other critical details and many people lost a big amount to these frauds.

I even created a video on this.

Today in 2020, the fraudsters are now using google pay to cheat people.

11. Introduction of Robo-Advisory

In last few years, there are platforms that are promoting the concept of Robo-advisory. I think delivering advice through algorithms is an idea worth trying and looks cool. There are certainly some aspects of advice that can be delivered through automation, but there will always be some aspects of advisory which would need a human element.
Here is Robo-advisor definition from Investopedia

“Robo advisors are digital platforms that provide automated, algorithm-driven financial planning services with little to no human supervision. A typical robo advisor collects information from clients about their financial situation and future goals through an online survey, and then uses the data to offer advice and/or automatically invest client assets.”

After all, investors are humans and they have feelings. We need someone to talk to, share our insecurities and also take human-advice. Robo-advisory is great in all aspects which are pure formula based, but wherever human emotions will come, you would need a human there, unless you yourself are a robot!

What do I expect in the next decade?

I am not an expert in predictions, but still, I will try it out. Here are a few things which my gut feeling says may happen in the next decade (read around 2030)

• Rise of Professional Advice – The more we interact with people who leave their inquiry with us for financial planning, we are very convinced that people are not able to manage their own financial lives. They need professional help once they have reached a certain net worth. You might be having a Rs 10 lacs portfolio today and you might be managing it, but once it becomes Rs 1 crore portfolio, you can understand that it could have been 1.5 crores with professional help.

• Rise of materialism – We as a country have not seen huge spendings at home and we have been traditionally savers. We are now opening up to spending and I can see we are also enjoying it. While the incomes are increasing, the avenues to spend are also going up and I can sense that we will be spending too much on brands, enjoyment, eating out, international vacations and whatnot. We will celebrate possessions more and more in the come decade. Here I am talking about the overall country as a whole.

• Retirement Time-bomb – In my latest talk with Subra, he mentioned that the retirement crisis is right in front of us even now, not just in the future. We have a penniless parent to take care of even now, but it’s not visible because they are living with the earnings of their son/daughter and it’s not visible. With families getting more and more fragmented in the future, we will see more and more senior citizens without much of retirement savings and it will ring an alarm bell-like no before.

• Mutual Funds will be a big thing – Mutual funds revolution has just begun in India. Even right now, the number of people who invest in equities is just 2-3% of the total population. A big part of our population has to still invest and when that happens, we will see massive growth in mutual funds (and other space too).

• Heavy changes in Economy and Infrastructure – We are standing today at the same place, where China was in the ’90s. We have very huge potential when it comes to Infrastructure building and we are already on it, though it is not going in a smooth way as compared to China. We will see a lot more highway’s, Metro, rural infrastructure coming up and much bigger and high rise buildings all over the place. Our economy is already near the J-curve and over the next decade we will see tremendous growth as the next lot of population will enter into jobs and move from small villages/cities to bigger ones.

As of now, I could think of these 4 points – but I would like to hear from you about your opinion on what all we will see in the coming decade!

In the last few years, the complaints from airline passengers have gone up with respect to issues like flights cancellations, loss of baggage and delays. Most of the times, the passengers find themselves with no help and bad attitude from airlines staff and the company itself.

Last month, I was travelling from Ahmedabad to Pune and my flight was scheduled to leave at 10:30 pm in night. However, the flight was delayed. First, it showed 30 min delay, and soon it stretched to 2.5 hours.

I along with many other passengers had no information about the delay. I also heard a passenger murmuring – “Will they provide us snacks?” after a 2-hour delay.

This made me think if an average airline passenger is aware about his/her rights in case of flight delay, cancellations or baggage loss?

Few months back, on 28th Feb 2019, a new airline passenger charger was announced by The Ministry of Civil Aviation which clearly defines the rights of travelers and liabilities of airlines that are operating in the domestic sector. It defines various important points and a guideline for passengers seeking redressal of their grievances, with regards to fares, flights, refunds, catering, and baggage, etc.

Before we start looking at all points, first as a passenger you should know various reasons why a flight gets cancelled or there is a delay! or for what matter a baggage is lost.

• Due to unoccupied seats to save their cost
• Due to overbookings
• Mechanical Issue
• Technical Issue (server crash, system failure)
• Natural Disasters like flood, cyclone, Earthquake etc.
• Bad weather conditions
• Political Disturbance/ Government regulations/ Civil War/ Strikes
• Mistakes of Air Traffic Control (ATC)

Now, Let’s look at various rights of airline passengers one by one.

1. Flight Delay

Let’s first look at the delay of flights which is what happens most of the time. If your flight has been delayed beyond a limit, the airline will have to offer you refreshments and free meals (for passengers waiting at the airport). The table below defines this.

[su_table alternate=”no” responsive=”yes” ]

Delayed (Block time)	Compensation
2 – 6 hours	Refreshments and meals
More than 6 hours	Refund of ticket fare or alternate flight
More than 6 hours if scheduled time of flight is between 8 pm-3 am	Refund of ticket fare or alternate flight plus Free Hotel Accommodation

[/su_table]

Note: Block time means the total time from the moment an aircraft first moves for the purpose of taking off until the moment it finally comes to arrival gate at the end of the flight. In simple words, it is a total travel time of flight.

2. Cancellation of flight

Flights do get cancelled at times for various reasons like airlines mismanagement, weather conditions or other reasons.

There are two cases here.

Case 1: If the flight cancellation was informed to passenger before 24 hours

In cases where the flight cancellation was communicated to the passenger well in advance (before 24 hours), the airlines have to either arrange for an alternative flight or give full refund to the passenger, as acceptable by passenger.

Previously, airlines used to cancel the flights at the last minute or before few hours of departure and just refunded back the ticket money, which is history now.

Case 2: If the flight cancellation was not informed to passenger before 24 hours

If flight is cancelled within 24 hours of departure (or last-minute) or the passenger misses the connecting flight because the previous flight was delayed (on the same ticket), in that case, the airline has to provide you extra compensation of up to Rs 10,000 apart from full refund or alternate flight.

So imagine you are at the airport (or on the way to airport) and the flight is cancelled. In, this case, you will get 2 things. First is, either of a full refund or an alternate flight option (you can choose any of them) and the second thing is a compensation of up to Rs 10,000 depending on how long was your flight.

[su_table alternate=”no” responsive=”yes”]

Flight travel time (Block time)	Additional Compensation (apart from refund or alternate flight)
Upto 1 hour	Rs. 5000 or booked one-way basic fare plus airline fuel charge, whichever is less.
1 – 2 hour	Rs. 7,500 or booked one-way basic fare plus airline fuel charge, whichever is less.
More than 2 hours	Rs. 10,000 or booked one-way basic fare plus airline fuel charge, whichever is less.

[/su_table]

Few Important points

• If you have checked in already in the airport, the airline has to also provide you with refreshments as per waiting time.
• You should have provided the contact information at the time of booking, else the airline is not liable to compensate you.
• You will not be eligible to claim any compensation on delay or cancellation of flight due to reasons which are out of control of airlines like bad weather, political unrest, a natural disaster or labour disputes.
• Airlines are not supposed to give compensation parts if the delays or cancellations happen because of security risks, air traffic controller or metrological conditions.

3. Boarding denied due to overbooking

Many times, airlines overbook the tickets in assumption that some passengers will not turn up or cancel at last minute if that happens and you are denied boarding the airplane then you can claim as follows if you have confirmed ticket,

Scenario # 1: If the airline arranges for an alternative flight within 1 hour of the scheduled departure of the original ticket, in that case, you can’t claim any compensation.

else

Scenario # 2: If an airline is not able to arrange for an alternative flight within 1 hour of the scheduled departure of original ticket, in that case, you are liable to get any of following 3 things

• 200% of booked one-way base-price + airline fuel charge, up to maximum of Rs 10,000 if the airline arranges for an alternate flight up to 24 hours from old scheduled departure
• 400% of booked one-way base-price + airline fuel charge, up to maximum of Rs 20,000 if the airline arranges for an alternate flight after 24 hours from old scheduled departure
• If you do not opt for the alternate flight, in that case, you will get full refund of the ticket price paid + 400% of booked one-way base-price + airline fuel charge, up to maximum of Rs 20,000

If you look at this new rule, it does a great justice to the passengers as the passengers had to spend a lot of money on book alternative flights at the last minute. Now the compensation is fair which helps passengers.

4. Loss of baggage or damage to baggage

In case of domestic flights, the airline is liable to pay you up to Rs. 350 per kg or up to Rs. 20,000 in case of loss/damage/delay of baggage

In case of international flights, the airline is liable to pay you up to 19 SDR per kg or up to 1131 SDR in case of loss/damage/delay of baggage. SDR here is a kind of currency value which is accepted internationally.

5. Change in the name of the passenger within 24 hours of booking the ticket

Now you can make changes in the ticket (corrections in names of passenger) within 24 hours of booking the ticket. Earlier after booking, any correction in name of passenger was generally denied by airlines and was treated as cancellation. This will give relief to customers as at times there are name mistakes in tickets or change of plans.

6. Cancellation of ticket

Case #1 – If tickets are cancelled within 24 hours of booking tickets

Earlier, canceling a ticket cost the passengers a huge penalty even if it was done immediately after booking the ticket. But with the new rules, if the ticket is cancelled within 24 hours of booking (provided there is a more than 7 days difference between booking date and departure date) then you will not be charged any additional charges.

Case #2 – If tickets are cancelled after 24 hours of booking tickets

In this case, following is the rule

• Airlines cannot put any cancellation charges for cancelling the tickets.
• Airlines should refund all statutory taxes, user development fees, airport development fees, passenger service fees to you
• Airlines can’t hold the refund in terms of credits forcefully. It’s not a default option now, however, if passenger agrees to it, it can be done
• Airlines have to clearly indicate the refund amount in case of cancellation in future.

DGCA has defined rules of refund and claim settlement for all airlines. If you have paid cash for your booking then you will receive the refund & compensation in cash at the counter. And if you have made payment via credit or debit card then the amount will be credited in your bank account within seven days.

Escalation of complaints

You can use Air Sewa, a grievance redressal system to take help on any issue related to civil aviation in India. We hope that these changes in the airlines’ rules will now help passengers a lot and will make things fair for them.

Do let us know if you have any queries, we will solve it in the comments section.