Tag: Beginner Level

5 reasons why you should not take Term insurance till 75 yrs !

Posted on by Jagoinvestor

Got a term plan for your family? Or may be you’re planning to take the term plan in a few days. If you are, good for you! . One of the biggest questions, every person considering term insurance has, is – “Should I take the cover for the maximum period?” . This is exactly what Chetan also asked on our questions and answers forum

Aegon provides coverage upto 75 years of age. or 20 25 30 35 40 years. I am confused which policy term is better to get maximum benefits?

Just like him, hundreds of investors have asked me this question over and over again, and I tell them, “Just take it only until you reach 60 years of age.”

And they happily ignore my suggestion; as if I am crazy, suggesting this to them. The “Insurance only till 60 years” looks kooky to them – kind of a “wrong deal” and they want to get “maximum benefit” out of the term plan. “The chances of my family receiving the  claim amount is higher when I am covered for long” is the common thought process of every person who is in the mad rush of buying the highest possible tenure.

term insurance plan for higher tenure

Trust me, that’s flawed thinking and I will explain why today. More than a sermon, think of this article as a discussion, where I put some points in front of you and you reflect and ask yourself – “Does it really make sense? or not?” and then make your own decision. So here are those 5 reasons on – why you should not take Insurance till the age of 75 years or more

1. You don’t need it beyond your working life

You really need to ask yourself the question – “Why am I taking Life Insurance?” and the answer is – “Because right now, I don’t have enough net worth, which will help my family if I am gone” or in other words – “Because my family is financially dependent on me.”

For a person who is not earning and does not bring money home, his death will cause family only emotional loss; not financial loss. Hence, logically you need to cover yourself through a life insurance product, only for the time you are working and others are financially dependent on you.

2. You will have “probably” have enough wealth by the time you retire anyway

Stretching the 1st point, if you are taking life insurance cover until you are 70-75 years, will you really need it at that time? Do you really feel that you will have any reason to have a cover of 1 crore that time (after 30-40 years?) . I am sure (more confident than you), that you would have completed all your financial goals by that time, you will have your own home by that time and you will have done everything in your life by that time. You focus area at that old age will be very different than what you focus on right now.

To understand this point, you have to stop for a moment and go into 2040-50; when you are retired and close to the heaven’s door. Are your children really financially dependent on your income – which does not exist? Is your spouse dependent on your income? You must have already accumulated enough wealth by that time and you must be getting some income out of that. Your death has nothing to do with family cash flows at the time.

3. The premium factors in your tenure already

Most of the people who feel that they are smart enough to take term plan till 75 years, forget that on the other side is a professional business running for decades now. They have hired people who are 10 times smarter, who design products (they are called Actuaries) that generate large profits for companies and not investors. Life Insurance is a “for-profit” business. They design things, so that they earn profit. If a company allows you to take a plan that lasts until you turn 75, why have they done that? Why did they allow that to happen? The premiums they charge already factor in everything. You pay premiums to get that term plan, it does not come free!

4. You will live longer – and they already know that.

Like I said in my last point, companies are “for-profit” businesses. They will not issue you a policy if your chances of living beyond 75 is not high. If you are a healthy person, already earning well, have access to good health care, what are the chances you will live beyond 75 years of age? Extremely high, that’s what!

Look around you – Are people dying early on average? No, you see people living beyond 80-85 already and here we are talking about your future which is 30-40 years away, when the average life expectancy of an average person in India would be closer to 73-76 years anyway (as per projections by govt studies.)

Now just imagine this … Compared to the 1.25 billion people in our country, are you in top 25% or lower?

Which means that you have much much better prospects to live beyond 80-85 years.  Which brings me to another point, that you should seriously worry about about your retirement planning a lot more than the less important question of insurance beyond 70-75 years.

Even when we do financial planning for our clients, we make sure that we plan for their retirement beyond 85 years and have them covered only till 60 yrs or even lower if they feel they will retire earlier. The important point to understand here is that, a life insurance coverage is just a support for your family in your early life when you are making money, your financial replacement, if you will. So when a life insurance company issues you a term plan until 75 years, it’s not you who are smart, but the company! They know, with a really high degree of probability, you will keep paying the premiums till 75 years.

It’s all chance. Yes, there will be people who will die before they reach 75 years of age and yes, their family will get a lot of money, but it really is just the game of chances … Companies make profits because of those who will live beyond 75 years and not by those who die before that.

5. The value of your sum assured is peanuts later

I hear it most of the time – “I am taking the term plan till 75 years, so that even if I die, my family will get the money. So, the higher the tenure, higher the chances of making money.” But they forget that by doing so, they are actually helping the insurance guys make profit, but lets say you die at 70 years. Celebrations! Your family will get that 1 crore, which at this moment sounds good, but will not be worth a lot that time.

Let me show you the mirror that lets you look into the future 🙂

Let’s say you are a 30 year old guy, and your monthly expenses are 40k per month. You say to yourself, “Let me take that term plan worth 1 crore so that in case, I die my family can get 1 crore which will provide them some good monthly income.”

It would be very good number if you die early in your life! . With each passing year that 1 crore will be worth less. If you die the next year of taking the term plan, the worth of that 1 crore is pretty much same, 1 crore. But if you die after 10 yrs, that 1 crore will be worth 50 lacs in today’s world. So getting 1 crore after 10 yrs is same as getting 50 lacs right now. Are you getting my point? The money you get in term plan is a constant number, not linked to inflation!

So imagine you have taken the term plan till 75 years and you die at 70 (after 40 yrs of taking the term plan), what is the worth of that same 1 crore at that time? Hold your breath! It’ll not more than 6-7 lacs assuming a inflation of 7% and even if inflation for next 40 yrs is a small 5%, it would not be worth 15 lacs today! . So when your family gets that 1 crore after 40 yrs, it’s kind of worthless. No one would be depending on that money anyway; it’s just a bonus on your children’s inheritance money!

Act like a real informed and smart investor

I have been seeing this madness for many months now and was constantly wondering why people are focusing so much on this small thing called “long tenure” in the term plan. I see investors abandoning one insurance company for another just because the other company is offering a term plan till 75 years.

You are allowing yourself to fall into a trap if you do this. If you have already taken the term plan till 75 years, do not worry … do not cancel it, just let it run it’s course. Stop paying premiums when you feel that your family can be taken care of, by the wealth you have generated. If you are planning to take a term plan right now, take it for as long as it takes you to retire, probably till 55 to 60 years, but not beyond that.

Would be happy to hear your thoughts and your views on this topic! . You have taken the term plan for very high tenure ! .

Launching our 3rd book “11 principles to achieve Financial Freedom” – By Nandish Desai

Posted on by Jagoinvestor

We are extremely delighted to share the news about the launch of our 3rd book – “11 principles to achieve financial freedom”, which is written by Nandish Desai and published by CNBC18. I consider this book as a masterpiece work by Nandish, which presents a totally new dimension to investors on how to think about financial freedom and how to step by step improve their mindset and thinking beyond the traditional thinking and ideologies when it comes to money.

When Nandish started writing the book, we brainstormed many times as we wanted to make sure the book becomes a gem of the lifetime. I read the book at every stage and re-read it 3-4 times after it was completed (as part of proof reading and to check things are fine) and every time I personally got so much learning and value out of it. I think every investor who will not read this book will loose some thing amazing in his life.

11 Principles to Achieve Financial Freedom - Personal Finance Book by Nandish Desai
Pre order Book

What is the Book all about – “Forward” from me

The best way to give you an idea about what this book is all about, I am putting the “Forward” section which is written by me specially for the book. It will clearly give you the understanding of what this book is all about.

Right now, what you are holding in your hands is not just a book, but years of effort and creation. Nandish and I started our career making financial plans and somewhere we started to realize that many investors’ financial life was changing after having a financial plan in their life. After a lot of research, we concluded that a financial plan was just one part of the process and other elements were required to live an awesome financial life. This book is about those elements that we have discovered over time.

We challenged the traditional financial planning process a few years ago and that is how our financial coaching program came into existence. This book is based on our financial coaching program that we have conducted with over 100 people spread across the globe.

With this book, we invite each investor to look beyond financial products and returns, and look at wealth creation as a game. Most investors make investments out of compulsion and out of need; the core message of this book is to see wealth creation as a project and will teach you how to fall in love with the process of wealth creation.
There are books that follow the trend and there are some books that set the trend. This book falls in the latter category; it is here to set the trend in the personal finance world.

Discovering who you are as an investor

Most investors are in search of solutions and answers; this book is not about getting answers, but about discovering who you are as an investor and gaining insights on how you can connect with your true wealth.
Nandish has written this book after working with hundreds of people. I am sure this book has the power to change your financial life; to some it will act as a wake up call, to some it will help them discover who they are as an investor, to some it will help them add different dimensions to their financial life.

While I was going through the initial draft of this book, I was convinced that this book would be a game changer not only for investors but also for financial planners. This book is simple and yet powerful and it will leave a deep impact on you as an investor.

There is a lot of hype around the words “personal finance” and “money” out in the world. While you are reading, this book will teach you to fall in love with the process of wealth creation.

Working with a Financial Coach

The narrator of this book is Sam, an IT professional based in Mumbai, who shares his experience of working with a financial coach. This book is not a story but it has conversations between Sam who is a lost, confused and directionless investor and his financial coach. They both meet and Sam participates in a program called the “90 Day Money Game.” The coach invites Sam to work with him for the next 90 days. The money game has 11 exciting levels that span the next 90 days.

Sam is a confused investor full of fear with a pessimistic view about his financial life before meeting his coach. But with each passing level, as his financial coach teaches Sam, his life starts changing as he implements the elements of living a great financial life and incorporates changes in his thinking and attitude towards various things. As Sam starts experiencing a big shift in his financial life, he starts to experience a new level of enthusiasm, positivity and motivation. With each passing level, Sam identifies why his financial life was a mess and how his whole life offers great possibilities.

The book teaches that an upgrade is always available in life. At the end of the 90 Day Money Game program, Sam is now a totally new Sam. He calls this his journey from Sam 1.0 to Sam 2.0.

If you also feel that you need direction, motivation and some exciting new ideas in your financial life and you want to move towards financial freedom, this book is for you. Nandish is an amazing financial coach in real life who has worked with hundreds of investors and changed their lives. Now it’s your turn!

11 levels inside the book

The book is beautifully written where the coach takes a person called Sam through 11 levels, each of which fuels a new thought inside the investor mind and opens up his thinking level in a totally new direction. Here are those 11 levels (chapter names), may be you get some idea about them by name of the chapters.


[table]

Level 1 Laying a strong foundation
Level 2 Creating new relationship with money
Level 3 Investigation begins
Level 4 The game changers
Level 5 Don’t set goals, set yourself
Level 6 Create system to create wealth
Level 7 Mastering game of financial freedom
Level 8 Active income vs. passive income
Level 9 How wealth is created
Level 10 How to increase your income
Level 11 Make each year your best financial year

[/table]

A small taste of the book content

Let me share with you 1-2 pages content from the book middle chapter, so that you can get a taste of the book

Personal finance is a level 3 promise

My coach said that 90 Day Money Game is all about making and keeping promises. Personal finance is not about gathering knowledge; it is a game of promises and actions.He taught me three levels of promises, which helped me immensely. Let me share what he taught me. He asked me to close my eyes and asked me three questions.

How good you are at keeping your professional promises?

I replied, “I am extremely good at keeping my professional promises.”

How good you are at keeping your personal promises? (With family and friends)

I replied, “I am not that great at keeping my personal promises. I keep them at times and break them at times.”

And how good you are with promises that you make with your own self?

I replied, “I am very bad in this area. I have a series of broken promises.” This question made me feel very guilty as I could see many such broken promises in my life.

He then asked me to open my eyes. He wrote on a white board


[table]

Level One  Professional promises  You keep them always
Level Two  Promises made to family members  You keep them at times
Level Three  Promises made with self  You break them all the time

[/table]

Professional promises: He said, “Sam you are good at keeping your professional promises, when a new task is assigned in your professional life, you really make sure that you give your best. Your colleagues see you as a committed person. You feel so proud when your company and its people see you as a committed person. You really do whatever it takes to fulfill your professional work commitments. At times you become a warrior, you work extra hours, take your work home but you make sure that the promises are kept.”

Promises made to family members: He asked me whether I had broken promises with my family members. My answer was “yes.” I could see that I have not taken my personal promises seriously the way I was with my professional promises. I could see the GAP between both levels.

Promises with self: This really came as a shock to me as he asked me how many broken promises I have with my own self. I could not even count them, as they were so many. I could see myself as a master killer when it comes to breaking promises with self. Every day I used to make a promise of waking up early and going for a morning jog but never went.

3 levels of promises

My coach said, “You are good with your professional commitments, you are ok with your family or personal commitments and you are the worst when it comes to making and keeping promises with self.”

Going for exercise every day and personal finance actions falls in third category where as an investor you need to make promises with yourself and then complete them. At a family get together or in any business conference no one will ever ask you whether you are consistent with your investments or not. No one will ever ask you whether you are paying your premiums or making your investments on time or not.

I got a very important lesson that quality of my financial life depends on how many promises I make and keep with myself.

He said, “Every time you have a broken promise, you are going away from your cheese.”

This was a big lesson for me, which I wrote in my wealth journal.

Learning – Personal finance is all about making and keeping promises

Want to join Action Revolution ?

For those who are promising themselves that they will take some actions in their financial life, we are coming up with an amazing action oriented program which we are calling as “Action Revolution”, launching on 1st May – Be on our email list to get the first chance to register for it. CLICK HERE

This book is 3rd one from jagoinvestor team . We have also published 2 other books . You can look at our books page to get all information about the 3 books.

Pay Rs 50,000 or buy this book

Nandish has worked with over 100+ coaching clients (we offer a program called financial coaching at Rs 50,000 at the moment). This is the best way to get exposed to what is it to work with a financial coach personally. So I would say, you should not even think for a moment and grab this book asap.

Is filing FIR compulsory for issuing duplicate passbook in PSU Banks?

Posted on by Jagoinvestor

Ayush lost his SBI bank account passbook and faced some issues from SBI bank, which I thought should be shared with others . Here is what happened with him. Read it directly from him (through our jagoinvestor forum)

Hello everyone. I recently lost my SBI savings account passbook unfortunately somewhere in my home. When i approached the branch, they said i need to file an FIR in the nearest Police Station. They said without it they will not issue me a duplicate passbook. When i went to the Police Station, after making me wait for an hour, officers were asking me for a bribe to file an FIR. : ) They were also asking for my complete account and other personal details. I hesitated to disclose any personal details to anyone. I thought i should avoid having an argument with them. So i came back home without filing an FIR. Isn’t it too much to ask for, for just issuing a simple duplicate passbook?

I also have accounts with HDFC and ICICI Bank, one for expenses and the other one for savings and investments. In HDFC Bank, they issue the passbook on the same day in case of loss of passbook. You just have to give a written application to them and its done within few minutes. Now i am thinking of leaving the SBI account dormant after leaving the balance to zero. It is so much of a headache. : ) I only opened the savings account with SBI because they have the best network of ATMs in the country. Is filing FIR in Police Station compulsory for issuing a duplicate passbook?

Is FIR really required to claim the duplicate Passbook Copy ?

The answer is NO .

There is no requirement like that . As soon as I read Ayush question on our forum, I was very clear that SBI employees whom he contacted just didn’t wanted to work and wanted to have an easy day in office, so they misguided him by telling that he needs to have a policy FIR for this, which actually worked ! and Ayush was back to home frustrated, promising himself that enough is enough and he does not want to SBI bank account at all. I feel SBI needs to seriously work on its employees and train them on “Customer Handling” .

Procedure to get the duplicate passbook from bank

The process is as simple as anything . Pattu (very active on our forum) shares 

I have lost my SBI passbook twice and got it replaced. There is no such rule. These days they have our photo and signature stored in the computer. So if the account holder turns up and gives a request for new passbook they will have to comply.

Even Naveen shares his parents experience 

Let me share my exp with SBH , where both my parents have sb accounts. My father needs passbook entries because he is not comfortable with debit card transactions and not having much knowledge about internet etc… He kept both passbooks at some location and couldn’t recollect where they are. Later, i have been to SBH branch and paid a challan paying slip( below 50 I remember 3yrs back) for both the accounts and submitted receipts to clerk, where i have been told to come at 4 pm later on the same day with both my mom and dad passport size photos…

Passbooks are ready and photos are pasted and stamped with bank seal and submitted to me on the evening itself. I felt happy for the service bcos my parents cant travel long to do this by themselves..

Give them RTI shock !

I had explained earliar how you can use RTI against PSU banks to get any kind of information and that’s exactly I suggested him. I suspect that SBI guy who told him that was not in the mood to work that day and just wants to tell you things which will make sure his work decreases.  I would say go to the SBI bank branch and tell that officer that you filed a RTI and put his officer name and asked them that what this officer is telling me is really required or not and RTI reply said that – There is no requirement like that . Demand him to meet bank manager and confirm it.

Finally what happened ?

After we all helped this guy on forum, he went back to bank branch and applied all that we told him. This time it worked and here is what happened –

 I went again to the branch and this time the same lady officer who was persistent for filing an FIR said that it is not compulsory. I was amazed by her reply. I also felt angry that i have to make two trips to the bank for this. The lady officer said, i have to talk to the Branch Manager in this regard and if he agrees, she will issue me the duplicate passbook. So i waited for another 1 hour since the Branch Manager was not in his room. When he didn’t came for another 15 minutes, i left for home. So i have to make another trip to the bank. This time i will directly talk to the Branch Manager and if he doesn’t agrees i am done with the bank. I will leave the account dormant after leaving the balance to zero. So much for issuing a simple passbook. : )

What do you think about this incident ? Do you feel PSU banks exploit customers ? Any personal cases ?

RSU, ESPP and ESOP – Understanding Meaning and Taxation

Posted on by Jagoinvestor

Most of the people who join their first job,  get benefits like RSU, ESOP and ESPP as part of their CTC package (infact this is how employers show a high CTC while recruiting).However most of the employees do not understand these things in the beginning. Over the next few months, they start getting some knowledge about these benefits as employee.

A lot of people confuse these 3 things with each other and often do not have a full understanding of what they mean and how they work and what are the tax implications when they exercise their benefits.We will now take each one of these and understand them.

employee benefits RSU ESOP ESPP India

In this articles lets understand all these 3 things – RSU , ESOP and ESPP in detail.

1. RSU (Restricted Stock Units)ESOP

RSU or Restricted Stocks units are very simple to understand. The Company gives company Stock to an employee without any conditions, however there is a vesting period involved. Vesting Period is the tenure for which you will have to wait, before you can claim those shares. So if a company gives you 100 RSU vesting in 2 yrs. That simply means that after 2 yrs, you will get 100 stocks of the company. It will be all yours and you are free to keep them or sell them after that. RSU’s are also a great way to reward the employees, like in 2012 WIPRO awarded 4.5 million RSU’s to its 1200 employees (mostly top management).

RSU’s are a great way to make sure that the employee stays with the employer for long term. Imagine a company, who gives 1000 RSU’s vesting in 4 yrs. An employee will thinking many times before changing his job, because if he leaves the job and moves to another company, then he will loose those RSU’s, which might be worth a lot of money depending on the stock price. I had myself got RSUs from Yahoo, when I joined them, but due to their declining stock price over so many years, RSUs were not a great motivator for me. It was just a bonus amount for myself.

RSU can also be given in phased manner sometimes, like 25% RSU each year. So if company is giving 100 RSU’s with condition of 25% RSU vesting each year, then 25 shares will vest in first year, then another 25% in 2nd year and like this, only after 4th year, an employee will be able to get all 100 stocks.

Its worth noting that if you leave a job, a lot of companies require you to sell your RSU’s in next few months. for example next 3 months.

2. ESOP (Employee Stock Options)

Employee Stock Options or ESOP are generally given by most of the big companies in India, especially IT companies which are listed outside India. ESOPs are nothing but “OPTIONS”, which are also in stock market in India (remember Future & Options?)

Let me tell you what Stock Options are in general. If a person has a Stock Option, he actually has a right to BUY a stock in future at a pre-decided price agreed at the time of giving those stock options. So in future whatever is the market price does not matter, you always have an option to buy it at the price which was agreed upon. In this case if market price of the stock is above the pre-decided price, then you can just exercise your options of buying the stock and instantly you will be in profit. If however, the current market price is less than the pre-decided price, then you choose not to exercise the stock option at all and nothing happens.

Let me give you an example. Let’s say that an employee joins a company on 1st Jan 2013. His company gives him 500 ESOPs with vesting period of 3 yrs and at the vesting price of Rs 200. What this means is that his vesting date is 1st Jan 2016 (after 3 yrs) , On that date, he has a OPTION to buy 500 stocks of the company at Rs 200 if he wishes. Now lets say on 1st Jan 2016 …

Case 1 – The stock price is Rs 800

In this case, the employee can exercise his option and he can get 500 stocks at only Rs 200 . At this moment, the employee will make a clean profit of Rs 600 each shares and a cool Rs 3,00,000 . Note that he does not have to pay anything here, when he exercises his option, he will automatically get his profit without putting anything from his pocket. It makes sense to exercise his option in this case, because vesting price is less than market price.

Case 2 – The stock price is Rs 130

In this case, it does not make any sense to exercise, because you will be in loss, because the price you have to pay is less than market price, so you let this option go.

Note : In case of stock options, you can never make any loss, it will always be some profit only.

3. ESPP (Employee Share Purchase Plan)

ESPP or Employee Share Purchase Plan is a benefit given by employer to its employees to purchase the stock of the company at a discounted price. In an ESPP plan, an employee has to contribute a part of this salary in ESPP plan each month. An employee can choose how much of his salary he wants to contribute by himself. It can range from 1% to 15% of his salary. All the money which he contributes gets accumulated for few months and then in one go, stocks are purchased for him at some discounted price. On what price the discount will be given depends on your company EPSS plan. However in general its the minimum of the prices in the start of the EPSS plan and at the end of the ESPP plan. Let me give you an example.

Suppose your company offers a ESPP plan twice a year which you can opt for, one window opens is Jan-June (where you can join in Jan only) and other is July to Dec (You can join in July only). So you will have to tell the company how much you want to contribute each month before hand. If you choose it to be 10% , then 10% of your salary will be cut for ESPP plan and you will get the rest in your hand.

Now suppose a person chooses Jan-June window and he is contributing 10,000 a month for this, then in next 6 months, he will accumulate Rs 60,000 for ESPP, and now at the end of the Plan he will be able to get the shares.

What will be the share price considered for him ? 

Let’s say that the stock price in the start of the plan (Jan month) was Rs 100 and the stock price at the end of the plan (June) was Rs 120. Then the stock price considered for him will be minimum of 100 and 120 , which is Rs 100 and on this he will get 15% additional discount and his final price would be Rs 85 only.

Note that this example is assuming that minimum of two is taken , your company EPSS might just consider the “starting price” or “ending price” .. So please look at your company EPSS plan in detail.

When to choose ESPP plan ?

ESPP is a great way to get the stock price at discount, but one should anyways take care of few things. If company’s future prospects look great in future, then one should buy the stocks anyway, so ESPP becomes a great deal where you sure shot get 15% discount. However if company’s prospects look bad in future, then you have to figure out if it’d make any sense to go for ESPP plan or  make a better use of your money elsewhere.

Below is a video from Salesforce which explains their ESPP plan, watch it to get a feel of how EPSS works ?

 

Taxation on RSU, ESOPs and ESPP

The taxation for RSU, ESOP’s and ESPP is governed by same rules, as all of them have to deal with stocks which a employee acquires and the taxation is pretty simple to understand. There are just two rules.

Tax to be paid in India

When you sell the your RSU/ESOP/ESPP (after vesting period is over) and get back the money, its your responsibility to pay the tax on the amount in India. How much tax is to be paid by you, depends on the nature of the gains. If you sell the shares before 1 year of acquiring the shares, then the gains are called Short Term Capital Gains (STCG) and if you sell the shares after 1 year, then the gains will logically be Long Term Capital Gains.

If stocks are listed in indian stock exchanges, then you have just have to pay 15% tax on Short Term Capital Gains and no tax on long term capital gains. However if stocks are not listed on indian stock exchanges, but some foreign country, then you will have to add the short term capital gains tax in your income and pay tax as per your slab rate, and 20% with indexation on the long term capital gains, which is the case when STT is not paid when the transaction is done.

Below is the simple table which will explain things to you

[table]

Listed/Gain-Type Short Term Capital Gain (Less than 1 yr) Long Term Capital Gain (More than 1 yr)
Stocks Listed on Indian Stock Exchange 15% Tax on Profits No Tax
Stocks NOT  Listed on Indian Stock Exchange Profits will be treated as your Income and taxed as per your Slab 20% with Indexation

[/table]

Incase Stocks are listed on Foreign Stock Exchange

In these cases, it might happen that when you sell your RSU, ESOP’s or ESPP, the tax is directly cut by the trading portal like etrade (in US) and you only get reduced number of units (after tax). After that when you take the money back in India, you might have to pay the tax on the income again if the double tax treaty is not available with that country.

I hope, you got a lot of clarity about RSU (Restricted Stock Units), ESOPs (Employee Stock Options) , ESPP (Employee Share Purchase Plan). These are some of the benefits employees get and understanding them is very critical for them. Please share if you have any of these benefits and if you had any confusion around them?

Do not close your Loans – If you want to improve your credit score!

Posted on by Jagoinvestor

Do you have a loan and want to close it as soon as possible? I know the answer is YES! . Everybody wants to get rid of debt and want to enjoy a debt free life. But, what if I give you a good enough reason to not close your loan and keep paying your EMI on time? And if I suggest you do that even if you have a lot of spare cash which you can use for paying of the loan. Lets see …

Improve your Credit Score - Do not close Loan

There are many people who are paying their previous loans, but when they apply for some new loan, its getting rejected because they have some bad credit record in past either due to settlement of some debt or because they have a bad payment record. This creates a very frustrating atmosphere, where you want to do something which you instantly make you a “good” customer. A big myth people have is that just because they have a loan going on, they are having a bad credit score, and because of this myth, they want to close off their existing loan.

However this is not true! Let’s see an incident which happened with Nagarajan

I was holding two home loans since 2000. I am a well paid professional drawing good salary, however due to frequent transfers my Post dated cheques were not replenished resulting in non-payment for over 6 months, Also due to some signature error a few times, cheque bounces happened, but they were repaid and corrected .

I dont posses any credit card. only debit cards were used regularly for any financial transactions. 6 months back a personal loan enquiry got rejected due to very bad credit score ( 450 only). so immediately I wound up all the loans ( 4 months ago). now I am loan free and no credit card holder. how long will it take to recover my credit scores ?

You would see how Nagarajan closed his loan thinking that his loan eligibility would increase because his credit score will improve. However what he did was totally wrong and the right thing was to just continue paying his existing loan. Lets see why.

Paying EMI regularly is a Opportunity to show your repayment capability

If you look a little deeper, you’d realize that your existing EMI payment is one of the only ways you can showcase your repayment capability. When you make EMI payment on time, this information is updated to credit bureau (CIBIL etc) by your existing lender and if done on a regular basis, it affects your credit score in positive way and also improves your credit report . Your Days Past Due (DPD) section in CIBIL report also gets positive because your recent information for last 36 months is there in the credit report.

So now I hope you are clear about the importance of paying your EMI on time on regular basis. Its one of the only ways you can build your repayment record and improve your credit score. Do you have a credit card or some kind of loan? If yes, then it might make sense to keep paying their dues on time just for making sure that you build your repayment history!

Can you share some thing related to this from your financial life ?

Mistake in your Medical report while taking Term Plan – Real Life Experience

Posted on by Jagoinvestor

What happens when your hospital goofs up and your term plan premium goes up because of that mistake? When you take a term plan, the insurance company either asks you to take up medical test in some hospital or a doctor comes to your home and does the checkup. Things mostly go well and at times some kind of health issue comes up, and you say

“Ahh … you say, I didn’t know there was this issue, Thank God! a medical test was done.”

Then the insurance company increases the premium because there was some issue in your medical report. You pay the increased premium, feeling secure now that things are black and white. But, what if the medical report was wrong because of some mistake the hospital made? What if there was a TYPING Error? Yes! It happens and we have a real life experience today.

wrong medical report term insurance plan

Nitin shared his experience on our Question and Answer forum while buying his term plan from HDFC and Aviva. Below are his experiences

Experience while buying HDFC Click2Protect

After some analysis I found below 2 plans suitable for my term insurance needs: [list style=”check”]

  • HDFC Click2Protect
  • AVIVA i-Life

After considering some factors, I had chosen HDFC Click2Protect and applied for it. My medical test has been performed in 4-5 days. Few days later I got notification from HDFC that my proposal is postponed because of ‘elevated level in my blood sugar’. It was a shocking news for me because I am a healthy person and never had any problem (touch wood). I called hospital people (where my medical check-up was conducted) and after request they informed me that my sugar level count is 173 (normally it should be between 70-100). I still not believed that and went for medical check-up again by myself and found sugar level count is 72(which is normal).

Then I decided to go for AVIVA i-life plan and applied for the policy. Fortunately/Unfortunately, my medical examination was scheduled at same hospital, where it was conducted before for HDFC. This time I carried my medical report (which I had done by myself) and asked hospital about the reason for differences in both reports. According to their report my count was 173 & according to my report count was 75. They checked again and found that it was a TYPING MISTAKE, actual count was 73 but they wrote it 173 by mistake.

Now, because of this mistake HDFC postponed my application & also my insurance records gets affected. Hospital GM apologies for the mistake and sent clarification note to HDFC about the mistake. Currently, my AVIVA application is under processing.

Lesson Learnt & Message DON’t trust on any medical report if it looks surprised for you. Please double check it with multiple doctors or Hospital if you think it is not correct and challenge it.

After this incident, he went for Aviva Term plan and the same kind of issue happened this time also. Below is the experience.

Experience while buying Aviva Term Plan

My medical examination for AVIVA ilife plan happened in same hospital (where I had for HDFC C2P plan). After few days, I got information from AVIVA that they have raised my premium by 50% because of ‘Increased liver enzymes’ in my body and waiting for the balance payment to issue a policy. It’s again a shocking news for me, since I didn’t expect it this time. But the good thing is that AVIVA has shared my medical report with me. I checked with 2-3 doctors about my report and according to them this increase in liver enzymes is possible for those people who drink alcohol or having fever in last 1 months.

But for my case, I don’t take alcohol nor having any fever in last months, so doctor suspect that this time also report may be not correct. So again, I went for a medical test (only for Liver part this time) by myself and found that my liver report is NORMAL (as expected). I informed AVIVA about the same and also shared my Normal medical report. After 2-3 days, finally got mail today that they have issued my policy without any extra premium. Hmmmmm……buying a online term insurance looks like winning a war for me.

Important Points Regarding Medical Tests

  • Make sure you do minimum 12 hours of Fast before the medical tests
  • After doing the medical tests, check if you can get the medical test copies or at least the results
  • For any point you are concerned about, better take a second opinion from another clinic
  • If possible, go for medical tests once again at your own cost to double check if you suspect anything

Did you double check your medical reports which you did for your term plan or health insurance plan? If not, its time to just have a second look and check if you are fine with it.

Sheconomy – The Wise Women Investor (TV Show by DSP BlackRock)

Posted on by Jagoinvestor

DSP Blackrock Mutual Funds have started a Women Financial Literacy called – Sheconomy , which is a TV initiative under their Winvestor program in association with CNBC TV 18. The aim of the initiative is to guide independent women to adopt wealth creation strategies by answering their queries on personal finance and helps them become informed investors.

Sheconomy - A women financial literacy Initiative

The show launched on 12th Jan 2013 with a panel discussion featuring a prominent matrimonial lawyer and a female psychologist who passionately believe that women must take care of their own finances. This is followed by seven episodes with various clusters of women such as homemakers, women entrepreneurs, working women, young mothers, senior citizens, fresh graduates and even a special episode with men and women talking to our Winvisors who answer queries and provide investment advice. The last episode would also be a panel discussion with some prominent women who passionately believe in the idea, share their views and experiences and talk about why they feel women need to be in charge of their own financial future.

The show airs every Saturday at 6 pm and is repeated at 4 pm on Sunday on CNBC TV 18. All the women investors should watch these shows if they want to learn more about personal finance and managing money. We feel women investors can greatly inspire other women investors. Three episodes are already aired, if you have missed them, you can watch them below .

Episode 1

Episode 2

Episode 3

Below are the names and schedule of all the 7 episodes of the Sheconomy initiative.

Episode Structure

Name of Show Show Timings Importance
Homemakers 19th Jan’13, Saturday at 6 p.m. A homemaker plays an equally important role in her husband’s financial success as well as her own. Though this cluster of women don’t typically take up jobs, investing the money their husbands allocate to them for personal expenditure could prove to be of great help in time of need.
Women Entrepreneurs 26th Jan’13, Saturday at 6 p.m Apart from all the investments which other women do, this cluster of women has another investment priority in their life ‘Their business’. It becomes imperative for them to invest in instruments that is not only safe but also provide the quickest returns so that money earned could be deployed into their business from time to time. Investments needs of women belonging to this cluster tend to be more dynamic than the rest
Working Women (Unmarried/ married) 2nd Feb’13, Saturday at 6 p.m. Women in this cluster have the highest disposable income and the least responsibilities hence providing ample scope and capital for planning investments. The married women of today has come of age from being the typical housewife, in fact getting married is the beginning of various responsibilities that a woman needs to share  with her better half at all times- Planning a baby, Bigger house, Better lifestyle, Retirement plan, monthly family budgeting, aging in laws and parents. There is an entire menu to choose from.
Young Mothers 9th Feb’13, Saturday at 6 p.m. Mothering calls for the best in women. With this emotion in mind a lot of young mothers have various aspirations for their kids; these aspirations come at price which one needs to be prepared for well in advance. A good investment made from the beginning can help young mothers to provide their children the best and fulfill all their dreams, even if you are a single parent.
Senior Citizens 16th Feb’13, Saturday at 6 p.m The life expectancy of women is higher than men So, the amount of retirement savings for women should also be higher. Statistics show that, on an average, women live 5 years longer than men, earn 25 percent less during their life time and work 11 years less in their careers and not many women are even aware enough of all of this. All these factors put together make this cluster of women extremely important to address when it comes to financial planning.
On ground forum with Men Date yet to be finalized A forum with the modern man on why he should encourage and empower the women in his life to take their own financial decisions. An educative forum for men that will teach them the upsides of their women being financial independent.
Fresh College graduates/ post graduates Date yet to be finalized Catch them young and make them grow a quote completely apt for youngsters who are about to plunge into their first corporate job. The need to understand basic money management skills such as living within a budget and handling credit and debt can lead to a solid financial foundation that in turn can lead to a lifetime of financial success.


What do you feel about these kind of initiatives ? We have also done a women centric 2 video series for our wealth members, incase you are already a member you can watch the series here .

Jagoinvestor Workshop in Mumbai – 10th Mar (Sunday)

Posted on by Jagoinvestor

We are conducting our next workshop in Mumbai on 10th Mar 2013 (Sunday). We call the workshop as “Design your financial life” . The whole idea of the workshop is to go beyond the numbers and products and talk about the real issues which can take your financial life to next level. In this workshop you will spend an entire day enhancing your thinking level and exploring the full potential of your financial life. There will be lot of interactions, some exercises and powerful conversations which will give your financial life a new shape. We have conducted same workshops in Pune, Bangalore and Lavasa till date and will be doing it in other cities soon. Below are some of the past participants testimonials

Register for the Workshop in Mumbai – 10th Mar

City Mumbai
Date 10th Mar, 2013
Where Hotel Tunga International, Andheri (East), Mumbai
Fees Rs 3,500
Registration Link Click Here
Go to Workshop Page Click Here

Note : Registration will stop before 1 week


View Larger Map

We are going to have only 1 event in each city each year. So if you wanted to attend these workshops, this is the best time to register for it. There are limited seats and huge demand from Mumbai readers for this workshop, so book your seats as soon as possible. We want to encourage financial literacy among women and for that reason, we have also discounted the pricing for couples. We really want husband and wife to attend the event together, which will make sure they are both clear about their financial life and how they need to design it in future. We have kept the tickets pricing in such a way that its affordable to most of the people. The event is at Hotel Tunga International, which is at Andheri East and being Sunday it would not be much issue travelling.

We really want these event to be your event and not just a jagoinvestor event. Its an opportunity to spend a full day dedicated to your financial life. We really encourage people to take those 10 hours for out of 1 full year and just focus on how you want to shape your financial life for future. There will be lot of sharing’s , conversations on money and some exercise’s which will really help you get a deep insights in the area of personal finance.It might be the case that you are interested in this workshop but not registering right now , in that case just let us know that you are interested and still thinking.

My Second Book – “How to be your own Financial Planner in 10 Steps”

Posted on by Jagoinvestor

I am happy to share this news with you all, that my 2nd book is going to release in next few weeks, whose title is “How to be Your Own Financial Planner in 10 Steps” . The book is published by CNBC 18. The book is now ready for pre-order, so you can order it now, it will be delivered to you as soon as it hits the stores which will happen in just few more days.

How to be your own Financial Planner in 10 - Financial Planning Book in India
Pre order Book

About the Book

By the time you complete this book, your financial life will have taken new shape!. You will have worked on 10 different areas of your financial life, in the same way a certified financial planner works with you. The book has the ability to guide you on how to plan the 10 most important areas of your financial life. There are two types of investors in India, those who plan their financial life and those who plan nothing and just let their financial live move with the flow. The second group is extremely large, and this book is targeted at this group.

Many investors who are DIY (Do It Yourself) investors can use this book to plan their financial life and be their own financial planners at some basic level. The book has the 3 elements of education, planning and action items all packed into one. Written for the common person, in simple language, the book deals with the most important financial worries and questions.

What are you waiting for ?

Anyone who feels that he can do his own financial planning and with a little support and direction he/she can plan his financial life, then one should buy this book. There are 10 chapters which cover 10 different areas of your financial life and helps you understand those areas, what you need to do about it, how you should mess it up and guides you to plan it out in simple and easy language. Each chapter has action oriented exercise at the end of each chapter, so while you go through each chapter, you will keep on making your action item list and finally complete things. I would say grab the book today, because this is the best it can be. If you need external support, you can always go for our online financial advisory services.

UPDATE – First Book Name is Changed

I have one more news to share. My first book “Jagoinvestor – Change your relationship with money” was a great success. However we are changing its name to “16 personal finance principles every investor should know” to make sure that the name of the book reflects what the book is all about. The book content is exactly same, just the name is changed now. So its now in new avatar.

16 personal finance principles every investor should know Financial Planning Book in India - Personal Finance Book in India
Pre order Book

Thanks for your love and support, because of this awesome community, it was possible to give shape to these 2 books. While the first book is more on the principles of personal finance which every investor should know, the second book is all about planning and taking action. I would be waiting for your reviews about the book.

Check your Income tax refund status online & Learn how to use RTI

Posted on by Jagoinvestor

Do you have any idea about your income tax refund status ? Have you filed your Income tax return long back, but have no idea when will you get your tax fund?

This is one issue faced by millions of tax payers in India. They file an income tax return where they claim back their income tax refund, but have no idea what happens to their cases after that!

Income tax refund status online

For months and years, they keep waiting for the refund status, but they have no idea when they will get their money back. Ideally they should get it back in few months, but in many cases they wait for as long as 3-4 yrs.

In this article, we will see how you can find out your income tax refund status online and how you can use RTI application to find out the status of your tax refund and speed up the process of getting it back.

How to find income tax refund status online

If you have filed income tax return asking for your tax refund, and you have no clue about the current status, the first thing you do is track its status online. All you need is your PAN number and assessment year for which you have applied for refund. Here is what you need to do

Income Tax Refund Status Online

You can also track your income tax refund status by contacting the help desk of SBI at 080-26599760 or contacting the Aaykar Sampark Kendra at 0124 2438000

File RTI application for income tax refund status

If you are not able to do much and you feel that just finding out online status is not helping you and you want to now get 100% clarity about your tax refund status, the next step is to file RTI application against income tax department.

We have earlier seen how one can use RTI to find EPF withdrawal or transfer status and how their issues were solved within weeks and months of filing a RTI against EPFO. So your next step is to file RTI in your tax refund case also. But you should wait for at least a year before you file for RTI against the income tax department.

Note that the RTI application has to be addressed to CPIO officer. Now the next question is how to find out the CPIO information. It’s actually not organized in a clean manner, but you need to start by going to this website https://www.incometaxindia.gov.in and then on that page you need to choose your state (your jurisdiction) from the drop down and click on “go.”

It will take you to the next page where you need to click on “CPIO/CAPIO” and play around to find out the exact place where they have dumped all that information. Below you can find a RTI template which you can use.

Download this RTI template for income tax refund

What should you ask while filing RTI

  • You should ask for name and designation of the officer who is supposed to process your income tax refund claim
  • Also ask for the officer official address and his contact number
  • Also ask for how long the refund is pending with the officer and the reason for the delay
  • Ask if some senior authority has instructed for delay and the certified copies if any
  • Also ask for the name, telephone number and address of the higher officer with whom you can file the first appeal

These above mentioned 5 things if asked in RTI, will be enough to move the earth below the concerned authorities feet and they might act faster on your case, because in most of the cases there are no valid reasons for delay. The delay is created just because of lethargy and at times in expectation that someone will visit them and bribe them to process the request!

Note that only the concerned person can file the RTI, no one else on his behalf can file it. In case you have tax refund for different years, better file separate RTIs for each. Do not mix them into one.

Tips while filing for Income Tax Refund

There are few well known mistakes people do while filing returns, because of which income tax refund delays happen. Let’s see those points and make sure you don’t do them.

1.Make sure your give permanent Address

A lot of salaried people, who live on rent, give their present temporary addresses while claiming tax refund, and when after 1-2 years their tax refund cheque arrives, in many cases the person has moved out of the current location. This causes the cheque to return back and the person is not there on the given address.

So make sure you always give the permanent address where you or your family lives and there are almost no chances of cheque returning back.

2. Give accurate Account Details, IFSC code

There have been cases where the account number given was inaccurate by 1-2 digits or the IFSC code was wrong, and that created the problem. This small thing can result in lot of frustration later, so double-triple check these details.

3. Try to do E-filing of your tax returns, if possible

As far as possible, try to file your income tax returns online and apply for tax refund, because the tax refund is much faster if e-filing was done. In case you are filing offline manually, make sure you fill form 30, contact your CA if you want to delegate this totally to someone else!

Conclusion

If you have been waiting for your tax refund from years, it’s the time to file a RTI application for it and find out why your income tax refund has been delayed for so long.