Five Old-School Ideas That Still Work
Five Old-School Ideas That Still Work
"A father is a banker provided by nature." When we were kids, we often saw our fathers doing the best in terms of managing the finances and providing the best for our education and other needs. We often wondered how did our father do such a good job with limited finances? Well, the financial practices and behaviour of our older generations have evolved and some old-school finance ideas used by our forefathers have stood the test of time and continue to be effective. Some of these are:
Many of us have noticed that our father would keep a cash-flow book where all our inflows and outflows were noted. We frequently tend to keep incurring expenses without keeping track of them. As a result, a lot of us find ourselves broke before the end of the month. Thus, we should keep a cash-flow journal so that our consumption can be tracked and carried out appropriately to avert this. The availability of numerous digital diaries for free can make maintaining records easier. Further, keeping a record and filing all of our utility bills, bank statements /passbooks, invoices & warranty cards of purchases and other basic things is also an age-old practice that probably most of us would have learned and followed from generations. This could serve as an important way to maintain track of your expenses.
Envelope budgeting is a concept that has been practised for several generations now. Many of our materialistic expenditures are planned even before we make a budget at the beginning of the month. We have a history of following the trends to keep our social status. Because of this, we frequently overspend, which causes us to reduce our savings and investments. Since an expensive purchase today could cause us to fall behind on our financial goals, this issue needs to be remedied. Therefore, budgeting should be done methodically and rigorously. Envelope budgeting is a simple practice whereby we put money into different envelopes or categories at the start of the month and then start spending on our relevant expenses by withdrawing from the related envelope. You may sometimes have some money left by the end of the month i.e., you have spent less than what you have budgeted for, you can make use of this by adding an extra amount in ongoing investments. You can carry this practice of budgeting either by using physical envelopes, or this can nowadays be maintained in the form of digital accounts, budgeting apps or simply having different bank accounts or wallets used for different expenditures.
Any savings left idle in our bank account causes our hands to itch. The equation, "Income (less) Expenses = Savings' is often true for us. Any income balance available to us makes us feel rich and we tend to spend it on shopping, entertainment or crossing items down the bucket list. We often make impulsive decisions on our expenditure in the mistaken belief that we have enough money. So it's best that we change this equation to, 'Income (less) Savings = Expenses' as early as possible. A SIP in mutual funds schemes can make this happen easily whereby SIP investments would be deducted at the start of the month. Transferring your income towards an investment, which is the best possible way to make it useful. This will also put your unplanned and impulsive spending in check. This simple approach of keeping money out of sight or reach, if aggressively practised, can do wonders for your financial well-being and could help you in bringing discipline towards your investments.
In today's hasty world, work stress, erratic sleep patterns, bad eating habits, consumption of alcohol & tobacco have become common in our social lives. With rising disposable income, social life revolves around get-together parties on most weekends with outside food & drinks. This not only cuts pockets but more importantly, has an impact on our health. In contrast, a different form of social life is still enjoyed by the older generation. Meetings at parks during walks, discussing topics at the tea stall corner, samosa parties and an occasional home visit for a regular lunch or dinner with home-cooked food is more healthy, saves money and more importantly sounds possible and meaningful. A balanced diet, good sleep, and exercises are all necessary to safeguard one's health and we all would agree, health is wealth.
Being patient is a key virtue for success in financial investments. With the right asset class, it allows you to harness the power of compounding interest. Patience is required not only in financial decision-making but also in our daily routine. Like, taking the "Buy and hold" investment position takes a lot of patience, but the fruit that one gets out of it is sweeter than being impatient. One has to give reasonable time for their investments to perform. Being patient also does not mean being idle. One has to make sure that important decisions are not procrastinated and that regular monitoring and periodic adjustments to your portfolio are still necessary.
While these old-school ideas remain evergreen when they are combined with modern financial techniques, they can help everyone to survive and grow in today's financial world. Perhaps most of us would also like to explore the old ways, the simple and slow-paced life where the focus was more on quality of life, relationships, emotional stability, savings, living within means and where the display of wealth and acquisition of possessions and being too greedy and materialistic was looked down upon. We may have gotten educated and rich, but there may still be a long way until we become wise and wealthy.
NJ E-wealth
Good Debt vs Bad Debt
Good Debt vs Bad Debt
The one thing that keeps most people awake at night is not a lumpy mattress or bad dreams. It's the Big Debt!
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Good debt is defined as a debt that has the potential for increasing your net worth or income over time. While you'll still have a regular payment to factor into your budget, "good debt" pays off in the end. It's an investment that increases in value over time. These debts pay for tools that will help you create a brighter financial future. Good debt may also be in the nature of consumption that seeks to alleviate your status to positively impact your business or practice. However, good debt isn't without risk if you overdo it. As a general rule, you should not borrow more than what you can handle. Some of the popular examples of good debt are:

Starting your own business is another investment for your future. The money that you borrow to start your own business can be considered good debt. A business loan can allow you to start or grow a profitable company to increase your future cash flow as long as you have a sensible and realistic business plan. If your business does well it will end up being worth far more than the loan you originally took out. However, one has to make sure that your personal wealth and business are kept distinct and not risked out too much with business loans as a business failure or a bad economic cycle may ruin everything for you.
Home loans are also generally viewed as a source of good debt. The money you pay towards the home loan can be seen as an investment. When you buy a home, you can stay in it for decades and later when there is price appreciation, you can sell it at a profit. Residential homes can also be rented and it can also be a good source of income. A house can be a source of social respect and great emotional comfort, especially when debt free. Further, there are tax benefits available on interest and capital repayments. However, the quantum of loan you take should always be a factor of your income where EMI payments are not a burden.
Student loans allow you to get an education and increase your long-term earning potential. Education has a direct impact on your future career prospects and earnings potential. Well-educated workers are more likely to be employed in good-paying jobs and tend to have an easier time finding new ones as and when the need arises. An investment in a college or technical degree can often pay for itself within a few years of entering the workforce. However, not all degrees are of equal value, so it's worth considering both the short-term and long-term prospects for any field of study that appeals to you.
Too much of any good thing is harmful. And that is indeed the case with debt. When we take good debt, we are making assumptions about the future based on our own goals and typical results in the past. But, there are no guarantees. Taking on more loans than you can afford can make it difficult to save for the future and add to the stress of repayment of loans. Before taking on any debt, it is always smart to carefully consider what return/benefits you expect to get and what could go wrong.
Bad debt involves borrowing money to purchase rapidly depreciating assets or solely for unjustified consumption. After months or years of making payments, you may not have left anything of value. These debts often come with high interest rates, costing you more out of pocket and some debt can lead to greater financial obstacles down the line. However, not all consumption expenditure is bad as one, after working hard, would want a life of comfort and lifestyle justifiable as per income and even aspire for greater dreams. The real question is affordability. If one can afford to make the full expenditure without a dent in savings and still takes a loan to delay payments and take advantage of the credit, such a loan may not necessarily be a bad debt. What makes it bad is going overboard and spending before you earn or taking a loan on the basis of your potential future earnings. Here are a couple of usual examples of bad debt.

An automobile is a necessity today for many. But for most of us, the cars we end up liking are always beyond our budget and we are tempted to take loans for that extra upgrade. By the time we drive the brand new car from the showroom to home, the vehicle already is worth much less than the amount we bought it for. The depreciation of the car is high and with high-interest payments, a big loan will soon start hurting in your pockets. Worse, just a few months later, you will again see an upgraded version of the car you bought.
With the easy availability of credit at your fingertips, almost all white goods, gadgets, mobile phones, vacations and even your online shopping is driven by easy credit. Debt has become an integral part of our spending. The risk in all this is that we end up buying possessions and experiences which we would have easily avoided had it not been for the easy availability of credit which often have high-interest costs. Over time, such a lifestyle eats into your savings potential and it would impact your wealth creation journey with the possibility of you getting burdened with accumulated bad debt. Credit card debt is of the worst kind with the highest interest rates.
Before taking on any debt, you should ask yourself, what is the total cost of ownership, the down payment required, the cost of interest over the life of the debt, and the benefits /outcome of the debt? You may also explore the opportunity cost of the money, meaning what next best option you are giving up by making this choice. With rational thinking, the right questions and patience, you may likely avoid mistakes and make sure that the debt serves you rightly and does not end up being a burden.
NJ E-wealth
Designing Your Health Insurance Portfolio
Designing Your Health Insurance Portfolio
In today's world, most people have a sedentary lifestyle with unhealthy dietary habits. Nowadays, we are even more prone to diseases caused due to stress and hectic schedules. According to the World Health Organisation (WHO), India has nearly 50.8 million diabetics, the highest in the world and 25 million people with cardiovascular illnesses accounting for 60% of all cases worldwide. However, with time and inflation, the cost of treating these diseases has also increased substantially.
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A health insurance portfolio is like a combination of different types of plans to ensure that you get the maximum benefits and medical coverage as is possible at an affordable cost. The idea is to give you comfort and confidence to not worry about medical expenses in case of any medical emergency when the need arises with your health insurance plans in the portfolio. While counting on your health insurance coverage, you would typically avail facilities such as cashless treatment; pre & post-hospitalisation expenses; no claim bonus, etc along with the tax benefits.

We can choose from different types of health insurance policies depending on our needs and wants. There are three main types of plans under health insurance to choose from:

The base health insurance policy is like your standard, standalone health insurance policy and covers medical expenses up to the sum insured amount. The coverage and benefits of the insurance vary depending on the insurance provider. Some of the common features and benefits to look at while considering a base health insurance plan is a comprehensive coverage, pre & post-hospitalisation expenses and a regular premium.
A Top-up plan offers extra coverage for a claim exceeding the base amount. Under a typical base health insurance plan, the insurer pays for claims up to the coverage amount i.e. the Sum Insured. A top-up policy is applicable when your insurance claim passes the threshold limit (deductible). The top-up plan typically covers expenses relating to a single hospitalisation and the claimed expenses have to cross the threshold deductible, and anything beyond the threshold can be claimed subject to the limits of the Top-Up cover. For eg., if the top-up plan of 5 lakh cover has a deductible of 2 lakh, then only when the single claim amount exceeds 2 lakh will the top-up plan be triggered.

As seen, the primary /base health insurance is supplemented using top-up health insurance. In the event that your current health insurance policy's maximum sum insured is reached, the top-up plan will provide you with the desirable medical coverage. This is an add-on policy with a lower premium and high coverage limit that provides flexibility in deductibles and can be a great choice if you feel that your current sum insured or coverage amount is insufficient.
A Super Top-up plan covers the total amount of all hospitalisation bills in the policy period, above the deductible amount. After the deductible is paid, the Super Top-up plan becomes active for all subsequent claims, just like a base plan in one policy period. Unlike a Top-up plan, there is no limit at a particular claim level, once the deductible threshold is crossed. This plan functions at a cumulative level and becomes effective once the first portion of the deductible is covered by the base health plan. Thereafter, the super top-up coverage becomes active for further claims once your deductible is paid/exhausted in a policy year.

As can be understood, it is advisable to align the policy period of your base policy and super top-up policy. It means if your base health policy's coverage period is from 15 January to 14 January every year, you should buy your top-up policy in a similar period to avoid any claim-related hassles.
A health insurance portfolio will differ based on an individual's age, needs, and budget. Age is an important parameter based on which the amount needed for health insurance coverage is determined. When someone is young and in good health, the need for higher health cover will be minimal but this will increase as people grow old and become more prone to diseases & ailments. Thus, additional coverage can be arranged in the form of a top-up or super top-up health insurance plan. It is important to understand that getting adequate & comprehensive health insurance is recommended when you are young & fit, otherwise, health Insurance companies won't give health insurance cover when you are old & unfit or develop a medical condition.
There is no scientific formula to get ideal health insurance coverage. However, the following age-wise categorisation of plans and the minimum coverage necessary can serve reference purposes.

  1. For ages 18-30 years, a Base Policy of 5 lakh + Super Top-up of 5 lakh
  2. For ages 31-45 years, a Base Policy of 5 lakh + Super Top-up of 10 lakh
  3. For ages 45 years and above, a Base Policy of 5 lakh + Super Top-up of 25 lakh. A Senior Citizen Policy can also be taken once the person becomes eligible.
Ideally, one should choose a comprehensive portfolio with a coverage of Rs. 50-60 lakhs that includes add-ons like OPD, routine health checks, maternity coverage, etc. But adding these features to your portfolio requires shelling out a larger premium. Therefore, a person on a tight budget should pick a base cover of at least Rs. 5 lakh along with some significant add-ons like the NCB (Non-claim bonus) and restore benefits. Although this will increase your basic coverage premium, it can still be an ideal way to improve your coverage with minimal costs. While planning, one should also keep in mind that the premium for health insurance increases due to age and medical inflation. Hence, you should make the necessary provisions while planning your health insurance portfolio.
In addition, there are other factors, such as location, that may have an impact on your portfolio. The needed coverage for a person/ family would be higher than that of Tier 2 or Tier 3 cities in this case since Tier 1 cities have high medical costs and lifestyle diseases are more likely to affect an individual. There might also be a case to protect yourself from specific diseases if you are prone to the same or have a family history. In such a case, you should ensure that your policy covers any of such likely diseases. Moreover, in case of pre-existing diseases, you should check the waiting period and the degree of coverage provided by the policy.
Keeping these things in mind as you plan for your health insurance portfolio becomes crucial. Although one person cannot comprehend all of these nuances, it is thus important to engage an insurance advisor for a portfolio of health insurance that is specifically outlined.
Usually, health insurance policies are upgraded every 2-3 years by the insurance providers and new features are added to them. As one needs to stay updated with the new technologies & skills, in a similar way, we may need to upgrade our health insurance as well. Either by paying the same premium or a few hundred more, you can upgrade your health cover to a much more comprehensive & feature-rich policy. The cost of health services has increased as a result of the advancements in the treatment of numerous ailments and disorders. And, this rising cost of medical care has further heightened the necessity for health insurance.
loans
NJ Capital Loan Against securities - New Feature
While Applying for Top-Up Loan, client's current mandate is utilized.

Important Points
  • Your bank details should be the same as your previous loan.
  • Mandate should be in Approved status.
  • The Mandate expiry date should be 3 months greater than the Top-Up Loan Tenure.
  • The mandate limit should be greater than your top-up loan EMI amount.
Now client will be able to make loan payments through UPI using a QR Code
Module Path: Login to NJ E-wealth Account > Transact > Loans > Reports & Utilities > Requests > Scan & Pay
Fund Manager INTERVIEW
patner Interview
Mr. Trideep Bhattacharya
CIO - Equities, Edelweiss Asset Management Limited
With PGDM in Finance from SP Jain Institute of Management & Research, Mumbai and B.Tech in Electrical Engineering from IIT, Kharagpur, meet our CIO - Equities - Mr. Triddep Bhattacharya.

Trideep comes with over two decades of experience in Equity investing across Indian and Global markets. Prior to joining Edeleweiss AMC, he was instrumental in builiding a market leading PMS business at Axis Asset Management Company, as Senior Portfolio Manager – Alternate Equities.

He has also spent a significant amount of time as a Portfolio Manager at State Street Global Advisor and UBS Asset Management (London, UK). When not occupied with work, Trideep loves playing Tennis, Bridge and is hands on with few musical instruments.
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Yash Shantaram Khanolkar (ARN-250374)
AMFI REGISTERED MUTUAL FUND DISTRIBUTOR

Yash Khanolkar
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"We have taken due care and caution in compilation of this E Newsletter. The information has been obtained from various reliable sources. However it does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions of the results obtained from the use of such information. Investors should seek proper financial advise regarding the appropriateness of investing in any of the schemes stated, discussed or recommended in this newsletter and should realise that the statements regarding future prospects may or may not realise. Mutual fund investments are subject to market risks. Please read the offer document carefully before investing. Past performance is for indicative purpose only and is not necessarily a guide to the future performance."

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