Thursday, June 26, 2014

Good News - My financial guru, Robert Kiyosaki, is visiting India

In 1998-99, I came across this book “Rich Dad Poor Dad” by Robert Kiyosaki –

I had a good job then and a management degree from XLRI – but my financial assets were close to NIL. This book changed my life and this book started me in my wealth journey.

I have always had wanted to be in one of his sessions – the closest I came to, was in Singapore in mid 2000,  when he was having one of his workshops there – but it was too costly for me to afford then.

I am happy to share that he is coming for Delhi and Bangalore in Sept and having two day sessions in each city. I am surely going with my family and I would recommend that you too register as soon as possible. The ticket prices go up as the date comes closer and right now (till 30th June)  the prices are very affordable.

Here are the details:

Current Value (till 30th June)
Actual Value
(only for Delhi)


I would recommend this to all my readers.

If you want to attend in Delhi – here is the link-

If you want to attend in Bangalore – here is the link -

Saturday, June 21, 2014

Best practices of money management post marriage

 I have requests from my ex students who are either married or getting married shortly - the request is to share some best practices of money management post marriage.

So here is my list - I am assuming that the couple is living alone.

Best practices in Financial planning

  1. If you both are working, then it is logical to have two independent bank accounts for salary and tax purposes. 
  2. But once the money comes into your salary account – transfer the whole amount into a joint account that can be operated by both of you. Do not keep track of my money vs your money. The money earned by both of you is common. Use this joint account for all expenses and for all savings and investments.
  3. Make a long term financial plan for the family – a 20 year plan is what I recommend. In case you want more details, please read the first few chapters in my book –the financial planner template that I have discussed in my book is also available here for you to download (you will need to read the book for understanding the logic though) - .
  4. Keep track of all expenses. There are quite a few expense management apps available that run on smart phones –use one common app (with two accounts -one for each one of you) and record the income and expenses on a daily basis. At the month end, one of you must collate the income and expenses and update your annual financial cash flow plan.
  5. Create a budget for all expense heads that you use in the financial plan. Try to live within this budget. If the budgets are low, then increase the budgets in the financial plan.
  6. You must internalise the difference between spending on assets vs spending on liabilities. Assets are the ones that give you money (e.g. education is an asset as it increases your earning power)  and liabilities are the ones that take money away ( e.g. a car or TV is actually a liability). Remember the rich spend on assets and the not so rich spend on things they think are assets but are actually liabilities.
  7. Keep an eye on the financial plan vs actuals every six months and modify the plan if it is deviating from the actual.
  8. Discuss your financial plan with your spouse every few months so that both of you are in sync on the path ahead.
  9. Use credit card as a convenience tool –do not take a loan based on the credit limit - only use it if you have money in the bank.

Best practices in Investing

  1. Learn investing – start with MF’s – it is easy to learn.
  2. Move towards stocks if you are interested.
  3. Study the real estate market in whichever city you want to invest in.
  4. Avoid fixed deposits and Insurance schemes that are positioned as investment and tax saving schemes.
  5. Start SIP’s in a few MF’s so that your savings are automatically invested in select MF’s.
  6. You must aim to invest in a property with the help of your savings and a home loan as soon as possible
  7. Surely measure your ROI from investments every year. Over time the ROI must be 15% or more .
  8. Insure yourself and your spouse through a term insurance policy.
  9. Take an insurance cover for your vehicle and house.
  10. If you do not have a hospitalisation policy through your company – then take one.
Over time, these money management practices will result in you "Getting rich and retiring early".

Sunday, June 8, 2014

What is the best time to buy a term insurance policy?

Term insurance policy is a life insurance scheme that covers only risk of death and does not offer any survivor benefits. It is like the insurance policy we take for our two wheeler or car – we pay an annual premium – if we have an accident, the repair bills go to the insurance company and they pay the bills subject to some deductions. Similarly, in Term Insurance policy, you take a policy for a specified number of years (let’s say 20 years), and specified cover (let’s say Rs 100 lacs) and you pay an annual premium for the 20 years.  In case if your demise in this period of 20 years, your dependants will get the insurance cover of Rs 100 lacs.

Term policy is the plan B of your financial plan. Let’s say you have done a 20 year financial plan and you are earning well and investing well.  You are well on your way to get financially independent in a few years. Even though  you know that life cannot be taken for granted and anything can happen to you any day – you assume that you will live till you are old –really old. Well that is a fallacy - any one of us  could meet our end any day.  It is for mitigating this risk of untimely demise, that we need to take a term insurance policy. If your financial plan (your plan A) fails due to your untimely demise, the plan B (term insurance policy) ensures that your dependants are not financially impacted and are safe.

So the answer to my question “what is the best time to buy a term insurance policy” is NOW  - you need to take the term policy now.
Anyone who is earning and has financial dependents, should have a term insurance policy. If both husband and wife are working, then both should take term insurance policies.

The following are the questions that I know you will have and I have tried to answer it:

  1. How much cover should I take?:  Take enough so that your dependants will have enough money to replace your income. For example, if your annual income is Rs 10 lacs, then you should take at least a cover of 100 lacs – this 100 lacs, if kept in a FD giving 10%, will give your dependants Rs 10 lacs. But then there is also inflation and taxes. So the thumb rule is as follows:
    1. If you are up to 25 years of age – take a cover of 20 times your annual pre-tax income
    2. If you are between 25 years and 35 years old – take a cover of 15 times your annual pre-tax income
    3. If you are between 35 years and 45 years old – take a cover of 12 times your annual pre-tax income
    4. If you are above 45 years of age – take a cover of 10 times your annual pre-tax income
  2. What about cover for my loans? You must take loan cover to ensure that  in the case of your untimely demise, your family is not saddled with the repayments. For every loan that you have, take a term loan cover.
  3. My company already has a group term insurance policy -so do I need to take it once again? Typically companies offer term cover up to a certain level. So if your company offers you a cover of Rs 50 lacs - then you calculate the additional cover that you need (based on the calculations shown in point 1 above) and take a cover for that amount on your own.
  4. Till when do I need the cover?  You need the cover till your are financially independent – once you are financially independent of a job, then you financial assets pay for your living and in the case of your untimely demise, your family will still have the financial assets paying for their living. But you cannot be sure of when you will reach financial independant – so take a term policy for a max period – typically till your retirement age. In case you reach financial independence before your retirement age, then you can stop paying the premium and discontinue the policy.
  5. How much is the premium normally? The table below gives indicative range of premium per year. These are indicative and there are many more insurance companies – so you do your research and take a decision.

Annual Premium for Rs 100 lacs cover till 50 years of age for a non smoker male
Insurance policy
LIC eTerm
HDFC Click2protect
ICICI Pru iCare
SBI Life eShield
Bajaj Alliance iSecure
Reliance online term


  1. Do I buy it online or through an agent?  No agent will tell you to buy it online. They will also tell you many reasons why you should buy it from them. But remember, an agent is commission biased. Typically, the same policy when bought online would be 20% cheaper – because the agent’s commission is discounted. Further the insurers see the typical online customer as a low risk, educated, reasonably well earning individual  -the kind of customers the insurance company wants to attract. So these policies online are aggressively priced  as compared to the same offline policy. Remember, your relationship with the insurance company is the same whether you buy it through an agent or buy it online
  2. What about medical tests? All term life policies bought online will be followed by a mandatory medical test which is funded by the insurance company. The policy premium can change if there are health issues found during the medical tests. One needs to go through this and it is basically good for you as otherwise, how often do you actually go through a complete medical check? But remember that, you will not get the results of the medical tests – that will be sent to the insurance company.
  3. Is this premium tax deductible? – Yes, -you can claim tax deduction for the premium paid for term insurance policies under sec 80C (up to Rs 1 lac of premium per annum)

 Give all details to the insurer to the best of your knowledge – correct age, correct salary are important.  If you are a smoker – clearly tell them that (it will increase your premium by about 25%). Remember, your family will need to answer some of these questions to the insurer in the case of your un-timely demise.  
Also if you notice, the table above clearly mentions male. The premiums for women are higher by about 10%.

So to answer the question raised above? – Well I guess you have the answer already J

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