OptiPlan Financial Life Planners LLP

17/04/2016

Tax planning in the 1st month of financial year...'Man...not again, give me a break. I have just finished the horrendous task for the last financial year just a few weeks back and you have started talking of tax planning again.' !! Is this what comes to your mind when you just read 'Plan your taxes'…

14/04/2016

How Unified Payment Interface will change the way we bank...

13/04/2016

05/04/2016

Why tax planning should not be put off to March...

21/10/2015

The Indian pension index value fell from 43.5 in 2014 to 40.3 in 2015 primarily due to a drop in the household savings rate.

14/10/2015

All loop holes being plugged...

The software will enable authorities to remotely detect fake or duplicate PAN cards.

13/10/2015

Typically, a banks advice appeared to be driven by the quantum of commissions earned rather than requirements of the customer.

11/10/2015

"How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case."
- Robert G. Allen

10/10/2015

New RBI norms may make home loans cheaper by 30bps - The Times of India on Mobile - http://m.timesofindia.com/business/india-business/New-RBI-normsmay-make-home-loans-cheaper-by-30bps/articleshow/49295775.cms

Interest rates on home loans are expected to come down by another 25-30 basis points, triggered by the Reserve Bank of India's move to lower risk weights on select home loans of up to Rs 75 lakh where borrowers are willing to put in more money.

05/10/2015

Financial Planning - The 1st Step !!!

Maintaining an Emergency Fund in true sense is a first step towards securing your financial situation and also having confidence on the back of your mind that in case of an emergency you have something to fall back on. If you don't have an emergency fund, you will end up using money earmarked for other goals.

Emergency fund is a critical root of your financial life, maintain it properly, before trying to give wings to your portfolio by investing in riskier assets.

As a thumb rule, an emergency fund should be enough to cover at least 6 months of your living expenses (including fixed repayments like EMI's)

Following factors need to be considered if you want Emergency Fund to work as a safety net in real sense :

Keep objective clear

Be clear about what you will use the money set aside. The money can be used for meeting essential household needs in case of your income falling short or for emergency medical expenses (don't mix up needs and wants here, paying school fees is a need but buying a new smart phone is not).

Is the name important ?

Setting aside some existing savings / investments on an ad-hoc basis cannot be termed as an emergency fund. This existing savings / investment you may have started with some goal in mind and now if you just rename it to an emergency fund for the sake of it, won't serve the purpose. To illustrate, money invested for your retirement, renamed to an emergency fund will just be mental satisfaction for you, as, if a real emergency situation actually arises and you have to dip into this fund, your retirement fund accumulation will go haywire.

Dip in, but replenish the same

Emergency fund is a sort of short term bridge to fund your needs in case of crisis and hence you have to refill whatever money you have withdrawn from it. If this is not done you will lose the discipline of maintaining this fund and also you will slowly be tempted to use this money for non-emergency purposes.

Review at regular intervals

Amount you need to save / invest for any other goal will generally be a fixed amount but the size of emergency fund requirement will keep varying according to the changes in your financial situation.

Events like wedding, child birth, taking a new home loan, spouse taking a break from work to look after child are some examples of situations which warrant a review of your emergency fund requirement. These situations will generally lead to a increase in the size of emergency fund.

On the other hand developments like : home loan being repaid in full, son / daughter / spouse starts working, reduction in expenses due to relocation to a smaller town etc are factors which can lead to decrease in emergency fund requirements.

Hence keep reviewing your emergency fund requirements and adjust every time there is a major change in your financial situation.

Risk, liquidity and returns.

The most important test an emergency fund has to pass is that of liquidity. As the name suggests, these funds are required in an emergency situation and should be easily accessible. Hence you should avoid investing in riskier assets like equities, long term bond funds etc.

Savings bank balance, Liquid / ultra short term bond funds are some of the avenues from where the funds can be accessed with ease, at short notice and are also less riskier.

In case you intend to maintain your emergency fund in a savings bank a/c maintain it in a separate account, as you may tend to spend this money otherwise kept for emergency purpose.

This way it will always be clear in your and your family members mind that money lying in a particular a/c is for emergency purpose only.

Risk, liquidity and returns, in that order, are the factors needed to be considered while deciding where you want to park your emergency fund money.

To sum up, an emergency fund is the first step towards implementing your financial plan and having peace of mind.

04/10/2015

Government may link returns to bank deposits, ’s rates http://t.co/uQWDRSHN7E

View - In current declining interest rates scenario, the pace of decline in PPF interest rates will be faster, which generally used to be at a considerable lag to bank FD's.

This move if implemented will affect an individuals asset allocation.

- Happy Investing,
Mehul Shah, OptiPlan

The move is part of the review by the finance ministry, which uses returns on government securities to fix rates for small savings schemes.