TomorrowMakers

Stop thinking you don’t have enough money and start investing

You are young, you are free, there’s a party this Friday like every other Friday, and you have no worry. Well, maybe just one teeny-weeny bit of worry at the back of your mind: is it time to start investing?

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But, it isn’t that simple! Where is that extra bit of cash to allow you the leeway to indulge in a bit of investing on the side?  

There’s that little irritation called the monthly rent outgo - as your job has forced you to move out of the comfort of your parents’ house and relocate to another city, and the daily expenses of living alone are not as easy on the pocket as you thought they would be. And don’t forget the car... it’s a must before you turn 26, right?  

 

But the question remains: where is the money to invest?  

How to start investing? 

Say you are between the age of 20 and 25 and have got a job that pays relatively well. You are eager to begin investing but have no clue how to go about it. Your first question will be how to start investing? 

Related: Money lessons you only learn in your twenties 

It is not unnatural to have a relatively low amount of savings early in one’s professional life; that is nothing to despair over. Look at the brighter side: the advantage of being young is you are starting early, and small savings add up to something substantial over the years. 

Here are some steps for investing for beginners: 

First, make sure you enter the world of investment confidently; the Indian economy has enough reasons to make you feel so. Consulting firm PwC believes1 that India will be the largest economy in the world, after China, by 2040, fuelled mainly by higher capital investments and better technology.  

This means that the Indian equity market will be on a growth trajectory over an extended period – till you are about 43-48 years old, depending on your age now. So, investing in the market keeping a long-term perspective makes sense. 

When it comes to investing for beginners, it’s a good idea to create an emergency fund that is equal to the value of six months of expenses; this will serve two purposes:  

(a) It provides you with a cushion to tide over emergencies,  

(b) you can invest in highly liquid funds that allow you to start small and withdraw the money when you need it. Note that fixed deposits are not very liquid and may not help during emergencies.  

Try and figure out that from your current earnings – repeat, current earnings – how much you would be able to contribute to the short/middle term and emergency funds, and how much you can contribute towards long-term investment. 

Most importantly, choose an amount to invest that you’re comfortable with.  One of the main reasons you may be delaying investment would be because you don’t think you have enough money to invest. “Maybe after my next salary hike”, you’ll tell yourself, assuming a higher salary would mean higher savings. But you’ll soon find that the more you earn, the more you spend.  

 

Better option? Invest small. Investing for beginners can start from as little as Rs. 1000 per month. That’s one dinner at a fancy restaurant! In a matter of 4-5 years, that money could grow to a trip to Thailand. Want to know how? Check out SIPs for Dummies.  

Related: Why create an emergency fund before starting to invest? 

Setting Goals 

Break down your goals for the next five years (the short term), and for the next ten years (the long-term), to make it easier to start focusing on funding them.  

 

These goals are not career targets, but more practical ones that require finances: for instance, buy a car in two years, get married and honeymoon abroad in the next five, etc., work out the estimates. 

 Pro Tip: Buying a house counts as a long-term goal. Though paying rent may seem okay right now, keep in mind that spending your hard-earned money in this way gives you no returns! A house, on the other hand, is an investment. EMIs you pay to afford a home loan, are eventually going to give you an asset.  

Steady Savings  

While making investments is essential, there are other emergencies you need to plan for. What happens to all the money you’ve saved, if you suddenly need to spend it all on hospital bills, post an unfortunate event? Or spend it on getting your car fixed, after a massive accident? These events can’t be predicted, but they can be planned for. That’s where insurance comes in. 

Investing for beginners should start with life and health. Contrary to what you might think, these policies are cheaper, the earlier you buy them. As you get older and unhealthier, your premium will keep increasing. To get you started, here are: 

In case you are wondering, it’s not too early to start planning for retirement. Here are some quick reads to prove the point: 

The Bottom Line 

As a wrap-up word, and given that the Indian economy promises to grow in a steady upward swing, follow these tips when you think about how to start investing.   

Disclaimer: This article is intended for general information purposes only and should not be construed as investment, insurance, tax or legal advice. You are encouraged to separately obtain independent advice when making decisions in these areas 

9 rules while buying health insurance [video]

Don't you wish shopping for Health Insurance was as easy as picking up groceries? But sadly, it isn't!

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More than 80 percent of financial crisis originate out of a medical emergency and the same can severely damage one’s finances
You can avoid such situations by keeping in mind these nine rules while buying health Insurance online or through an advisor
Rule number 1:
You must have an individual health insurance even if your company offers group health cover.
Corporate cover is not enough because it could
a. Cease once you leave your job or retire
b. Not offer all benefits or
c. Might not cover all family members

Rule number 2 – Choose the right amount as ‘sum insured –
Minimum cover should range between
Rs.3 to 5 lakh in a small city and
Rs. 5 – 10 lakh in a metro
Also, keep increasing your health cover at regular intervals to counter medical inflation

Rule number 3- Ensure your preferred hospital is cashless
Whether it is the hospital closest to your home or the one where your family doctor practices. Ensure that your preferred hospital is an in-network hospital before buying health insurance.

Rule number 4 – Buy a health cover that gives you lifetime renewability.
Lifetime renewability ensures that health insurance provider can't refuse your policy renewal when you are old and are at higher risk

Rule number 5 – Say no to claim loading.
Claim loading is the amount charged by the health insurance company on your renewal premium when you make claims in your policy
So, if you get a critical illness which requires long term cure then with a claim loading your premiums will keep on increasing and may soon become un-affordable.

Rule number 6 – Buy a policy which gives you a restore limit. Super top up restores your health cover in case you fully utilize your sum assured. It acts as a buffer for unforeseen critical illness

Rule number 7 – Never lie and hide information in your application form. If you have an ailment please make sure you mention it. Most plans will cover pre-existing diseases after 3 to 5 years

Rule number 8 – Be aware of the waiting periods. All health plans have a waiting period for pre-existing ailments. Please see what the waiting period is and try opting for a plan that offers minimum waiting period.

Rule number 9 – Buy a plan with no or minimal sub limit.
There are two kinds of limits that insurers place. On hospital room rent and on specific diseases.
For example, you have a mediclaim policy of Rupees 3 lakh that has a clause restricting room rents to 1% of sum insured. So applicable room rent is 3000 per day
You have to be admitted for 2 days and the General Ward will cost you Room rent of Rupees 1000 per day plus all other eligible expenses coming to  Rupees 73,000
But you don't like the general ward and would like to stay in the twin sharing room which will cost Room rent of Rupees 3500 per day, plus all other eligible expenses Rupees 2 lakh 43000
Now you'd think that insurance company will reimburse Rupees 2 lakh 42000 removing 1000 for the room rent
In reality you'll only get Rupees 75000. Because the room rent restriction means that all expenses other than room rent will also be restricted. Therefore, always avoid any policy that has any such restriction. Whether for room rent or any specific procedure.
Thanks for watching the video and be sure to subscribe our channel or visit the site for more such information

What do you do after a car accident? [Video]

Never lose your temper, get into an argument, or admit liability- this might invalidate your insurance. If the other driver is being violent, call the police on 100.

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*car accident occurs between 2 cars*

Do you know what you’re supposed to do if this happens?

  1. Always keep a first aid kit handy.
  2. Check for injuries.
  3. Walk on a straight line to ensure there is no brain injury or a concussion.
  4. In case you or anyone else is injured, call an ambulance at 101.
  5. Move people with minor injuries away from the accident spot and provide basic first aid.
  6. Remember, if someone is gravely injured, do not move them around a lot. This might aggravate their condition. Call police if needed.
  7. Once you're out of the car, move it to the side of the road so a moving car doesn’t hit you.
  8. Can’t move your car without a tow truck? Call your insurer’s Road Side Assistance to tow it and take it to the closest network garage.
  9. Take photographs of:
    • The damage caused to yours and others' cars
    • Injuries caused to you and the other victims and
    • The location of the accident
  10. Next, gather information.
  11. Make a note of:
    • Personal details of the driver and the owner
      (name, address, email ID, phone number. Driver as well as owner)
    • Details of the car
      (the make and model of the car and number plate number)
    • Insurance Details
      (their insurers’ name, number & policy number)
  12. Never lose your temper, get into an argument, or admit liability- this might invalidate your insurance. If the other driver is being violent, call the police on 100.
  13. If they don’t arrive in time, go to the nearest police station and file an FIR.
  14. In case no one is hurt and cars can be driven away safely, you might not want to call the police.
  15. Next, file your insurance claim:
    • Schedule an inspection with the insurance company.
    • Share all the evidence and a get a cost estimate
    • also always remember to keep your car papers handy
    • Get the repairs done and get your car back as good as new!

Above all, remember to drive safe!