Investment Planning in case of job loss

Are you worrying about your Job Loss? Here is what you can do!

The thought of losing a job is very scary, isn’t it? With the evolving technologies around and automation happening in every industry, it is but natural to be worried. Any of us can lose our job at any time and the worst part is we can’t do anything about it.

What you usually do to get out of this fear is you start talking to your peers, your friends, spending more time with your loved ones or you may watch a motivational movie etc which can motivate you. Each of them will motivate you but you would end up getting the perfect answer for what if I lose my job?
So here are some best ways to prepare for and tackle the job-loss situation:

Create your emergency fund:

Build your emergency fund out of your income. Transfer around 30% of your saving income into Liquid funds or ultra-short-term funds where risk is minimal, and your money will start growing on a daily basis. An ideal emergency fund should be equal to six months’ future expenses or if you are having any EMI’s going on, it should at least equal future six months EMI.
Another option would be to reduce the EMI amount & increase the tenure of the loan temporarily till the time things get normal. This is not at all beneficial for you in the long term so better have an emergency fund in place.

Fun Fact: There are certain mutual funds like Reliance Liquid Fund which provide instant redemption facility whereby you can get your money in just 5-10 min in your bank account 24*7. These funds can give you returns ranging from 6.5% – 8%.

Understand the employee benefits:

You should be aware of all the details of your salary, your unused leaves and their compensation, insurance etc. It will help you in estimating the future income.

Utilize your open-ended/Withdrawable Investments:

You should always have an investment which can be easily liquidated. In such critical times, your real estate, Public Provident Fund (PPF), National Savings Certificate (NSC) etc investments will not help as you can’t liquidate them but your investment in mutual funds safeguard you in such cases.

Use loan protection plans if you have any:

To safeguard investors from any uncertain events, banks do provide loan protection before taking any loan. This plan covers other critical events like illness or job loss. If you have this policy, redeem the plan’s benefit at times of job loss.

Make sure about your personal Mediclaim Policy:

You should always make sure that you are having your own Mediclaim policy other than the one which gets provided by the employer. Medical emergencies can arise at any time and will impact you majorly in your crucial times.

Look ahead for the opportunities:

While it is obvious to get frustrated by job loss but at the same time, you should also think about the skill set, the knowledge set required to qualify for the best opportunities in the market. Because, the above measures will help you in tackling the temporary emergencies, knowledge and skill set will give you permanent solutions.

Losing a job is a stressful activity, however proper planning & a balanced approach can help you in coming out of such cases.

Invest in Mutual funds online - Dipika Jaikishan

How to invest in a Mutual fund online?

As the newer generation is moving from manual transaction to online transaction, this video talks about the various advantages of investing online. It also helps in simplifying the process of investment in a fast, effective and efficient way. Mobile apps like MyWay Wealth can be installed and steps are as easy as:

  • Register one time.
  • Complete your KYC(Know Your Customer).
  • Sync your bank account.
  • Select your mutual funds for investment.
Invest in your Child's Future

Make the right investment for your child’s future

“The cost of college education today is so high that many young people are giving up their dream of going to college, while many others are graduating deeply in debt”

— Bernie Sanders

Even though this quote is said in the context of education in the USA, the situation isn’t much different here in India. When we meet our old friends over a cup of tea or coffee, we cherish our school/college days. These nostalgic memories take us back to the good old days when it was much easier to dream, set our goals and achieve them with ease. The inexpensive lifestyle in those days gave us a lot of room to lead a carefree life.

Do you remember that schools use to collect a ‘humble’ fee of Rs 11,000 from a standard 12 student 15 years ago? But now the same education would typically cost about 2 lakh which is ten times more.

We at MyWay Wealth tell our customers how the inflation in the education system rises in double-digits while your purchasing power climbs by just 6-8% each year. Simply put, it is tough for us to make ends meet.

The table below shows how expensive your child’s education would be (in a 5-year spread timeline) if education costs keep increasing at 12% every year. Just so that numbers are relatable and easier to understand, we have normalized the education costs for 5 years ago by computing them at the same rate:

Rising Costs of Education in India

You would have realized by now that as years pass the expenses would keep increasing, while your salary wouldn’t increase in the same proportion, unfortunately. Moreover, these forecasts of education costs don’t take costs of gizmos, gadgets, sports amenities and extra-curricular costs into consideration, which make education unaffordable even further.

According to HSBC Value of Education Survey 2018, there was an INR. 4.15 lakh shortfall between what parents contributed and what students needed for a complete education.

This is quite an eye-opener and reflects the under-preparation by parents for their children’s education. A major reason for such a discrepancy is the fact that parents do not fully understand education inflation and so, are unable to financially plan in an adequate manner.

Let us explore some investment options which are specifically focused on financially securing your child’s future:

Sukanya Samriddhi Account:

  • This investment can be made only in the name of a minor girl child and should be initiated before she turns 10 years of age.
  • Each girl child can have only one account and this can be opened for a maximum of two girl children.
  • The current rate of interest is 8.5% per annum which is tax-free.
  • Scheme qualifies for tax deduction under section 80C.
  • Minimum Investment amount: INR. 250, maximum investment amount: INR.1.5 Lakh in a financial year.

Children’s Fund

  • These funds have a lock-in period of 5 years or till the child attains the age of majority; whichever is earlier.
  • An investor can choose debt-oriented or equity-oriented schemes in the name of his/her minor child.
  • Minimum SIP amount: INR 500.

“The problem with Indian education is that education in itself is overrated while the need to financially plan for it is underrated”

Now that we’ve understood the need and benefits of long-term planning, don’t hesitate, make the smart choice and starts investing. Let your aspirations come alive.

Child's Education Goal - Dipika Jaikishan

How to invest towards Children’s Education Goals?

This video helps you to plan your child’s education successfully and tells you the need to invest right now for your child’s future.

Here is a quick overview of this video:

  1. What is a child’s education plan?
  2. What your basic motivation should be while investing in this plan?
  3. Where can you invest in your child’s future?
Child education

Secure your Child’s Education

Most of you would have heard these words of wisdom from Nelson Mandela:

Education is the most powerful weapon which you can use to change the world.

— Nelson Mandela

But the rising costs of education (at all levels from elementary school to college higher education) have made it harder to get a quality education for our kid(s). Quoting Arne Duncan (who was Secretary of Education for the USA):

State governments generate less revenue in a recession. As state leaders struggle to make up for lost revenue, legislatures tend to cut funding for higher education. Colleges, in turn, answer these funding cuts with tuition hikes.

— Arne Duncan

Arne is talking about the state of education in the USA, this isn’t any less true here in India. 10-15 years ago, fees for a good school was about Rs. 10000-12000. The same quality of education in the same school for standard 12 is now about Rs. 2 Lakhs per year. That’s a hike of over 10x in 15 years. For the uninformed, most expert financial advisors say that while purchasing power parity increases by 6-8% every year, education inflation is always in 2-digit numbers.

Think of the times when we reminisce about missing the good old days from when we were younger, studying in schools and colleges (at a fraction of cost that we pay today for the same quality of education).

Forecast of Education Costs for next 10 years

Based on ‘Q3 2017 Salary Budget Planning Report’ (by Willis Towers Watson), Salaries in India are projected to rise at 10% in 2018 (the same as an actual increase in 2017). But education costs are stated to increase by 12% on an average across different grades.

To give you an idea about the hike in education costs in a 5-years spread timeline (assuming that costs continue to rise at 12% every year), here is a simple illustration:

 2013201820232028
Under-graduate₹ 1,41,857₹ 2,50,000₹ 4,40,585₹ 7,76,462
Post-Graduate₹ 11,34,854₹ 20,00,000₹ 35,24,683₹ 62,11,696
Higher Education A-tier (abroad)₹ 28,37,134₹ 50,00,000₹ 88,11,708₹ 155,29,241
Ivy League Higher Education ₹ 45,39,415₹ 80,00,000₹ 140,98,733₹ 248,46,786

At the risk of sounding redundant, it’s worth reminding that your salary would not increase at the same pace.

Miscellaneous education costs

Also, the above forecast doesn’t even consider ‘miscellaneous costs’ that piggyback on the top of regular education expenses (such as gadgets and other extra-curricular costs). We had been focusing on tuition expenses for our quantitative analysis above, but let’s not forget the additional financial burden of a standard of living that one has to maintain at schools (think gadgets, books, social activities for the child, etc.) Moreover, children, these days take extra classes (such as summer camps, extracurricular activities such as art or sports coaching, etc.) none of which come cheap.

Costs for college education

Well, while school education costs could be met by saving small amounts, the cost of higher education in college might easily take up 40% of your monthly salary.

In case you didn’t notice, this comparison only states the obvious: That as years pass, the costs of school and higher education would only go up.

What can you do to be financially prepared for your child’s education?

First things first: How much do we need to save? Based on calculations in the table above, parents have to eventually save Rs 65L for their child’s higher education.

Well, here is what we recommend to our investors on MyWay Wealth app:

SIP + Term Insurance = a good education plan.

1. Invest in Mutual Funds

Our MyWay Wealth app helps you to build a mutual fund portfolio to save for education.

Once you input your risk appetite while analyzing the past returns (1Y/3Y/5Y/10Y/15Y/20Y), our Smart Recommendation Engine (built on top of scientific financial models and years of historical market data) recommends a portfolio of mutual funds that will help you build the corpus for your child’s education costs.

2. Get term insurance which provides a cover of Rs. 65Lakhs.

This simply means that Rs 65L should be covered by a term plan. In case of your absence (such as accidental death), the education goal will not be compromised. This policy for a healthy adult of the age of say 32 would come at a premium of ~Rs 5000 annually. Let us not look at immediate gains causing ourselves long term pains and buy a term cover to secure education of kids even when we are not there for them.

Investing towards Retirement - Dipika Jaikishan

Investing towards Retirement

Do not delay investments for your Retirement. Investing early will help you to build a large corpus that would make sure you are financially independent and secure during your Retirement Days. You have worked hard, now its time to make it work you.

Retirement Plan

Pension or Annuity for your retirement corpus?

Pensions and annuities are two great kinds of retirement income. But don’t confuse one with the other. They are two different instruments with their own advantages and disadvantages. Let us see what they are and which one would be more appropriate.

What is a Pension?

It is a type of retirement account which is mandatory for Government employees but is also recommended for private-sector employees to secure their retired life. The fund is opened and maintained with regular contributions throughout employment.

Some companies offer pension to their employees as part of the job (Employees’ Provident Fund or EPF) while others can voluntarily opt for other pension schemes (PPF/ NPS). In the case of private sector employees, the employer manages the contributions and payouts, which is one less worry on your end. Even if the company suddenly goes bankrupt, the Pension Benefit Guaranty Corporation will try and get you your pension as much as they can. You may not get the entire amount but you will still have most of it.

An important feature of pension is the tax exemptions as you receive the payments on your retirement under Section 80C (PPF, EPF, NPS, etc).

As far as maturity is concerned, you generally have two options.

  1. You can receive monthly payments which give a regular source of retirement income.
  2. You can choose to get your pension as a lump-sum amount. This way you can get the entire amount at once and use it as you like.

At the time of your retirement, you receive payouts regularly or in a lump sum, depending on the scheme that you opt for. The amount you receive depends on several factors like your age, salary and the duration of your employment.

What is an Annuity?

It is similar to an insurance scheme. You make a deal for a stipulated amount of money and pay the money at one shot or through deposits regularly. Your money is invested in mutual funds, stocks or bonds. The specifics like the amount you receive, maturity, etc. are set by you. When the time comes, if you retire or not, you start to receive your payments from the annuity.

A big advantage of annuities is that if you use your income-after-taxes to fund the annuity, then your pay-outs are totally tax-free. Suppose you exhaust your pension completely, you can open an annuity that lasts till your death.

Conclusion

On the whole, a pension needs very little planning on your part because it is likely to make most of the payouts as the law protects pension payments. Whereas with an annuity you receive a fixed stream of payments by buying it with some or all of your pension ‘pot’.

When it comes to deciding which of the two is ideal for you, it is best to look at your lifestyle, planned retirement corpus, spending capacity, etc. It will help you understand which one is more beneficial for your retirement as per your requirement and circumstances.

retirement

How to plan your Retirement

“Old age is like everything else. To make a success of it, you’ve got to start young.”

-Theodore Roosevelt

In India, the most common beverage consumed is a cup of hot tea. It is served in the house, every morning, evening and sometimes even at night. A cup of hot tea is comforting and each person has their own way of making tea depending on their tastes. Such is the case of saving money. Many people do it in a different way. Now one of the most mundane of all saving is that of retirement. When approached with the subject people wave it off saying they’ll probably never retire or they will be well taken care of by their dependents. But like they say, your parents are not your emergency fund and your children are not your retirement fund. That’s why planning for your savings is crucial for maintaining your lifestyle even after you retire at that time.

So how does a person begin to plan for retirement? Well, there are two important points to keep in mind:

Your Spending

Every person’s individual spending habits vary. Some spend on food while others spend on clothes, some spend on their trips to exotic places while others spend on furnishing their dream home. One of the most important things to remember is that what you spend now will only increase in the years to come thanks to the constant inflation. So, in order to plan for what you spend after you retire to take a hard look at how much you spend these days. Try and anticipate how it will grow over the years while taking into consideration the inflation in the market. An easy way to do this is using the Rule of 72 which states that if you want to know how long it will take to double your money at 6% interest(inflation), divide 72 by 6 and get 8 years. Knowing this will instantly give a clear picture on what you need to do rather than leaving it up to chance to figure it out.

Your Saving

Now it comes down to how much a person must save. Many already have savings like FDs and Provident Funds so it can vary in terms of that. But when it comes to stocking up for your retirement there is a formula that will work wonders for you. Based on the age you are you save up that percentage of your income (after taxes). If you are 25 you should put away 25% of your income, if you are 30 you must put away 30% of your earnings. This should begin as early as you start to earn right until you are 55 or 60 years old.

Say you are 65 when you finally give yourself a break and want to sit back and take the load off. You will have children who take care of you and dependants that are always with you. Would it be better to still be standing on your own and do whatever you want rather than be totally dependant on others? You can use the money to pay your bills, go on that trip you planned for, buy your dream house, even pay for your dependent’s emergency needs at times.

Retirement isn’t just another option, it’s a need. So don’t delay, choose a way to save up for your retirement. The money you save today is like a bag of tea that is stored up until the right time. When you finally retire you can have a hot cup of strong tea. However, if you don’t plan for it and save up, you will have only a weak tea that gives no energy or comfort whatsoever.