The Big Day Has Arrived – Jagoinvestor School Launches today

Our biggest dream gets fulfilled today. We are once again ready to serve investor’s community with our brand new offering jagoinvestor school.

There has been enough of text articles on our blog (which will continue as it is). We now want to go to the next level and for those who are committed to going to the next level, for then we will do more of webinars, video programs and online classrooms where learning and sharing insights will make personal finance FUN.

We both (Manish and Nandish) will give our best to the school members, but we will also get the best of the best people to share their knowledge, wealth creation ideas and strategies with school members.

What is Jagoinvestor School?

Jagoinvestor School is all about becoming a dedicated student of wealth. The school will help you to fall in love with the overall process of wealth creation. For the next few years we are going to dive deep into the school. We will dedicate our time, energy, knowledge and skills to empower members of the school.

We will teach and share everything that we have learnt so far from the time we started this blog. We will stay committed and will also generate high level of commitment amongst all school members. We will demand action and will ask members to do the required work.

The school is not for the faint of heart, it is for those who are committed to creating wealth. The foundation of the school will be FUN, ACTION and COMMITMENT.

Why you should join the school?

If you have benefited from the blog and want to learn more about personal finance, then come and be a part of our school. If you want to create an extra-ordinary financial life you should immediately join the school. The school is for those who want to get accountable in the area of money, who wants to work on their financial life and someone who wants to take their financial life to the next level.

It is our promise you will see a dramatic shift in your discipline level and will start to enjoy the overall process of wealth creation.

Here are the 10 things you will get in Jagoinvestor School

  • 360° evaluation report on your financial life
  • Access to DIY program “100moneyactions”
  • Access to 50+ Video/Audios under Wealth Club
  • Monthly Webinars/Classrooms on Various Topics
  • 23+ Excel-based Tools & Calculators
  • Monthly Reporting & Tracking Structure
  • Start SIP for your goals with Jagoinvestor
  • Discount on Workshops & other Services
  • Access to Network of Trusted partners
  • 3 ebooks on Signup
Join School Now !!

Why we love teaching and making a difference?

Because there are so many people waiting to get help in their financial world and when we help someone to reinvent their financial journey it fills our heart with a lot of fulfillment. In the last 2 months, we have received 100+ thank you emails, out of which we are sharing some of them below.

We are not sharing their names and these are personal sharing written straight from the heart. The sharing done is not about us it is about investors who have rigorously worked on their financial life and created an amazing financial life for themselves.

Success Story/ Sharing 1#

[su_note note_color=”#F1F1C7″ text_color=”#333333″]

Hello Manish and Nandish,

Hope you are doing great. After having consulted with you ~3 yrs back through “Financial Coaching” I had seen a phenomenal change in the way I treat things in lieu of financial discipline. I truly have to appreciate your efforts in transforming me like this.

I now am relatively confident that I will be able to tackle things much more carefully when it comes to policies / ULIPs etc.

I now want to go with you again, to review my new financial goals and the path I am taking to achieve those. Please let me know what is correct means to go over this with you. Please do revert at your convenience. Looking forward to a positive reply from you.

[/su_note]

Success Story/ Sharing 2#

[su_note note_color=”#F1F1C7″ text_color=”#333333″]

Dear Manish/ Nandish,

Wishing you and your families a New Year 2016 Filled with good health, peace, and happiness.

Please find below a small write up on my personal finance journey in 2015.

2014

  • One of my colleagues told me about the Jagoinvestor website.
  • Began reading the articles written by Manish/Nandish.
  • I had huge credit card bills during that period. The articles helped me take the right steps and gave me a perspective.
  • Planned and worked towards getting debt free on the credit card bills in 2014.
  • I had improved on that front but wanted to get better and make my financial life stronger and be more in control.
  • Dropped an email on 20th Dec 2014 wanting to connect with Jago and avail of their services/support.

2015 :

Since I was travelling on a business trip, Set up my 1st call with Nandish on Sat 24th Jan 2015 around 11:00 AM.

  • Nandish shared a couple of docs that entailed the complete flow of our association e.g. Data Sheets, Health Checkup Data Sheet > Final Report, etc..
  • Nandish invested some time in going through my data sheet and reverted with a Basic Financial Plan. Along with the plan were simple action check-list for taking actions for me.
  • Now commence the journey to bettering and being more in control in my financial life.
    • Learned on what basis were the most important and had to be in place.
    • Corrected and improved on the wrong choices and products I had made in the last 10 yrs.
    • Which never took into consideration inflation and may other critical areas that need to be looked at.
  • Based on Nandish/ Manish guidance we worked on strengthening the foundation in the below areas
  • Term Plan
  • Medical Insurance for Family
  • Investments (SIP)

Attended the Jago workshop held in Mumbai and personally met Manish and Nandish and various individuals like me, It boosted the confidence all the more, to stay focused and consistent on this journey leading to financial freedom.

It has been a slow and steady journey to correct the errors of the past and dig and build a New and strong financial foundation for the future for me.

I’m very happy about the progress we have made in 2015, this would not have been possible without the guidance and support from Manish and Nandish. Based on my personal experience I’ve recommended the same to my various friends and even my sister who is working with the Jago team.

Looking forward to keeping on bettering and strengthen the foundation each year and being more financially free and continue this associate with Manish and Nandish.

Not sure if I manage to cover all the points, as I just keep writing impromptu

[/su_note]

Success Story/ Sharing 3#

[su_note note_color=”#F1F1C7″ text_color=”#333333″]

Starting the year 2015, I made a promise to myself that I will not ruin my sleepover money management issues. To fulfill this, I had taken the necessary steps towards being a better money manager of our(me & my husband’s) hard-earned money, i.e. meeting Nandish & Manish.

I was following the blog from 2014 but I was always having doubts in mind: Does these process really work and will it work for me as well?  I attended a one day workshop that is held in Pune by Jagoinvestor and that was the turning point of my life.

After the workshop, I decided to take help from Manish & Nandish and hand over all my worries to them. I did it and I can really sleep better now.

For 2016, my goal is to be a better organizer on maintaining Financial documents and do the remaining planning part of it.

[/su_note]

Success story/ Sharing 4#

[su_note note_color=”#F1F1C7″ text_color=”#333333″]

Hi Nandish, happy new year to you and your family too.

2015 has been a great year for us. We continued on our monthly targets and never missed any. We saw great growth coming this year and we are completely debt-free this year. Though we need to improve on two fronts. Our expenses have increased a lot now after the kid.

So we need to be careful to plan nicely and stick to it. On the heath front, some health issues are cropping in. So we need to exercise much more and much harder.

Hope this was good information.

[/su_note]

Success Story/ Sharing 5#

[su_note note_color=”#F1F1C7″ text_color=”#333333″]

The year 2015 gave me a better awareness of why Financial Management is important. In terms of finances throughout the year, the inflow was barely able to meet the outflow. Midway through the year, the realization dawned that my finances are more tilted towards Real Estate and questions on liquidity, gain in the context of a weak Real Estate market.

I was sincerely praying that I get proper guidance on how I should be saving for my next 5-10 Years. I do not know if I should call it as luck or prayers answered, I somehow got a chance to read Manish’s book “16 Financial Principals every investor should know” which was an eye-opener pointing me to the mistakes I have made in my investments.

It did not take time for me to connect with Jago Investors and have been interacting with Nandish. I feel I am in safe hands and hopeful that the year 2016 will be a year of consolidation and growth in my financial journey.

[/su_note]

The School is about creating SUCCESS STORIES:

I shared a few stories with you because jagoinvestor school is all about creating success stories. Every month we will encourage school members to learn and to take action in their financial life. It is our promise if you will surrender to the structure of the school your financial world will go to the next level. You can visit a dedicated page of school to learn more about the elements of school.

Invitation to join the school

We invite readers, Asset Management Companies, Insurance companies, and various other financial institutions to get associated with this school. From the bottom of our heart, we invite each one of you to be a part of the school, this is one of the best choices you will be making as an investor.

We would like to join hands with some Asset Management companies or organizations to make sure the school reaches maximum investors.

The money generated from the school will be used for the expansion of the school, we will one-day eradiate financial illiteracy and every Indian investor will be a proud jagoinvestor. We need your love, blessings and encouragement, share about school with your loved ones and see that you join the school at the earliest.

If you have any questions about school feel free to ask in the comments section.

Join School Now !!

Love you all, see you at the school.

5 Challenges which you should overcome to create long term wealth

Do you want to create a lot of wealth? Do you want to see crores of rupees in your bank account? I am sure you know that’s not an easy task. You also know that it will take a lot of time and dedication to create wealth over the long term. Do do you know that it’s more tough than you think? I will show you why?

wealth creation

Have you ever seen those retirement calculators online, where you punch in your numbers and find out how much corpus you will be able to generate over the years if you consistently invest a fixed amount year after year at a certain rate of interest?

The calculator throws a big number at you and you feel – “Wow … That’s looks straight forward and simple”

Below you can see an example.

I calculated how much wealth a 30 yr old guy can generate by the time he retires at age 60 (30 yrs tenure) if he invests Rs 20,000 per month at a return of 12% per annum. Below is the result.

wealth creation long term

It looks so simple on paper. One can generate a wealth of Rs 7 crores in 30 yrs period if one consistently invests Rs 20,000 per month.

Doesn’t it look over simplified? It definitely is!

While the calculator above makes it look like a child’s play to create long term wealth, in reality – it’s definitely not that easy and there are various things to be considered here, which I want to discuss in this article.

What are the assumptions in the calculator above?

If you look at the calculator above and the numbers, you will realize that 5 assumptions which are

  • The investor keep earning over the years and bring back the income
  • The investor will have enough surplus each month
  • Investor will be able to generate a 12% return over long term
  • The investor will not disturb his wealth creation process
  • The investor will not use the money out of the accumulated money till the end of tenure

Now if you look at the 5 points above, long term wealth can be created only if all the 5 points above are true or maximum of them are true. Each of the point above is a challenge in itself. If you overcome all these 5 points, you are then set to build long term wealth.

So now, if you try to capture these points as the ACTION and RESULT, then here is how it looks like

wealth creation model

So let’s touch on each of these 5 assumptions one by one and see in detail and see what are the challenges in handling them

Assumption #1 – The investor will keep earning over the years and bring back the income

Let’s start from the most basic foundation point.

A lot of people who have been earning from many years (let’s say 5 yrs) and never faced any issues in their career seem to feel that its a cakewalk to continue doing it without any issues for the next 20-25 yrs of their life. They think that it would be a smooth ride. However, you need to know that

  • There is a section of the population who are struggling in their career and will not be getting the same salaries if they switch jobs
  • There are people whose income is not rising as per their expectation and a lot of people take salary cuts
  • A lot of investors are out of their jobs/business due to competition, policy changes in the industry
  • A lot of investors at times spend many months without bringing back any income because of health issues, layoffs, and other reasons.

At least 3 of our clients have stopped their SIP’s in the last 6 months because their income has stopped/reduced due to some issues at their workplace. While it might be a short term problem, you never know if it can extend for a very long time for some one. One client is working in the Middle East, and his job is not that stable and he is damn scared of this fact.

Another client told me that as per his understanding, he is getting the maximum salary he can command in his industry and if he loses his job for any reason, he will have to join another company at a lower salary.

One client is hell scared because he is just surviving his job from many years and if he is fired due to non-performance, he does not believe that other companies will hire him at the same salary

Focus on your “employability” and potential to earn

My partner Nandish Desai, says a very important point about employability – “To get a job, you need to be useful for someone”

You need to make sure that whatever you do, whichever sector you enter, which ever skill you acquire – do it like a pro. Become a highly useful person in your domain of work. Be among the best. Your skills should be outstanding and you should be the master of what you do. If that happens, you will be highly sought after and everyone will want to hire you.

This way you are ensuring that all your future income is secured. If things get tough in your industry, you will be one of the last people who will face issues. If you face any issue, you will soon find a new job. And if you want to switch, you can command a better salary.

Focusing on your career and investing in your own development is one of the most rewarding decisions you can make in your financial life. Only when you ensure that you have taken care of this point, other points will come into the picture.

You need to understand that only if your future cashflow is protected, only then you can save from it and only then you can think of the returns and everything else. No income, no wealth in the future!

Assumption #2 – The investor will have enough surplus each month

Taking the example above, the 2nd assumption was that the investor will continue investing Rs 20,000 per month over the next 30 yrs without fail. For you personally, this number can be Rs 10,000 or Rs 50,000, the same is true for yourself.

Will you be able to consistently invest that much each month? Will you be left with that much each month? year after year?

You might be able to continue that for some months or years but think of the real-life issues which we all face. And you never know your life will take turns, you never know how unpredictable things are. You might have to switch jobs because of health?

When you will have kids, your expenses might shoot up, you may face an emergency which might last for many months to come, there can be health issues and you can get into the never-ending cycle of –

High income -> high expenses -> less saving.

In fact, I have seen this in reality. Forget about investing each month, one of our clients is redeeming back from his mutual fund’s corpus because there is a prolonged medical emergency at home and he is not able to handle all expenses the way he had planned before.

My whole point is that it’s very very tough to maintain the consistency and discipline in investing in real life and there will be disturbances.

High Lifestyle is making saving tougher

Now a day’s it’s more common to see people living on a paycheck to paycheck basis. The high lifestyle and the increased consumerism have ensured that even if you are earning high, it will get tough for you to save. Salaries like Rs 1 lac or 2 lacs per month are very common these days in many cities, but the savings are not in line with the salary.

Hence, you need to ensure that you after your expenses are done, you generate a consistent and a minimum 20% of investible surplus from your salary. Take it as a game and try to win it each month.

Assumption #3 – The investor will be able to generate a 12% return over the long term

The next assumption is that the investor will generate 12% return over long term from his investments? Now where do you invest your money to get more than 12% returns over such a long term?

Any guesses?

The answer is equities !. It has to be in shares, equity mutual funds, ETF’s, Index funds, etc. This is not an easy thing for the majority population in India, because most of the people in India do not understand how equities work and banking products are their lifelong favorite. They are earning 8-9% (6-7% post-tax) from years.

So for them to earn 12% would be very tough because first, they need to get clarity about how equities work and get comfortable with it.

Data and chart:

Now let me show you some data and charts which will convince you why you should be in equity to earn a 12% return on your investments.

Below is the chart which shows the CAGR return for 10 yrs periods if the money was invested in NIFTY. The data is from 1st Jan 2001 to 1st Jan 2016, so there are many 10 yrs period like

  • 1st Jan 2001 – 1st Jan 2011 (first point)
  • 2nd Jan 2001 – 2nd Jan 2011
  • 1st Jan 2006 – 1st Jan 2016 (Last point)

We then plotted the CAGR Return for all these periods and below is the answer. The CAGR return almost always was above 12%, however for few months towards the end it was a bit below 12% .

CAGR return nifty 10 yrs

Another graph which I want you to see is the 10 yrs CAGR return chart from Sensex, which is for its 36 yrs of existence.

So there are 26 different “10 yrs” tenures and we calculated the CAGR return for all the 26 data points and below is the result. Around 21 times out of 26, the return was more than 12% and at times it was very high like 20%-30 %. Few periods had fewer returns like 6% or 11 %, but then if you look at the overall 36 yrs period, the CAGR return converts to 17% return.

CAGR return sensex 10 yrs rolling returns

Now while it’s very easy to conclude that if you invest in equity over a long term, you will get required 12% return, its very tough to practice in real life, which we will see in next point very soon.

asset class returns

Lets me share with you that a very small percentage of our India population invests in Equity.

The major money lies in FD, Gold and insurance products and even real estate. And it’s going to be very tough to generate a 12% return from these asset classes. In fact, Morgan Stanley’s Research has clearly shown that equity has beaten all the asset classes in the long run and below is a snapshot of that research.

So if you want to build wealth over the long term and you are investing the majority of your money in FD, understand that your post tax return is lower than the inflation.

Your money might be growing in numbers (Rs 10 lacs became 20 lacs in 9 yrs), but the worth of your money has come down (20 lacs today can buy less of what 10 lacs could have bought 9 yrs back). You are in fact getting poorer in a slow-motion and you are not realizing that.

Assumption #4 – The investor will not disturb his wealth creation process

Read the following question and answer.

Q – Do you know what is the biggest challenge for an investor if he has invested in equities (mutual funds or Stocks)?

ANS – To remain inactive and sit tight without doing anything and let his wealth grow.

Making money in stock markets is challenging, not because markets have any issue, but because we investors have a behavioral issue. We can’t handle the uncertainty and volatility which comes with the stock market. It’s not for weak-hearted.

For some one who has been with FD’s and has the habit of seeing his investments grow in a linear fashion, he can literally go crazy with mutual funds because it brings so much of ups and downs and volatile movements.

Should I stop SIP when the market is falling?

In the last 2 weeks itself, we have got many emails from our clients whose SIP’s are going on in equity mutual funds, asking if they should stop their SIP’s as markets are falling? I have told them to act like a ninja investor and see it as an opportunity and pump in more money because in the coming years we might see a very good bull run? (any body remember what happens for the next 2-3 yrs after 2007 crash ?)

Note that all these clients SIP’s are running for very long term goals like retirement or children’s education which are going to arrive only after 15-20 yrs. There is no problem as such with that behavior.

It’s very natural, but I am just trying to tell you that it’s not that easy to handle the pressure which comes from the volatile nature of markets and very few investors have that dedication and understanding of how things work in the stock market.

Very few people can control their greed and fear and that’s the reason very few people are able to make the most of the returns from the equity markets over the long term. Below you can see a snapshot of kind of queries which start coming up if markets show any kind of fall for a long time like 6 months or a year.

markets are down

The cycle of Greed and Fear

If you see the stock markets right now, you will realize that we currently are in that same phase where investors panic and take out the money from their portfolios. Markets are falling from last 1 yr and especially this month it has gone down by a big margin.

So even if an investor is investing a good amount each month and he has read about how equity markets work and they understand the game of equity, still it’s very tough for an average investor to stay calm and stay with markets consistently for a very long time.

Some stop their SIP’s, Some redeem their money and shift it to FD’s thinking – “I will again be back, when the markets will calm down and start going up”.

However, you never know when that up move started and by the time you realize, you lose the next bull run. The below chart clearly shows how 99% of investors think and behave in stock markets.

cycle of greed and fear

So what is the solution? What should you do?

Remember that if you are in equities with a long term view like 10-15-20 yrs, then you are going to see many cycles of ups and down. You can’t escape it. You need to think of the down market as the “sale” where you can accumulate more stocks or mutual funds units at a cheaper price so as to gain from the up move later.

And when markets are going up, don’t redeem your money or try to “book the gains” because you will most probably miss the bigger up move trying to redeem the smaller up move. You need to understand that you are not there for “trading” or short term profit booking (incase, you are there for trading, then this does not apply to you)

Just sit tight, keep your SIP going and make sure you are in right mutual funds (not the best, because it does not exist). Review them in a few years and let the process of wealth creation take place. It requires patience and only a small percentage of investors are going to reach the final destination. Be one of them.

Assumption #5 – The investor will not use the money out of the accumulated money till the end of tenure

Having 5 lacs in your bank account is very different from having Rs 5 crores. You might think – “What’s the difference? it’s just 100X, rest everything is same”

No, your feelings about your money, your risk appetite, your thoughts around money, your desperation to do something will be at a very different level when you have 100X money in your bank account.

It’s a very tough thing to “not do anything” when you have so much money getting accumulated in your account. Once your corpus reaches a respectable limit like 80 lacs or 1 crore, you will start thinking in these lines

  • Let’s shift some money in FD now.
  • Let’s upgrade our house now, I can surely take out 50 lacs from my portfolio
  • Now I deserve that dream car I always wanted, I have good money now
  • Let me have a grand wedding for my children, after all – I have a good corpus now

Your lifestyle will go up, your vacations will get luxurious and you will get all the reasons to spend the money and take a dip in your portfolio.

Let me be clear, that I am not saying there is anything wrong with spending your money or using it for yourself.

please do that. After all, if you have managed to earn so much money and accumulated the good corpus, you surely deserve a better lifestyle.

All I am saying is that it’s a challenge to let your portfolio grow and not disturb it. So in our example at the start of the article, you might not reach 7 crores as per calculation, but may be 4.3 crores or just 3 crores, because you keep taking out the money out of your corpus many times in between for various reasons.

If you are just taking out a portion of your corpus and reinvesting in something else which you can redeem back later, it’s still fine. But if you are “spending” the money and consuming it, then it’s GONE. That part will not reflect in corpus now and you will have a lesser corpus to that extent.

If you can make sure you have that ability to stay calm and see your wealth grow without disturbing it, then you are bound to see a good amount of wealth in your life.

So here is the final checklist before you start your wealth creation journey

  • Spend a good amount to time to understand how equities work in the long run. I have explained about equity in the 3rd chapter of my 1st book – “16 personal finance principles every investor should know”. Get a copy and read it
  • Work on your career strongly and become very very good at what you are doing. Make sure you are highly employable even if the bad time comes. This will make sure your cash flows are more or less ensured.
  • Spend 10% time on cutting down your expenses if there is any scope, and spend 90% of your energy in increasing your income. Remember, reducing expenses is tough and has a lower limit. Increasing income does not have a ceiling.
  • Make sure you start the SIP in equity mutual funds with a long term perspective. When markets fall, rejoice ! and keep adding more money. Be a tough hearted and you will be rewarded over long term
  • Make sure you plan for other goals separately so that you do not use your main corpus in between for small things

Let me know if your way of looking at long term wealth creation has changed or not by reading this article. I would love to hear your views.

ICICI launches “Smart Vault” – Robotic technology in bank lockers

ICICI Bank has recently launched “Smart Vault” which is a cutting edge robot managed locker service. There is almost no intervention with the bank staff and the security is very high. Watch the video below to understand how it works.

Here is how the “Smart Vault” is operated

  1. Locker owner will swipe their debit card and enter their ATM PIN
  2. There is a biometric authentication required
  3. You will then enter a private room where a robot will bring the locker in front of you
  4. You can open your locker with a unique key, provided by the bank. For added safety, you may also choose to have an additional personal lock on your locker.
  5. Once you are done, you can keep your belongings back in the locker and robotic technology will take it back
  6. You may leave the locker room once the “Thank You” message flashes on the kiosk screen

The vault uses robotic technology to access the lockers from the safe vault and enables customers to access their lockers at any time of their preference,” the statement issued by ICICI Bank, country’s largest private sector lender, said.

In case a customer has more than one locker, the interface allows customers to choose which locker they want to operate.

The lockers will come in different sizes and the cost will depend on the size of the locker and the city location where the locker is located (linked to real estate prices)icici smart vault size

As of now this smart vault is launched in Delhi, but soon it will replicate in other cities as well. Its a great thing because its a new innovation from ICICI bank on the locker service.

What do you think about Smart Vault service and the robotic technology used? Would like to avail such kind of lockers by paying a higher premium rents?

No claim rejection for life insurance policies older than 3 yrs – IRDA

There is very good news for those who have bought life insurance policies (especially term plans). From now on, life insurance companies will not be able to reject claims for any policy which is 3 yrs old.

Yes, you read it correctly.

no claim rejection for life insurance policies older than 3 yrs

No Claim rejection after 3 yrs

If your policy is 3 yrs old, no matter what happens, the life insurance company will not be able to deny the claims. There was an amendment in the sec 45 of the Insurance Act 1938, and due to that now onwards a policy can’t be denied a claim because the policy-holder gave some wrong information.

As per IRDA, the company has 3 yrs in hand to detect any misrepresentation or misstatement from the customer side and reject the policy. However, once this period is over, the insurer will have to settle the claims.

What this means is that those investors who were highly suspicious of insurer’s intention and always kept looking at the claim settlement ratio numbers don’t need to worry now.

While this seems to be great news, one should think of what kind of implications will arise out of this change. I can think of a few of them

1. It will not be easy to buy life insurance

The major impact of this change will be that now the medical tests might get more details checking a lot of things. Till now insurers were bearing all the costs, and I think it will happen in future also, however, I think this will result in higher premium amount, which I think investors will not mind because now there is a guarantee of claim settlement

2. Chances of Fraud in the life insurance space

Already, there are many frauds that happen in life insurance space from the customer’s side. I remember an episode of Crime Petrol, where a man planned his death so that his family can get the life insurance money, however, he didn’t get the money because he was not able to execute the plan.

However, with this new change – the chances of fraud and misrepresentation can increase. Imagine a smoker or a person involved in risky activities. A lot of people like these to not disclose these facts because their application might get rejected or the premium might rise. So a lot of people suppress disclosing this fact and it’s going to be a hard time for companies to figure out these things. There will always be few cases which will not come under their radar.

What do you think about this latest development? If you hold a life insurance policy already, how do you see this new change?

Update your Aadhaar card details online in 5 min and download a new one [VIDEO inside]

Do you want to know how to update aadhaar card details online? Yes – It’s possible. You can easily update your details online without any offline documentation and then download your new aadhaar card online and start using it.

Recently, I wanted to change my address details in my aadhaar card and I completed the whole process online by visiting the website of UIDAI. It was just a few minutes task and very easy. I have also created an online video tutorial with all the steps. Below is the video if you want to refer to it.

8 step process to update your aadhaar card details online

  1. Go to https://ssup.uidai.gov.in/update
  2. Enter your aadhaar card number and text verification code to generate the OTP
  3. Enter your OTP and then on the next screen choose the details you want to change
  4. Enter the details which you want to change and then proceed to upload the documents
  5. Choose the supporting document which you want to upload. Make sure the document is self attested and signed by you and scanned back.
  6. Note down the UTR number which can be used later to check the status

update aadhaar card details online

How to Check the status of your Aadhaar change ?

Once you have submitted the change request, you will get a UTR (Unique request number), which can be used later to check the status of the change. Here is how you check the status later

  • Visit https://ssup.uidai.gov.in/check-status
  • Enter your Aadhaar card number and the UTR number (without slashes)
  • You will get the status. It might be awaiting approval or might have approved already in which case you can then download your new aadhaar cared online and start using it

check status of aadhaar card details change

How to download your new aadhaar card after the update is complete?

  • Visit https://eaadhaar.uidai.gov.in/
  • Choose the option to enter your aadhaar card and enter all details
  • Generate the OTP and enter that to proceed
  • A PDF will get downloaded which can be opened by entered your pin code as the passport
  • You can now start using this new aadhaar card by taking a color Xerox

download aadhaar card online

Cases where you might want to change the aadhaar details

  • Your address might have changed after your aadhaar card was made
  • Incase of name change after marriage in case of female
  • Your mobile number or email id is changed
  • You have changed your name or your name was wrongly captured at the time when you applied for aadhaar card
  • By mistake your gender or date of birth was wrongly captured

I hope this tutorial was clear and easy for you to follow. The process to update aadhaar card details just takes 5 min of your time. Try it and let me know if it worked for you or not. Also do not forget to share this article with your friends circle; it would be very useful for them.

Update your FATCA declaration online in 2 min, if you are an existing mutual fund investor

Are you an existing mutual fund investor? If YES, then you must have got an email from the fund houses where you have invested to provide some additional information about yourself and about your tax residency related questions in the name of FATCA declaration.

In this article I will quickly guide you about what is this FATCA Compliance and how you can update this information with AMC online in 5 min.

What is FATCA Compliance?

Foreign Account Tax Compliance Act or FATCA was passed in US in the year 2010 to make sure that the financial institutions across the world share some basic information of their US based clients.

A lot of investors from US (US citizen and NRI’s residing in US) were supposed to disclose their investments outside the US, but it didn’t happen the way US govt was expecting.

So finally, US govt passed this FATCA law and signed treaties with various countries across the world. India is one of them. So now various financial institutions based in India are asking all their customers to give a declaration about their tax residency, place of birth and if they are paying taxes in any other countries. I am not going into too much of detail here, because you can read it in detail in this moneylife article here .

The main purpose of this article is just to help you understand, how you can update these FATCA details quickly in 2 min online.

All mutual funds investors are supposed to update their information with AMC’s by the end of Dec 2015.

If an investor fails to update their FATCA declaration, then their additional investments will not be processed in future and any SIP which is currently running will also get stopped. So it’s suggested that you complete the declaration as soon as possible. Note that your existing investments will remain intact and there is no impact on that.

How to update your FATCA related information online?

It’s very simple. All you need to do is visit the following two links and update your information.

I have created a short video tutorial on how to update the FATCA information online. Please check it below

Note that a mutual funds is either serviced by CAMS or Karvy (all funds except franklin Templeton, go this link where you can update FATCA for franklin). So these agencies have come up with the links online where one can update all their information.

When you update your information online, an OTP will be generated which will be send to your email/phone which is registered in their records. If you are invested in mutual funds which are services by CAMS (like Birla, ICICI, HDFC etc) , you just need to update the first link (cams one). If you are invested in mutual funds which are serviced by Karvy like Reliance, UTI or Canara Robeco, then you will have to update the karvy link as well.

Below is the snapshot explaining how you can update the CAMS link 

Update FATCA online

In the same manner, you can update the Karvy link with your FATCA information. The OTP will be generated in that case also and all the information is same. You need to update the karvy link, only if you have invested in any mutual fund serviced by them in past.

In anycase, my suggestion is to try to update both the links. There is no harm anyways

FATCA Impact on US & Canada NRI’s ?

So what is the impact of this FATCA declaration on those NRI’s who are based in US and Canada. Let me be very brief and to the point here. Only 3-4 AMC’s in India are going to except fresh investments from US & Canada based NRI’s. Few of them are UTI, L&T and Sundaram mutual funds. so if you are a NRI based in US and Canada, now you will not be able to invest in mutual funds from HDFC, ICICI, Birla, Reliance and many others.

However any existing investments can be continued (SIP wont be continued, but the current worth in those funds will be as it is) . One can redeem them whenever they wish to.

NRI’s based in other countries can invest in any fund house they want.

Incase you have any question on this FATCA declaration, feel free to ask your queries in comments section

Financial Life of a cab driver & life of Mumbai

I recently visited Mumbai for some work and it was 7:15 pm in the evening. When I came out of a building in Andheri East, Mumbai.

I had booked a cab from Pune to Mumbai and I was now ready to be back. I called up the cab driver and here is the conversation…

ME – “Bhaiya, kidhar hain aap?”

Driver – “Bas sir, Yahi hun 200-meter piche, 20 min me aa jaunga, aap gate ke pass hi rahiye”

ME – “Main aa jata hun paidal chal kar, Aap bataiye kidhar hai exactly”

Driver – “Arre nahi sir, aap wahin rukiye jidhar hai, itni bhid me Mujhe nahi khoj payenge”

Finally, after a long 20-30 min, I saw a car near me, honking like hell and flashing lights on me. It was my cab driver and he was indicating – “Get inside the car asap”

Finally, I was inside the cab and we were going back to Pune. It took us another 20 min to just get out of the lane. It was really frustrating to just see yourself in the middle of traffic and move nowhere.

The first half of the total time took us to come out of Mumbai and the second half took us to reach Pune. Finally, I reached Pune at 11:30 in night.

Story of the Cab Driver and his Financial life

In this article, I just want to share with you a conversation between myself and a cab driver I met recently. I asked him some questions about his life, a bit about his financial life and his work schedule. I know, it’s not directly related to personal finance, but I think, it’s a good idea to share it with you all as it has some good things to know about.

Tax driver

(The photo above is not the real cab driver in question)

The moment we were out of the lane we were stuck in at Andheri, the driver looked really irritated by the sheer amount of traffic. I asked him – “Bhaiya, Mumbai ki life Kaisi Lagti hai aapko?”

And his answer stunned me – “70 saal jeene waala insaan 50 ke khatam ho jayega, yahi hai Mumbai ki life”

While I knew he was a bit tired and his frustration was making him speak these words, there was surely some element of truth in his words. The way of life, the speed, the running around for everything. It’s really mind-boggling in Mumbai.

Anyways, One my way back to Pune, I had conversations with Driver and here are few things I came to know.

1. He drives 400 km EVERYDAY

Did I ask him if travels to Mumbai often? He said every day. YES – Everyday .. 30 days in a month… May be once in a while there is no pick or drop but in general every day. He said that he does close to 10,000-12,000 KM every month. His legs and Back pains a lot and sometimes it’s so bad, he can’t explain it. We reached Pune around 11:30 pm at night and he had to get back at 4 am again to take someone to Mumbai airport.

2. No family life

I think we felt by good talking to me, and he kept on going.

“Family life nahi hai Kuch Bhi Sir .. Ghar Jata hun, khana khata hun aur sidhe so jata hun”. He told how his life is tough and there is no energy left once he is back home. He has no motivation to talk to his kids, spouse or enjoy with them.

Even when he has to drop or pick someone, he has nothing to do and he just sits inside the car and it’s really tough to do that, day after day, month after month and year after year … It’s the height of boredom”

He was a calm person, but he said that when he is stuck in jams atleast he feels he want to throw away the car like HULK. It was a calm frustration coming out of him.

3. He had Life + Health insurance

I realized that his job is very risky. He has to drive each day and he is prone to accidents. His legs are so important for his job and to earn the money. I thought I will explain to him why he should think of covering these risks and I asked him – “Do have Insurance?”

  • “Yes Sir, I have life insurance and health insurance both from ICICI Lombard”

I was happy and a bit shocked to hear that because I didn’t expect him to have that. He told me that one of his agent friends had explained to him about these products and how it might help him. I congratulated him on that point and said that it’s a great thing that at least he has something. Thank god he did wait to find the “best product”

4. He saved Rs 4,000 per month in Recurring deposit

Though his earnings were limited and he was on a tight budget, he told that he managed to save Rs 4,000 per month. He gave it to his wife every month which is invested in Recurring deposit. I thought it was a great thing and didn’t say anything like “why don’t you invest in equity?”. I think it would have confused him a lot and it was not the right time for all that Gyan. He was doing well.

What do you learn from this?

Let me know what you feel after reading the story of this cab driver? I think that the cab driver did a few things correctly which even many with a lot of privilege fail to do. Like if you see this cab driver, he has a habit of saving some part of his income even though he does not earn as we all do. He had life insurance and health insurance which is really commendable. I know he does not represent an average cab driver from that angle, but still.

Please share your thoughts

Want to buy health insurance with small premium? – Use super topup policies?

Do you want to know how you can take a high health insurance coverage at a cheaper premium, without compromising on the benefits and features? Today I am going to share how you can do that using top-up health insurance policies.

Gone are the day’s when Rs 2-3 lacs of health cover was considered a good cover, its not even average cover these days. With rising health care cost, a health cover below 5 lacs is just not sufficient for most of the people. I am confident on that, because in last 6 months, we have helped more than 1000+ people to take their health insurance and majority of them ended up with a coverage in range of 5-20 lacs.

I know, a lot of investors understand the importance of high health insurance cover, but they are unable to afford a high premium. So what is the alternative?

Use Super Topup Policies to increase your health cover at lower premiums

The solution is Super topup policies.

You can use Super Top-up health insurance policies to upgrade your health cover by paying a lower premium. Super Topup plans are the health insurance plans which pays only when a certain threshold is crossed.

For example, consider a super top-up plan for Rs 20 lacs with deductible of Rs 5 lacs.

In this case, the policy will pay only when the initial Rs 5 lacs is paid off and they will pay the additional amount above Rs 5 lacs. So if the claim amount is Rs 12 lacs. The policy will only pay Rs 7 lacs (over and above 5 lacs deductible. If you are new to this concept, we have already explained the topic of super top up in detail here, please read it first.

So how can you use super top up to take a higher cover?

Instead of taking a full cover of X+Y amount, you can take a base cover for Rs X and take a Super topup plan for Y amount with X as deductible. This way you will be covered upto X amount by the base policy and for any claim above Rs X, the super top-up policy will get triggered and come to your rescue.

The main benefit here is that the Super Top-up policies come very cheap and overall your premium will be small.

Example of 3 member family (2 adults below 35 yrs + 1 kid)

Suppose you want to take a high cover like 20 lacs for your family (3 member family). Here you have two choices

Choice 1 : You can take a stand-alone policy of Rs 20 lacs here. If we take an example of Optima Restore Family Floater, the yearly premium would be Rs 23,527.

Choice 2 : As 2nd choice, suppose you the same take the same Optima Restore Family Floater for Rs 5 lacs, which will cost you Rs 12,513 and on top of it, you take a 20 lacs super topup from L&T Medisure Super Top Up with 5 lacs deductible, for which the premium would be Rs 4,389. So the total premium in this choice will be 16,902.

That’s a saving of 28% in premium.

However, note that both the choices will differ with each other, because from features point of view there are a lot of differences in both the choices.

So for those who already have a 5 lacs cover already and wanting to increase their cover to 15 lacs total, below I have listed down some companies top up cover plans and the extra premiums they will have to pay.

Below is an example of how you can increase your health cover from 5 lacs to 15 lacs (or take 15 lacs cover).

super topup plan example

Do you have a small health cover right now?

So, ask this question to yourself? Do you have a small health cover of 2 lacs, 3 lacs or max 5 lacs and you want to upgrade it to a big number like 15 lacs or 20 lacs?

For the sake of explanation, let me take an example of 5 lacs existing cover and lets see how you can increase it to 15 lacs for a small premium increase. So all you need to do is take a super top-up cover of 15 lacs with 5 lacs deductible. Below are some plans with the premium amount for a single individual of age 35 yrs.

Premium for different Super top up plans in market

Comparison of Super Top-up Plans in Market?

Below I am sharing the comparison of various super top up plans in the market and how they differ from each other on various parameters.

Top up policies comparision

Why Super top up premium is less?

I am sure many investors will have this question in mind that “Why is the premium for a super top up plan so less?“. The answer is that the probability of a super top up getting triggerred is statistically very less and hence the risk for the insurer is not that high.

Think about it this way. If you have a large cover of 15 lacs right now, what  would be the hospital bill on an average? Most of the times, it would be in range of 50,000 to 1 lacs if you get hospitalized for a minor case and few lacs if there is some accident or some major issue.

Only in a very very fatal case or if you are highly unlucky, your bills will run over in the range of 10-15 lacs and thats going to happen once or twice in your lifetime. So the chances for a company paying for a claim above a certain threshold is very less. That’s the reason the premium for a top up plan is less. Higher the deductible, lower the premium.

Is it advisable to buy the base plan and super top-up from the same company ?

The answer is YES. If your base plan and the super top up plans are from the same company, it would surely help because you have to deal with the same company for both the claims. The documentation process is more simple and the communication is smooth. The company will not find any issues because it has all the records with them.

However note that even if you have it from different companies, it’s ok. You ultimately have to look at the features and what combination works best for you and if the total premium is affordable to you or not.

What are Convertible Top-up plans ?

Lately, a new kind of top up called as convertible topup plans are coming up in market.

“Some companies offer Super Topup plans with an additional feature that allows the plan to be converted into a base plan. This is done by buying out the Deductible in the plan.

For instance, if you have your company health insurance for Rs. 3 Lakhs you could buy a Topup of Rs. 15 Lakhs with a deductible of Rs. 3 Lakhs. In case you leave this employer, and/or are without cover, you can apply for buying out the deductible at the time of renewal by paying additional premium. There are certain conditions/triggers based on which this feature gets activated into the plan.

This is an excellent feature for people who feel that they would be working with employers who will provide health insurance cover all their working life, without any break.

For instance,

In case of Religare Enhance – The convertible feature gets activated after 4 continuous renewals. The plan has a waiting period of 1 year for Pre-existing diseases

In case of Apollo Optima Super – The option is available for customers who have bought the policy before crossing the age of 50 years. The option can be opted between the age of 55 and 60 years at the time of renewal by paying additional premium, if the policy has been renewed continuously without break. “

Who all should buy a super top up plan ?

  • Those who are having a small cover by themselves or a group cover through their employer and want to increase their cover (ideally you should have a base policy for a minimum amount)
  • Those who are right now having a small cover and want to upgrade it
  • Those who can take care of small medical bills themselves (like up to 2-3 lacs) and only want help in case of bills beyond that number by paying a small premium

Other Important Points related to Super top-up plan

  1. A super top up policy can be taken stand alone – A super top up policy can be taken without a base policy. There is no compulsion that you should hold a base policy.
  2. Premiums will rise as per age slab – You should be aware that just like a normal health insurance plan, a super top up plan premium will also rise as per age slab in coming years, so even if the premiums look very small right now, it’s bound to increase later
  3. No Claim Benefit not present – Generally super top up plans do not offer No Claim Bonus (NCB) . This is the primary difference between taking a base cover of a high amount and combining a small cover with top up cover, because then you loose on the benefits of a No Claim Bonus over the years.
  4. Not always a great option – Just because the premium is less, it does not mean that combining a small base cover with a super top up is always the best plan. Depending on situation, you need to find out if its a good option in your case or not. It might happen that you might loose out on some benefit and feature on the top up plans

I hope this article helped you to understand how you can increase your health cover at a small premium. Please ask your questions if any below in comments section

Jagoinvestor is coming to Hyderabad – 1st Nov 2015 (Workshop)

Hyderabad – We are coming !

Finally, we are doing our 1st investors workshop in Hyderabad on 1st Nov 2015 (SUNDAY). We started doing workshops few years back, till now we were doing programs in Pune, Mumbai and Bangalore and have trained around 500+ investors till date. It’s time we expand and include more cities, we are excited for our Hyderabad event.

Why you should spend 1 full day with us ?

We always love spending full day with participants, having some amazing conversations around money, how to plan their financial life and how to make  things more simple and robust.This one day can bring a real turnaround in any person’s financial life and it can help you get started as an investor. It is our promise you will walk out of the room with a new level of energy and vision as an investor.

Note that no personal finance knowledge is required to be part of this workshop.

You can just skip this article and directly register for the workshop (early bird tickets available at discount)

Why we conduct these workshops ?

We do offline workshops so that we can connect with some of our readers at a deeper level, round the year we write articles, reply to thousands of comments and work with a few hundred investors one on one and in that process we learn, grow and expand as an individual.

Workshop gives us an opportunity to share outrageously all the knowledge and experiences that we acquire round the year. The program is an opportunity to get our readers more and more action oriented.

Why you should come for this workshop?

  • You will learn how to improve your financial life with your current set of resources and income.
  • You will learn how to plan for your financial life goals
  • You will interact and learn from other’s people’s financial life
  • You will dedicate one full day to get better with money management
  • You will learn to add new dimensions to your financial life
  • To understand that personal finance can also be fun
  • To give a whole new direction to your financial life

Below are some of the pictures from our Mumbai Workshop we did recently

mumbai-workshop-2015-4

mumbai workshop 2015

mumbai-workshop-2015-3

mumbai-workshop-2015-1

It’s time at add Jagoinvestor workshop to your financial journey

It has been a few years now conducting “Design your financial life” workshop and the experience has been amazing. It is a wonderful space to be in, in which the group learns and starts to fall in love with the process of wealth creation.  We do not teach tricks and tips to build wealth in fact we help you to discover your own personal process of creating wealth.

This time we want more and more couples to participate so that they can get on same page when it comes to personal finance. It is extremely important that husband and wife both take equal interest when it comes to money management. We are offering special discount to those who want to come with their partner. (You can even come with your parents, siblings or friends and can claim the discount)

The workshop we conduct are highly interactive, it has lots of activities and fun exercises which helps you to discover your relationship with money. The sessions are interactive and very easy to grasp for any kind of investor, beginner or advanced. In short there is something for everyone in this workshop.

Register for Hyderabad workshop on 1st Nov, 2015 (SUNDAY)

Earlybird Ticket
(Last 1 ticket remaining)
Rs 3,700 + Service tax @14% Buy Earlybird Ticket
Single Ticket Rs 4,200 + Service tax @14% Buy Single Ticket
Couple Ticket Rs 8,000 + Service tax @14% Buy Couple Ticket
Venue and Timing Details

8:30 am - 6:00 pm , 1st Nov (Sunday) , 2015
BEST WESTERN Ashoka
6-1-70, Lakdi-ka-pul,
Hyderabad – 500 004

Check Map
Detailed Directions

  • The hotel is 5 in walk from Lakdi Ka Pul Railway Station
  • Lunch and Breakfast is included in the program fees

We invite you to join and participate in Hyderabad workshop. Come alone or with your spouse or parents, siblings or friends but see that you do not miss this opportunity. Do not let time or money to get in your way and book your seat at the earliest because we will be taking only limited participants and registration will close after some days.

This workshop is strictly for investors and not for advisors or finance professionals. If you have never participated in any personal finance workshop let this be your first experience.  If you have any questions you can write in the comments section or you can mail us.

9 ultimate checklist to know if your financial life is on track or not?

Let’s quickly see today what I call as a good checklist to find out if your financial life is on track? Are you doing well? When can you say that your financial life is an ideal financial life?

What are those parameters? 

  • Is high income good?
  • Is having low expenses great?
  • Is having 50 lacs in saving’s great?

A lot of investors do not even know if they are doing good, bad or just average.

checklist of good financial life

I know its very subjective to say if someone is doing well or not and no one other than you should make the final judgement, but still lets look at some high level points which should be present in a good financial life. Atleast you can get a sense of how you are doing on few parameters.

Lets see how many of these are true for you.

1. You have positive surplus each month

The first indicator I think is very simple and very important – “Are you left with a positive surplus by the end of the month or not?”. Its as simple as that. Unless you are left with some surplus (income – expenses), it makes no sense just to brag about your salary itself. What will matter is if you are having a good positive surplus each month or not.

And I am talking about a decent surplus, like 20-30% at least. So if you are earning Rs 80,000 a month, but you are left with just 2-3k by the end of the month, please don’t say you are left with surplus. It should be at least 15-20k, because this is what will help you in building your wealth. If can surely say that you earn a lot and spend like a king and enjoy life like anything. Well that’s great and its surely a great thing. But not having a surplus is surely a big negative point.

Did you pass this check or not?

2. Your net worth is going up on yearly basis

Is your net worth increasing on yearly basis? Are you getting wealthier over years or not?

  • Are you wealthier as compared to 5 yrs back?
  • Are you wealthier as compared to 3 yrs back?
  • Are you wealthier as compared to 1 yr back?

I am not saying that be highly rigid about 1 yr. It’s totally fine if your graph is a bit down for few months or last 1 yr, but as a general rule, it should be moving up over the years (especially if you are young and moving towards your retirement)

If the answer is YES, then fine – you are doing great, else there is something you need to fix. Your net worth would keep going up and up in two cases. First is when your investments are doing well and the interests and returns you earn on it add up, this happens mostly in later part of your life, when money already have reached to a level and now the compounding.

The other case is when you keep investing out of your surplus each month and its very important in initial years of your life, because only when your net worth reaches a respectable level, you will be able to feel the power of compounding and its effect on your net worth.

Did you pass this check ?

3. You are not heavily dependent on loans to pay your bills?

If I take away your credit cards with the condition that it will be returned to you only after 3 months, will you panic?

I am sure many investors will panic and start wondering how they will manage now. Note that said “heavily dependent” and not “heavily using”. Personally I use credit card a lot and frequently, but you can take away my credit card and never return to me and I will not even care for a minute (after I block it).

However, some people are so dependent on credit card, like its oxygen for them. Apart from credit card, a lot of people get into this cycle of

  • Need money for some purpose
  • Take personal loan
  • Keep paying the EMI to clear off the loan
  • Need money for some purpose
  • REPEAT !

This is a very unhealthy sign in your financial life and you should just not be doing this because its messing up your credit report and it will cause you insane amount of trouble getting future loans

Did you pass this check?

4. Are you protected by external risks which will destroy your wealth

In technical language, I mean to ask if you have taken life insurance, health insurance, added life insurance if you have home loan or not.

Imagine, that you are saving money for your down payment of your dream house, but you don’t have a health insurance (here is a checklist on how to buy health insurance) and suddenly some accident occurs which requires hospitalization, what is going to happen?

All your money which you have accumulated over the years for your dream home will just disappear and you will be back to square one, wondering how will you achieve your goal now?

If you didn’t take sufficient life insurance and you have a home loan EMI, then you are completely gone!, then your family will either have to pay the money from somewhere or vacate the house.

As per a rough calculation, if a male aged 30-35 yrs earning 10 lacs a year, wants to take sufficient life and health insurance, he can get a 1 crore worth of term plan and a 5 lac health insurance for around Rs 20,000 a year easily. Thats just 2% of his yearly salary. I think you should calculate, and judge if its worth covering these risks or not. By the way taking your life and health insurance is a one time task.

Do you pass this check or not?

5. You will be able to handle sudden surprise expenses without external help

Do you have enough resources to handle surprise expenses or any unplanned expenses? Imagine following scenario’s

  • Your father needs 75,000 by tomorrow
  • You spouse needs Rs 1 lac which will come back after a 1 month.

Are you in a situation to arrange this money instantly (at least 2 months of salary) or not?

By instantly, I didn’t mean that it should be lying in your saving bank account, but can you at least arrange for this amount yourself without any external support or not is the main question.

Many people I know will have NO as the answer, because they either have locked the money in financial products because of tax saving or they just don’t have it. So this point actually tests how you have managed liquidity in your financial life.

Are you able to pass this check or not?

6. You are investing a minimum of 10% of your income consistently

This is related to the first point. But still lets give a better framework to it. Are you investing at least 10% of your income consistently or not? Ideally it should be maximum but can you afford to invest, lets give a number which looks possible for everyone.

So if you earn Rs 50,000 per month, you should at least be saving Rs 5,000 a month, that too consistently.

Please don’t say you started a recurring deposit of Rs 5,000 few months back, BUT later stopped it because your kids school fees had to be arranged. That does not qualify!

I think any investor has to first learn and experience what it feels to regularly invest and next comes the conversation of mutual funds, generating high returns and all that.

That’s why, I think once you start your career, you should atleast open a recurring deposit and let it run for a year. First see how the wealth accumulation looks like, and how does it feel your wealth growing.

This will give a good base to start your wealth creation journey.

Anyways, Did you pass this check or not ?

7. You are not over-leveraged beyond the danger levels

What percentage of your income goes into paying EMI’s?

The higher it is, higher is the leverage. And beyond a level, its highly dangerous. Imagine a family whose total income is Rs 1 lac a month, but they are paying an EMI of Rs 72,000 and managing everything else in the rest amount.

Imagine what all can go wrong with this situation?

A lot of people commit themselves to too much debt which looks manageable in that moment, but in long term they are a big pain.

Double Income, No kids families with too much debt

The best example I can give are double income couples, who take the loan considering that both husband and wife will keep earning and the incomes will keep rising.

However few years down the line, if wife stops working due to the new born kid (most of the cases), it becomes very tough for them to manage the EMI, and other expenses.

What is the problem here?

They planned for the “best case” and not the “worst care”. So when you plan your loans, the future looks rosy, everything looks perfect – but life is not like that. You have to consider all angles possible and in advance think about all things which can happen in general and then position yourself towards it.

As a thumb rule (which obviously does not make sense in every situation) is that one should not be paying more than 40% of their income in EMI. Keep a lot of breathing space in between. This is not applicable to you, if you are highly adventurous.

Did you pass this check or not?

8. You are earning real return in positive number

Are you earning positive real return on your investments? Which means that your post tax returns are beating inflation.

It makes no sense to earn 8% in a fixed deposit, out of which 30% will be deducted as tax (if you are in 30% tax bracket), and left with 5.5-6% return at the end of the day, whereas prices of all things are going up by 9% inflation.

So when you tell yourself –  “I have invested in FD”, in reality you have only earned a positive absolute return, but a negative real return.

Its exactly like, you can buy apples for Rs 150/KG near your home, but you went to that favorite shop 5 km away here you get it cheaper at Rs 135, only to realise later, that you spend Rs 40 in petrol.

So as a good practice, keep limited amount in saving bank, fixed deposits (especially if you are in higher tax bracket) and more and more in asset classes which will give you higher return (with high volatility, not risk) like Equity mutual funds, stocks or real estate.

Did you pass this check or not?

9. You are on a high level clear what you want from your financial life

This is one parameter which I like and its not related to numbers.

So here is my question to you – “Do you have clarity on where you are headed in your financial life?”

You have been working from last many years, and you are saving money properly and everything is in place, but what is your game? Where are you headed towards?

Let me explain you with an example

When I called one of our clients from Bangalore, just few days back – he told me he is headed towards creating his ONE crore networth in next 4-5 yrs and he is already 40% done.

I loved this, because what he has done for himself is that he is kept all the clutter out and he is highly focused on what is wants out of his money. He knows his game !

  • So are you headed towards becoming “Debt free” and working towards it?
  • Are you headed towards buying a house in next 5 yr?
  • Are you headed towards building a regular income of Rs 40,000 per month in next few years?
  • Are you headed towards spending 50% of your income each month and enjoy your life to fullest without worrying for future?
  • Are you headed towards setting up a business along with your job?

So whatever it is, it has to be very clear. Don’t go in silence when I ask you where are you headed? A lot of investors face this problem of not knowing what are they doing, why are they doing it, what they want to achieve ultimately, everything is vague and very unclear. Don’t be like that.

Are you able to pass this check?

How much did you score?

Out of these 9 points, I would like to know how much did you score and if you are happy with it? Where can you improve and whats your plan towards it? Do you think this is a good checklist which you should look each year once and ask yourself about it.

Please share your views about this article in comments section.