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POSTED BY ON March 14, 2012 3:32 pm COMMENTS (12)
Need Advise on personal finance:
I have been going through the forum for last few days and finally I created my login today.
I am 30, male, married 8 months back and my monthly take home salary is 50k credited in Yes Bank. And I contribute 2.5k to my EPF account every month since last 6 months. Had withdrawn all my EPF prior to this when I switched job.
My wife is non-working and has no capital, income, pan card or bank account.
I have a 15 lac FD in HSBC Bank,maturing in last week of march 2012.
I have another one dozen FDs totally another 15 lac in ICICI and HDFC Bank and maturing during different months in 2013.
I have 2 lac in Muthoot secured NCD @ 12% maturing in Sept 2013.
I have a few shares. Todays market value of my shares is 4 lac.
I have 2 lac in my savings account.
I own a car bought 1 year back at 5.5 lac down payment.
If you are wondering how do I have 30+ lac with 50k Monthly salary, that’s because I had worked in US for 2.5 years.
I have not bought any kind of insurance for myself or for my wife. We do not have any PPF, MF, or Gold investment.
However my employer gives health insurance for upto 4 lac for my wife and me combined.
We live in parents owned flat and therefore pay no rent. Our monthly expenses are 25k.
I have excluded expenses towards my parents and sister as they manage it from their income.
Goals:
Need to contribute 20 lac towards my sister marriage in next 2 years.
Need to take care of my parents. currently aged 56 & 52 , my family and my baby,due in Nov 2012.
Live a middle class life style.
Move to a bigger house after sister’s marriage by selling this house and contributing another 50 lac from my savings and bank loan.
Buy a 10 lac car few months before sister marriage for myself.`
I have no accounts in any public banks because I dont like the attitude of employees there. Thats why I dont have PPF Account either.
As for term or endowment insurance, should something happen to me, I dont think my wife will be able to follow up with insurance companies for claim and the other paper work.
So I have not gone for any insurance.
Till now I never worried, as I was single and was earning decent and my expenses have always been less than my income.
Now that I am married and a baby due, I thought may be I should start doing some planning. Better late than never!
I have not made any will. However I have nominated my wife in all my FDs and Bank Accounts.
Any advise will be greatly appreciated. Am not looking at directly investing in stock market.
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“Even assuming the worst case the SBI employees in the branch near your home are not that friendly you just need to take the pain to open a savings account and PPF and get online access, You perhaps never ever have to visit the branch again”
I agree 110% on the above statement of @justgrowmymoney. I opened an account in SBI just for opening PPF and linking with my SB. Now SBI has become my #1 bank and I closed one of my private bank account.
Dear Ramprakash, may I know – Father, mother, sister, all are earning or some? If some are earning, please clarify who is earning & yly income of the same?
Although it’s a more personal question but whatever you have discussed above, leads me to the point that you are going to arrange a huge dowry for your sister, please do tell me am I right or wrong? if I’m right, please do quote a figure you & your family is ok for the marriage expenses of your sister.
Regarding your last reply – Higher Value Car = good match making, Do you really feel so?
I’m sorry, If you feel, I’m intruding too much in your personal life, but as you are asking suggestion with an open mind, I’m asking you too many question to help you out.
I have already read the discussion between you & dear justgrowmymoney & dear Rmohan. At first glance, I thought, the basic idea is there with you after this discussion, then I though I should add my own views also & that’s why I’m asking you the questions.
Hi Ashal
Thanks for reading my lengthy query.
I understand that more details are required for a proper plan. I have mentioned all that you have asked without disclosing things that I may not be comfortable with. My mom is a homemaker. She has no income. My dad runs a small business and will continue to do so for approx 3 more years. Within a year after my sister’s marriage he plans to close it down and retire. I dont know his exact annual income (my guess is it could be 5 lac p.a.) but his three main goals were one own house (he bought in my mom’s name), my marriage and my sister’s marriage. First two have been achieved. My sister works with an IT firm and earns 23k (take home) monthly excluding PF contribution. She does not stay with us and works in Bangalore. She meets her expenses and approx. saves 8k in saving account. She does not do any investments (apart from EPF) and is in 10% tax bracket.
Not exactly dowry. But we plan to bear all the cost of the expenses for the wedding ceremony and gifts to relatives etc.
I dont know how much the expenses will be, but the agreement between dad and me is that I contribute 20lac and the rest (be it 1lac or 50 lac) will be arranged by him. How much is the ‘rest’ amount, i feel, is out of scope of this discussion beacuse the rest should be covered under my dad’s financial plan rather than mine.
A lot has been said about the car. I am always open for discussion, whether it is constructive or negative.
As for the car, it is not for dowry. It will be for us to upgarde the social status. We are in Delhi and owning a bigger car makes a differnce in the socity (mindset of Delhiets) irrespective of whether we really need it or no. I have no requirement for a bigger car. I am happy with my current car. Its just for social status.
Dear Ramprakash, some more questions – Mother being a home maker – does has a PAN card for self or not? Does she has any bank account? Is it possible to you to open a bank account for your mother in the same bank where your FDs are about to mature? Please read again, I’m asking to open an individual account for your mother.
You may feel for me a bit irritating that I’m asking too many questions & not answering your basic query but my dear friend, it’s for your own good that I want to understand the whole situation first. I do hope you won’t mind it.
Thanks
Ashal
Hi Ashal
Not at all. Why will I feel irritating if someone is taken an interest and pains in responding to my query and helping me.
Yes she has Pan card. When I said she has no income,I meant she does not do a job. However my dad has her name as partner in his business to make income tax effective.
Since you proposed opening a bank account in her name,would it not be better if I open one in my wife’s name as she has no income. Ofcourse the only issue is will have to apply for Pan card first, which could take 1-2 months.
Many Thanks
Ramprakash
Dear Ramprakash, can you pin point the yly income of your mother from that business partnership? I’m not using your wife for the exclusive reason of clubbing provisions of section 64.
In case your wife do not has a PAN card, please arrange one for her right now. It ‘ll not take more than 15-20 days to reach PAN Card at your home. If you want to discuss more details in private, you may do so by writing a personal mail to me ashalanshu@gmail.com
Thanks
Ashal
My opinion:
I agree with @justgrowmymoney strongly on 2 points:
1) Taking term insurance and your statement “I dont think my wife will be able to follow up with insurance companies for claim and the other paper work.” is absolute rubbish.
Sorry if I’m being a little harsh, but I have personal experience of one of my wife’s friend (also my friend) who lost her husband in an unfortunate accident. Her words when I asked about husband’s investments (1.5 years after accident) was “He just screwed up my life!”. Reason: He didn’t take any term insurance and she has a kid to take care of 🙁
Surely you don’t want that kind of statement against you. I pray that nothing happens to you but if it did, your wife should not be saying this to you.
2) A fancy car for 10 lacs can be put away for some years; not necessary to combine that with your sisters marriage.
Thanks Mohan for going through my query.
1. I dont have an issue taking an online term insurance and I know it is a good idea. They are convinient and cheap. Around 12k for a 20 year term policy. Only reason I havent taken is the hassle in claim process. The ease of paying premium is inversionally proportional to the pain of claim process. The reason is insurance companies mandate that they are informed within certain days in the event of death and other processes to be followed. The family is generally in a state of grief by a loss of life, and insurance is Not on their mind at that moment. It takes 3-6 months for them to recover and start getting normal. By that time, the specified period of making a claim is already expired. I think insurance companies should atleast give 1 year time to the family to make claim.
2. Regarding the car, I dont have a requirement now. But once we start seeking an alliance for my sister, I think it does make a difference if one has a better car.
Dont know if you agree with above.
Hi,
1) Asking your insured to collect the benefit should be part of educating them on the insurance policy
2) Well, my personal take. If you get a better groom because of a bigger car, then the groom is more interested in money rather than the welfare of your sister. You may disagree and we can agree to disagree
Ram – Your title says it all. I think your cash/Debt position is pretty decent – what needs to be done is channelling money to the right sources. Asset allocation determines a bulk of your future wealth. Check this out – http://justgrowmymoney.wordpress.com/2011/12/13/asset-allocation-your-oneway-ticket-to-wealth-generation/
Step 1 – obviously is Term Insurance: Dont even think of Endowment plans. Stating your wife cannot followup for claim is really a very lazy/dumb reason not to take insurance. As part of one’s overall financial lives we must educate spouses about investments and make sure they understand basic finance. Go and take a term insurance immediately or come up with another innovative answer to not take Term Insurance.
Public sector banks: Several public sector banks provide services at par with most private banks. It may be a little irritating to deal with them but banking with the likes of SBI is really a pleasure. Even assuming the worst case the SBI employees in the branch near your home are not that friendly you just need to take the pain to open a savings account and PPF and get online access, You perhaps never ever have to visit the branch again (which easily explains why you parked so much funds with HSBC, ICICI, HDFC and ilk). You can open and close FDs at will with a few clicks, fund PPF etc. Also public sector banks provide higher interest on FD which will be a ‘sizable’ amount on 30 lacs. Something you lost just because you could not walk into a public sector bank. Not a great thing in my opinion. Apart from SBI several other public sector banks provide superior services. The old stigma refuses to fade away though!
Having a separate health insurance is needed because you dont know when you will change jobs/lose jobs. If your new employer has no enough health insurance that is also a problem. What if you are sick between jobs? Again if you decide to retire in your 50s getting a fresh cover will be very expensive. Though not an immediate need get a separate plan over the next 2-3 months.
Since your sister’s marriage is just 2 years away when the FDs mature move them to Liuid Mutual funds and opt for growth option (if in 10% tax slab0 or dividend option (20% and beyond tax slab). These are tax efficient avenues than FDs which eay away your returns by way of tax.
At your age you must have about 70% invested in Euity and 30% debt whilewhat we see now is aout 10% Equity . I am assuming the direct stock folio is your ESOPs. It is difficult to make a call without knowing the portfolio – you may perhaps choose to retain it.
When FDs mature and you have put aside money for your sister’s marriage you must start investing in Equity Mutual Funds to start growing a sizeable corpus. I recommend putting of your new car purchase by some years as wealth building should take priority and given the fact you already own a car.
Thanks justgrowmymoney.
In essence you suggest that I
1. Get a term insurance
2. Open a saving account in SBI and PPF Account.
3. Get a health insurance
4. Park FDs upon maturing in liquid MF Divident option (am in 20% tax bracket) and utilise the same for sister’s marriage.
5. Invest 70% of any new savings, after sister’s marriage expenses, in equity MF. Rest 30% in Debt Funds like PPF.
6. Hope step 5 helps in building corpus for new car and new house.
Excellent summary!