Why do Women need Financial Education and Money Management Skills?

Apart from the fact that everyone (men and women alike) should be aware of how to manage their money appropriately. The socio-economic situation around us increases the need to know how to grow one’s wealth for women.

1. The cost of being a woman – Spendthrift nature

Women have always been considered as spenders. The temptation to shop and hoard things is perceived as a common womanly trait. Moreover, it is considered okay for women to do the same. Statistically, women are the best buyers – so things are marketed towards women including the men’s products. Discounts, offers and sale days such as Women’s Wednesday Bazaar are specifically women-oriented because we make the most of such days.

Due to this innate spendthrift nature, even the banks have introduced special ‘Woman’ bank accounts with special ‘Debit/Credit card’ which allows them additional points for shopping. Women are encouraged to let their purse loose at every other step.

2. The cost of being a Woman – More expensive things

A study from New York – has shown that woman pays thousands of dollars (equivalent to lakhs of INR) over their lives to purchase similar products as men. Women’s products cost 7 percent more on average than similar products for men across toys, clothing, accessories, personal care, home, and health. The report also pointed out that although gendered products often differ in branding, construction, and ingredients, shoppers do not have control over those factors and must purchase what is available at a higher cost. Women have no choice but to buy expensive products.

Apart from this price differential treatment, there are certain expenses that we have to incur such as sanitation, hygiene, skin care because of our body, biology, and gender.  These are certain basic expenses which cannot be avoided.  So, how do we continue to afford everything? We cannot stop using the basic things which have become a part of our life just because it’s more expensive as compared to men. Should we just start buying men’s products which are similar to ours?

3. The disparity in the pay scale

According to The Global Wage Report 2016-17 published by the International Labour Organization, the gender pay gap in India amounts to 30%. To put in simple terms, men get paid 30% more just for being born as men.

Apart from getting paid less, the number of paid working days are lesser than men, women tend to take more leaves over their working career as compared to their men. They do so during their pregnancy, marriage, taking care of their children and elderly in the house resulting in lost income and depleted savings.

4. Longer life expectancy

Women live longer than men by an average of 5 years. So, we need more money for our retirement and insurance for a longer duration than men. Further, a woman has a 50per cent chance that at some point in her life, she will need long-term care – meaning a period of at least 90 days when she requires assistance with activities like dressing, eating, and bathing.

5. No support to fall back on

Most of us are used to being dependent on our families or partners for financial support. We have always had someone to fall back on in case of a financial emergency. 

Women who are suddenly single, like divorcees and widows, obviously are at an immediate disadvantage. They do not have that financial backing. 8 out of 10 women are responsible for taking care of their finances at some point in life.

6. Ability to take decisions

Researchers have proven that women have the ability to make smart decisions under pressure and are not carried away by market trends and investment biases. Women’s behavior with respect to handling money is very stable. This is also the reason why women asset managers for mutual funds are very sought out for.

Wealth Cafe :

Women have limited income and a list of unavoidable expenses.

The only way to deal with this is to grow your wealth by yourself. Learn about the farfetched world of finance.

Our workshops are designed to you (women) acquire the skills of financial planning and money management. Rather than leaving the money matters to the other members of the family, money education will make you more independent and empowered to make smart money decisions confidently. 

Don’t just be a feminist, be a ‘fe-money-ist’.


Annualised Return and CAGR

Annualized return and CAGR are not technically the same thing. They refer to the returns on various investment options computed on per annum basis. All long term investments multiply by your wealth by compounding.

Where investment has grown at different rates over a few years, CAGR is the formula used to define the number at which the investment has grown year on year.

Compounded Annual Growth Rate (CAGR) shows how much a person’s investment grew in one year. In other words, it is the average returns an investor earns on his investments after one year. The bank or the financial institution calculates this rate in terms of annual percentage.

How to calculate CAGR?

To calculate CAGR, you must know the following:

  1. The investment made in the initial year (the year of investment)
  2. Amount invested in the current year and
  3. Tenure of investments

CAGR = [(End value/beginning value)^(1/year)] – 1


For example, you bought a stock for ₹100 in 2015. It appreciated by 25% to ₹125 in the year 2016 and further appreciated to ₹150 in the year 2017. Therefore, the appreciation in the rate from 2015 to 2017 was 20%.

If you want to know the growth rate of your investments for the complete period of time, use CAGR. If we put the above values in the formula, Compound Annual Growth Rate for your investment between 2015 and 2017 will be 14.47%.

Mutual Funds/Equity and CAGR

Return on any investment is discussed in terms of CAGR. Especially, in case of equity and mutual fund investments. When you invest in mutual funds, the return that is shown in CAS statements and your Dmat statements are in CAGR.

This is because the actual return % on mutual funds is dependent on the movement in the stock market which keeps changing. It never grows or falls at a fixed rate.

Hence, it could be possible that an investment in mutual fund grew at the rate of 20% in year 1, 30% in year 2, 10% in year 3. In such a case, it becomes very difficult to discuss the actual gains. This is when and why CAGR is used in market-related variable returns investments.

In our Article, how to set goals, we have discussed the expected returns on various asset classes, we are always talking about CAGR.

Wealth Cafe Note:

  1. CAGR is an average rate. Hence, if a CAGR is of 15% of an investment made for 4 years. It could be possible that the first 3 years have 30% gains and the next 2 years lower gains.
  2. The gains are not distributed evenly over the period of investments. One must stay invested for the right time based on the asset class to benefit the most.
  3. CAGR is different from absolute returns and year-on-year gains.
  4. There is a chance that two investments may reflect the same CAGR, with one being more lucrative than the other. This could be because the growth was faster in the initial year for one, while the growth happened in the last year for the other.
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What is Absolute Returns ?

If you are making direct investments in various mutual funds or making the same through any portal/website. You could see in the mutual fund statements that a column states absolute return and a % is mentioned next to it.http://www.wealthcafe.in/understanding-a-mutual-fund/

Absolute return is the simplest return metric that is used to quantify how much gain or loss you have made from an investment. It simply tells you how much money you have made or lost as a percentage of the money you invested over a given period of time.

For example – you invested Rs. 100 in 2010 and it became 130 in 2012, your absolute return is 30% for 2 years. It is not a per annum return.

Absolute return is the actual return that you receive for the specific period i.e. from the start to the end.

If you invested INR 10,000 in October 2018 and currently, in Feb 2019, its value is 10,600. The absolute return is 6% on this investment.

Absolute Return = Current Saleable Value – Purchase Value / Purchase Value * 100

Absolute Returns are not used for mutual fund calculations until the investment period is less than one year. The returns can be very misleading. It is mostly used for real estate investments. You must have heard people say that they bought a house in 2000 for 30 lakhs and today in 2019 the value of that house is 1 crore. This is absolute returns of 235%

Why Absolute Returns are not favorable?

It is hard to compare 2 different investments return where the time periods vary: The scope of using absolute return metric to evaluate performance is limited as it does not take into account the time period of investment and its compounding effect. For example, if Fund A gave you 25% return over 2 years and Fund B gave you 25% returns over 1 year, both of them would rank the same if you take the absolute return metric when clearly, one fund has taken longer to deliver the same returns.

It does not allow comparison against various asset classes: Different asset classes returns are generally referred to differently. Real Estate and gold are generally discussed in absolute terms whereas fixed deposits and mutual funds are discussed in annualized returns.

Absolute Return gives a false impression of high worth: Further, because absolute figures are usually high, it gives a false impression of the worth of that investment compared to others. Take the real estate example. The investment in Bombay house which fetched a gain of Rs.70 lakhs does sound grand, and an absolute return of 235% sounds even better. But when we look at the same gains in CAGR terms, it works out to be a modest 6.54%.

Tip – Absolute returns are feel-good returns but they do not give the real gain scenario. In our view, you should always compute the annualized return or CAGR. Refer our Article on the same.


What is XIRR in Mutual Funds and How to compute the same?

What is XIRR? How to compute the same?

Cash inflows and outflows may not always be evenly matched and instead, these could be at irregular intervals.

Specially, in a mutual fund SIP. In the case of SIP, there are investments made at regular intervals, some withdrawals, then investments and so on. There is no fixed pattern of such investments and it makes calculating the exact return on these investments a bit difficult.

XIRR or extended rate of return is a measure of return when multiple investments at different points of time are made in a financial instrument.

SIP Investments Method

In a SIP, you keep investing regularly over a long period and get back the maturity amount upon exit. SIP investments happen on a pre-decided date and even the amount is fixed and depending on the NAV of the scheme on that day, you get a certain number of units. You can read more about SIP in our Article http://www.wealthcafe.in/why-should-you-do-a-sip/

Hence, you keep accumulating units from the day your SIP starts. On the day you exit the scheme, i.e., redeem your total units, you get the maturity amount, which is NAV (of redemption day) multiplied by total units (on redemption day). You may also choose to redeem a part of your investments as and when you need them.

XIRR is used to calculate the return in the case above where various investments are made on different dates and the simple return formula is not applicable.

XIRR can be computed using an excel as excel has an inbuilt XIRR formula. To compute XIRR, we do not need the NAV amount or number of units.

The details required :

  1. SIP Amount
  2. SIP dates
  3. Any lumpsum Investments
  4. Date of such investments
  5. Redemption Amounts
  6. Date of Redemptions

Steps to Compute XIRR. (The steps are explained with reference to the image below)

Step 1 – Enter all the transactions in column B

Step 2 – In the next column (Column C), enter all the amounts of SIP and the lump sum investments. All the investments amount should be in negative. Also, any lump sum amount should be added to this column and the same should also be in negative.

Step 3 – In the case of redemption, add that amount in Column C in positive.

Step 4- In the next box, enter the XIRR formula which is = XIRR (select all dates, select all values)*100. This shall give you the XIRR amount.

You can see the extract of the excel in the photo below.



Should you switch from the traditional endowment plan to a mutual fund?

In spite of being a financial planner and helping people invest and understand investments, it took me a long time to convince my husband to stop paying his endowment plan and invest the equal amount in the term-insurance and good equity oriented mutual fund.

It is just not him, 9 out of 10 people own an endowment insurance plan rather than a term insurance plan. The only reason for the same is to get their invested money in return.

Further, even after knowing that the endowment plan is not a wise investment choice, they are not convinced to surrender the insurance policy because they do not want to bear the loss on surrender.

We have tried to make your decision of switching much easier by calculating the actual loss that you might incur on surrendering the insurance policy versus the benefit of investing the premium amounts in the mutual funds.

To make it easier for you, I have tabulated below the gains that one would receive in both the scenarios to help you take a smart decision.

Scenario 1 – You continue to invest in the endowment plans such as Jeevan Labh or Jeevan Anand from LIC. (this is purely for an example purpose)

Total Premium over 35                           8,40,700
Maturity value after 35 years                        12,20,000
Total Gains from Insurance                           3,79,300

Scenario 2 – You withdraw the insurance premium amount and invest the same into mutual funds. You would also incur an additional cost of buying a term Insurance which would give you a cover of 1 Crore for INR 1200 per month.

Total Investments     8,13,551
Value at the end of the term  41,06,447
Total Gains from Mutual Funds   32,92,896

For detailed working of the above 2 tables and how we arrived at those numbers, refer to surrender of an endowment plan vs investing in mutual funds (working).

We have attached the excel sheet here for your own calculation. Just change the numbers in the boxes highlighted in pink, the sheet would compute the gains value and CAGR in each scenario. The same shall help you take a decision of whether you should stay invested in an endowment plan or move out your money and invest in an equity mutual fund.

These decisions are very case specific and factors such as risk-taking ability play a huge rule in deciding the movement. Never forget the following base rules before making the switch:

  • Understand your risk taking capacity.
  • An equity mutual fund is very volatile in short-term, investments in them are made from a long-term goal of 10+ years for the best results.
  • Where you cannot bear the risk, it is best to consult your financial advisor, who shall guide you in the same.

This transition is easier and profitable in the first few years of insurance premium has been paid. If you plan to move after 10-12 years of paying insurance premium it will generally not be profitable. The premium amount lost on surrendering the policy would be higher as compared to what you can receive in the balance tenure in mutual fund investments.

Please note the assumptions and explanations provided in the excel sheet for the computation of gain numbers and do your analysis accordingly.


How to do goal based investing

Setting up a goal is something that no one does these days. I am asking you all to set a financial goal.

Every time I ask someone – Why are you investing? What is the purpose of your investment? 90% people will answer to grow my surplus money.

I have money lying in my bank account. I am just spending too much. I thought it was time to start investing.

My next question is ‘for what do you want to grow your money?’ Their answer is to become rich or help in a financial need or to travel. Travel is a more focused goal but becoming rich? Isn’t everyone working to become richer than what they are today?

In cases, where your goal is more focused and clear, you will be in a better position to achieve it than your investments where it is not.

When you know where you are going, you are halfway there.

I know it is extremely difficult to sit with a pen and paper and jot down your financial goals. However, the difficulty of the process does not reduce the importance of the same.

I have listed below a step by step process of identifying your goals, requirements, money that you need and the products into which you must invest to achieve your goals.

What do you want to achieve in life?

I am sure you have been asked this question by various people ‘What do you want to be when you grow up? Where do you see yourself in 5 years? What do you want to do in life?’ These are all your various goals that people want to know.

What are the things that require money to be achieved – i.e. financial goals?

Yes. All goals need money but all goals are not financial goals. Wanting a promotion at work, Best in your field, learn a new hobby or activity are all personal and professional goals which does not require too much investment or any investment of money from your end.

Owning a  house, traveling to Europe, buying that car, your child’s post-graduation are some examples of goals which require a huge investment of money from your end and are called financial goals.

Hence, make a list of all your goals and from that highlight your financial goals.

Prioritise your goals – difference between Need and Wants?

It is very important to prioritise your goals based on its importance and requirement.

Needs are such things that you cannot do without and cannot be canceled, such as your child’s education or your first house.

Wants are things which you desire but can do without them such as a vacation, your second home etc.

Segregating your goals into needs and wants will help you prioritise them better. All the needs can them be numbered based on their importance followed by your wants.

How much money do I need today to achieve these goals?

Once you have made an entire list of your goals and sequenced them, you must identify what is the cost of achieving those goals. For example, if your goal is to buy a car, you must identify which car you want and how much would it cost. ‘I want to buy a car like I20 and it would cost me 7 lakhs INR today’ – this a well-defined financial goal.

Where you are estimating the cost of goal because you do not have an exact basis to calculate it, always consider the amount on the higher side.

By when should I achieve these goals?

The fact that it is a goal, it means it is futuristic and you do not have sufficient means to achieve it today. Hence, you must identify and apportion a realistic timeline towards your goal.

For example, I want to buy a car in next 2 years.

  • Goals less than 5 years: Short-term goals
  • Goals between 5 years to 10 years: medium-term goals
  • Goals more than 10 years: long-term goals

Adjust the Inflation

Given that goals are a futuristic, the current cost that we have associated to our goals will obviously increase in the future because of inflation. Identify the inflation rate towards your goal. The inflation rate is not the same for all types of goals; it varies depending upon the market conditions and the goal.

After knowing the inflation rate and the current cost, you will be able to compute the future value of your goal.

It is very important to identify the correct inflation rate. If you take a lower inflation rate your goal will cost you more than what you estimate and if you take a higher inflation rate, the future cost may scare or reduce your confidence to be able to achieve the goal.

Asset allocation based on the goal, cost, and tenure

Once you know your goal and its value, it is time to identify the investment products.

The tenure of your goals will help you to identify what asset class you must invest in and in what ratio.

  • The term is less than 5 years – 100% Debt
  • The term is 5 years to 10 years – 40% Debt 60% Equity
  • The term is more than 10 years – 30% Debt 70% Equity

This is a very general method of asset allocation. It may vary depending on your risk taking capacity and ability. Hence, it is important to analyze the same for oneself.

Portfolio Return Expectations

Return expectation from each class of the asset is as follows:

  • Equity: 12%
  • Debt: 8%

You will have to invest money in your goals based on the tenure and asset allocation. Each goal will not have one investment but may consist of many investments some in equity and others in debt. Hence, it is important to compute the return expectations for the entire portfolio, to be able to compute the exact amount you must invest to achieve your goals.

For example, my goal of buying a car is a mid-term goal, my asset allocation will be 40:60.

My portfolio return will be (40% * 8%) + (60% *12%) = 11.2%

How much money to invest?

This is the most crucial part, the entire computation of the above working will lead to identifying how much money you need to invest to achieve your goals.

There are various ways of investing but it is better to do it in a systematic manner. You can invest as a monthly fixed investment amount or invest annually with a fixed percentage of investment increasing per annum.

SIP – 7900 per month invested for 7 years will give you a return of 10,14,000 @11.2 %.


This method can be a bit complicated when followed step by step especially the last step of computing the actual amount that one needs to invest to achieve their respective goals. However, it is the most defined way of achieving your goals. There are many software used by us – financial advisors where the software does the same calculation for us. When you will sit with an honest financial advisor, the first thing that they will ask you is to define the goal. There is no plan without a goal and hence, such a working is extremely important for your financial planning.


Why you should not buy financial products from your banker?

The simplest answer to this question is that, more often than not, the banker is more interested in the product than he is interested in you. To illustrate this better, we have discussed a few examples below: Say you have been a customer of a particular bank from 2008 tillBelow is what you would have typically experienced over this period of time. Your first job, 2010: Sir, along with your salary account, we are offering you a credit card, free of cost. There will be no annual charges and you can enjoy a credit limit of INR 50,000. Along with this we are offering you this “Investment product” which gives higher than market returns, especially for our customers. To make it easy for you, you can pay the yearly premium in 12 equal interest free installments using the credit card. (With this, he introduces you to the world of credit cards plus has latched you on to an investment product mostly a ULIP product (link on ULIP article) without you properly understanding the product. What he doesn’t tell you is the charges involved in delayed payments on the credit card, neither does he guide you as to how you can be a disciplined credit card user!) 2008, with the markets soaring or currently when the markets are doing  very well: “Sir, XYZ Mutual Fund has come out with a New Fund Offer (NFO). The new Fund promises very good returns since they are focusing on the Infrastructure theme which will give very high returns over the next few years.” “Sir, ABC Mutual Fund has come out with a New Fund Offer (NFO). The new Fund promises very good returns since they have a “new strategy” where they will identify “superior growth” stocks and generate superior returns.” (What he doesn’t tell you is the risks involved in investing in equities and that he is selling you a product which doesn’t have any track record of good returns!)
                                                                                                                                       Take an informed decision
Immediately after the 2008 crash: A period of silence from your banker. Obviously, he doesn’t want to bring up the returns from the ULIPs and NFOs he sold to you earlier in the year! 2009, post ban of entry loads on MFs: Sir, this is a unique investment product. It not only gives you high returns by investing in Equities, it also gives you an insurance cover. (What he doesn’t tell you is that ULIPs hardly take care of your insurance requirements. Neither does he elaborate on the various charges on the ULIP products!) 2010, post reduction in commissions on ULIPs: Sir, you should invest in this product. If you invest INR 25,000 per year you will get INR 13,70,000 tax free after 25 years and also an insurance cover of INR 10,00,000. (What he doesn’t tell you is that the rate of return is a partly 6%!) I guess many of you (irrespective of your age group!) will be able to relate to the above experience. It clearly demonstrates that your banker is more interested in selling the product that earns him the maximum returns with no consideration to what is the right product for you. He sees the immediate short term benefits for himself from the sales made to you. Why think like your banker and look at the short term? Think long term. Hire a Financial Planner, pay him a fee to give you the right advice and invest in the right investment product. Over a period of time, the benefits from investing in the right financial product far exceed the fees you pay your Financial Planner. Again, think long term. Educate yourself! It is very important in today’s time, when there is a pool of information everywhere but no good data, learn and understand and take an informed decision, rather than just following someone blindly. It is your money, if you will not treat it right, why would a banker do that. PS: There can be exceptions to the above kind of bankers. But, more often than not, the story is the same everywhere.

The trap of cash back offers

Recently, while booking my flight tickets through one of the travel booking websites, I saw this “100% cash-book offer “flashing on my laptop screen. I got super excited, 100% cash back means the entire flight ticket would be for free. Who would not use this offer? I immediately registered on the mobile e-wallet and made the payment through the same. However, after making the payments, when I started to book my return flight tickets with the cash back I got, I realized that I had done a grave mistake of not noticing the tiny ‘*’ and thus, not reading the conditions specified in fine print below the offer. Following unfortunate events happened after I made the payment using mobile e-wallets:
  • The offer was a 100% cash back offer of only the base price of the flight ticket and not the entire amount I spent on buying that ticket. So where my total cost including charges and taxes was INR 4200. I only got a cashback of INR 2700.
  • This is not that bad right; I got almost 70% cash back which is still an amazing deal. To make most of the cash back, I decided to book my return tickets using the wallet cash back. I was still happy because if not 100% I did get a 70% discount on my flight bookings.
  • While making the payment, after I had put the mobile wallet details, the system asked me for my bank details for balance payments. How could this  be possible? My return flight ticket was worth INR 2500 and my wallet had a balance of INR 2700. Why is the travel website ask for my bank details as well?
  • After a little more ‘*’ reading, I realised I had missed on another fine print. It stated that I could only use 15% of the cost of each purchase from the cash back balance in my mobile wallet. Thus, only INR 450 would be paid through the mobile wallet, balance INR 2550 had to be paid separately.
  • I declared that this was outright FRAUD and I am now a victim of cash back offers from MOBILE WALLET Company.
Cash-back offers; Discount; Sale – Are we really saving money through these?
Are we all actually benefiting from the cash back offers and these discounts? Some of you may say whatever is the discount, it is still a discount. The cash back appears to be like it is reducing my expenses but it actually makes us spend more, worry more and definitely, calculate more on every rupee spent. I have discussed the same below: Spend more than required: My flight cash back seemed like a decent discount inspite the restrictive clause of using it. To make the most of it, I had to do make next few purchases through the mobile wallets. Hence, I decided to shop for my upcoming trip. I shopped for things like shampoo, body wash etc which I did not specifically need for my trip but was buying to exhaust my cash back. This wallet did not work on so many regular e-commerce websites that it was a struggle to make the most of it.

I just spend on things I did not need to utilise my cash back. This is what cashback offers do to you, it makes you spend more than required so that you can benefit completely from the cash backs received. It becomes your personal loyalty programme.

Limited Validity: Most of the cash back offers come with a validity period. I had to utilize the cash back  in my mobile e-wallet within a fixed period of  6 months and to utilize the same, I ended up ordering daily use unnecessary items in advance. Inspite of this, after 4 months,  I gave up on this regular hassle and ignored a cash back of INR. 1100 lying in my mobile wallet. The effort, time and unnecessary small purchases that I made to utilise the cashback were not worth the money that I wanted to save. Like me, many people are falling into the traps of the mobile wallets and cash back offers. Such cash back offers are also provided by various credit cards which makes us shop for that one extra shirt or dress so we can cross the specified limit to get the cash back in our credit card. If you get a 5% cash back on a purchase of INR. 5000 it is Rs. 250. You might end up shopping for lot more than the cash back just to get that cashback. Cash Back offers are a loyalty programme: The trap of cash back offers is not direct. As stated above, cash back offers are like a loyalty programme. It generally makes consumers spend more than we want by convincing us that we are getting more benefits out of it. Cashback works as a nuclear reaction making us purchase continuously. Usually, we end up spending more compared to the cases where there are upfront direct discounts or no discounts at all eroding the cash back completely. It is very important to know that none of the financial institutions including mobile wallets, credit card companies, banks, etc are doing charity or customer support in any form. Any discount or cash back is what they can recover from us easily. Nothing in life is for free, when anything is for free or at a discount, you are the product. Thus, we should be wise enough to understand where we are getting a discount and make most of it rather than falling prey to unnecessary cash back traps. I hope next time you see that cash back flashing on your screen, you will take a more informed decision.  
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To buy or not to buy

To buy or not to buy is an old story. The new story is to be this or that. We are definitely spending on one thing or another. It is not that we are not spending at all. The only thing we as a consumer are doing is deciding whether to buy this or that. Some of us do not even do that, we just end up buying everything because of our 2 best shopping companions’ credit cards and EMIs. People have stopped justifying their expenses and this is the reason why there are not enough savings and thus, reduced investments. You can save only when you spend less and thus, I have dedicated this article on how and where we spend extra and how can we control our spending.
  • Buying on Impulse – This would be the most common way of going off-budget. Have you bought something and then realized that you don’t enjoy it anymore or you aren’t as excited about it as you were at the time of buying it. It is very common to do the same, especially when you are not feeling very good, you see your neighbour own something that you always wanted. To avoid this, don’t buy something that you like when you see due to certain emotions/influences immediately. Go back. Sleep overnight on that purchase. If next morning you wish to own it, go back and then buy it.
  • Carrying credit card balance – Using a credit card to buy the new laptop, phone or even those expensive shoes online. Having that credit card balance has become the way of life for most of us where consumer credit is so easily available. The problem arises when it is used for regular purchases. Paying interest as a failure to pay off credit card bills makes the prices of the charged items a great deal more expensive. We have written it in detail in our Article – Why you must avoid credit cards.
  • Avoid paying bills on time – Have you ever missed paying your telephone bills or other utility bills at home? In this time of auto debit/email reminders/ Paytm reminders, it is still so surprising that so many people with balances in their bank accounts forget to pay their bills on time and are completely ok with doing the same. For instance, if you have 4 credit cards and you are not clearing the minimum dues on time, you would be paying at least Rs. 2,000 in late charges alone. However, if the same amount is invested every month in a scheme that earns, say 10% annually, it can actually fetch you 32 lakhs in 25 years.
  • Spending by habit: Quite often a lot of our spending is a daily habit, which could be unnecessary too. For example, if you buy a takeaway coffee every day for your office staff/visitors why not invest in a coffee machine? Re-evaluate your habitual spending patterns and decide whether that is necessary.
  • Having unused memberships/subscriptions – Everyone has an account on Netflix, Hotstar, Amazon Prime, Voot TV, the unlimited data pack, household cable with HD. All of this totals to around 2000 INR per month. The same is equivalent to Rs. 24,000 per annum. Do you have enough time and resources to go online and watch movies on all of them? A person on average is spending 24,000 per annum for his entertainment solely through online channels. I have not even considered the money spent on theatres and other modes of entertainment. Gym memberships are other classic examples of unused memberships.
  • Paying for unnecessary services/charges – When a seller is selling something new in the market, it is their job to create a requirement for their products but it is up to a consumer to judge sensibly if they actually need that product or service. You may sometimes need a car helpline service, but why to go for the extended warranty on a car or washing machine when that is hardly worth the price? Do you also really need all those extra features for your cell phone?
  • Not having clear needs in mind: People tend to overspend when they don’t have a clear objective of what they need to buy. Thus, they often end up buying things just because they ‘look nice’ and not because they are actually needed. Therefore, avoid getting inside a mall without a clear objective. Window shopping has put most of us into huge debts or low cash balances.
  • Living beyond one’s means – The availability of car loans to buy the first cars or easy access to credit cards can tempt anyone to indulge in buying things even without being able to afford the expense. But just because you own a credit card, it does not mean you should indulge in whatever you fancy at the moment.
Being ignorant of one’s spending – Ignorance is bliss? Think again! “Many chronic shopaholics live in denial about how much they spend. If you realize how much you spend on various items, this alone may be sufficient to reduce your spending.

Common Nomination Mistakes that you must avoid

We have listed below the common nomination mistakes that people make and how should one avoid making them. Not informing the nominee –This may sound very basic but at many families, the wives and children are not involved in the financial matters of the house. Not informing the nominee about his/ her nomination and the details of the policy is a major mistake that you can do as a policyholder. The insurance policy is taken to secure your dependents and if they are not informed of the same, it does not serve its purpose. Generally, the insured is reluctant to inform the nominee because of insecurity or just carelessness. Such an ignorance will deprive the family members of the financial support that they would receive from the policy. Not updating nominee details –This is due to laziness and ignorance. Avoiding to update details is as good as not nominating someone. Another problem is not revising/updating the details of the nominee periodically like his address, age (minor to adult), status etc. If the nominee dies before the policyholder, it is very important to change the nominee details immediately. The policyholder has the right to change the nominee and his/her details any number of times during the term of the policy. Appointing Just One Nominee –Generally while entering details in the policy form, many of us mention just one nominee even after having more names in mind. It can be because people do not know they can nominate more than 1 person. Where the nominee dies before the policyholder and the details are left unchanged, there can be severe delays and rejection in receiving the claim money. As a policyholder, you must state more than one name in the nominee column with some defined percentage or the order in which the nominee should receive money. Remember to enter genuine details like full name, address, and relationships with the insured. You can also appoint successive nominees in your insurance document. This is considered the most advisable method of nominating. Appointing a nominee under 18 without an appointee –Prefer a major person instead of a minor so that one does not require having any appointee in such a case. If there are circumstances where it is compulsory to mention a minor as a nominee then it is advised to offer genuine and complete details of the appointee which includes his / her name, address, relationship with nominee etc. And the appointee is in charge of the minor until he/ she turns 18. Having Wrong Notions About Nominee Rights : Most of the people have a preconceived notion that a nominee has absolute rights. This is not true. If the nominee and the person to whom proceedings are bequeathed in a Will are not same, then a priority is given to the provisions of the Will over the rights of the nominee. In case a policyholder wants to give absolute rights to his/her nominee, he needs to prepare a Will and mention the beneficiaries thereof. It’s better to be cautious and have clarity on these matters in advance to assure financial protection of your loved ones.

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