FAMILY FINANCE

   Basically Insurance is a risk transfer instrument or arrangement that a typical customer signs with an Insurance Company.    The basic logic in entering into an insurance contract goes like this. Life and events occurring in life, are largely unpredictable and unforeseen.These are beyond human control. But the consequential damages and sufferings to an individual are heavy and painful.    By entering into an insurance contract, we cover our selves and our family members against financial insecurities which come about due to such unforeseen occurrences,by paying a periodic insurance premium to the insurance company. In turn, the insurance company, undertakes to compensate you for the sum assured in case the particular event occurs.      Events may be simple inconsequential event or critical. Let me give some  examples. A kid falling down while playing football and  getting slightly bruised we may classify as inconsequential...

FINANCIAL TRANSACTIONS    As a family member you would enter into many financial transaction of substantial value with others like your family members, friends and different financial institutions. Here we exclude the day to day type of transaction that we get into, like buying weekly provisions, fruits, petrol ...   What we are considering here as transactions of importance may be a loan that you may extend to your near or far relative to get over an urgent medical emergency, a short term loan of Rs 2 lakhs given to your friend or colleague for getting over some loan payment deadline etc.    The other type of transactions which we are focused on would be making a fixed Deposit  in a bank or Post Office, investing in Shares or Mutual Funds, taking some insurance cover for life, health or property of self or other family members.       In all these cases, the person entering into such transactions must make sure that at le...

  Conventional investment made by most families are on the following assets: a) Gold jewellery, b) Chit funds, c) Silver and other precious stones, d) Saving in Banks and Post Offices, e) Saving in Cooperative banks  and f) Land & property.   Though all the asset class listed above would not qualify as investment, we shall make a beginning with this list. Each type of asset class has its own merit and demerit which we shall  review here.    Investment in Gold is easy. It can be adapted to the fund available to invest in gold, can be bought from the local jeweller, can be exchanged or sold in case immediate cash is needed. Normally gold price has shown an overall increasing trend with every passing year, though it may fluctuate midway, as per changes in the market. The down side in investment in gold jewellery is that while you purchase or sell them, you stand  to loose money on making charges and wastage which varies from 7 to 22% of th...

  By being a qualified professional or an expert, in any stream - be it engineering, medicine, marketing & sales, teaching - you name it, you do not become a financially literate person. Putting it in another  way, you are  financially not literate. This is the fact, unless you are trained and qualified in the line. As per statistics,  majority of us are financially not literate, which is not a sin. But it is a serious handicap if we do not know how best to manage our finance and grow our wealth, when we are seriously committed to work life long for our own well being and that of our dear and near ones.   To  make a committed beginning towards becoming a successful FAMILY FINANCE  MANAGER the very first step  you must take is to accept this fact. Neither having passed High School Maths or Engineering Math qualify you as a financially literate person. Failing to accept this reality, you deceive yourself. It will be a counter productive...

  The conventional understanding of saving is the amount remaining from your monthly income after meeting all your expenses. A very interesting definition of saving, as per the financially wise, is that saving is  the amount set aside in the beginning, based on your plan for meeting your major financial goals, and the remaining amount from your income is used to meet your  monthly expenses ! Some wise thought indeed. But how many of us are ready to follow such inputs ?   Now, coming to saving, we know it is the amount set aside to meet some unexpected expense in the future. Fair enough. While such saved amount are allowed to be in your Saving Bank account, the annual interest it would earn is hardly 4%, if it is in Fixed Deposit it may touch 7.25 %.   While we  are considering the interest earned by our savings kept in the bank, it would be interesting to know that the annual inflation rate in India is in the range of 5-7% per annum ! So what happens ...

  Like for achieving any important mile stones in a family  - be it educating your child, getting them married, sending them abroad for higher studies or  building your first home - you plan with great care and attention, You  need to make a conscious decision to plan  for growing the family finance and wealth. It is a critical activity which  must be undertaken without delay, at what ever stage of life you are in. As a first step, identify the major mile stones of your family  and the corresponding financial outlay required in the next five years,ten years and so on up to the next 25-30 years.   Next compare these periodic financial targets  to be met at important mile stones with  the current  and future level of income to see whether it would be adequate enough to meet those needs. What is the monthly saving required to meet the future goals? If it is not adequate what is the next step to be taken ? You  need to  giv...