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Buying Life Insurance – A Balancing Act

July 25, 2016 Leave a comment

wealthymatters The conventional financial wisdom is that people best serve themselves by purchasing an online term insurance plan and investing the rest of the premium in diversified equity mutual funds. I have a slightly different take on the matter. Let me explain. Many readers have remarked on the difference between my stand and that of other experts.

If you are young, just started working, have little savings, come from a family with little savings, are the sole or main bread-winner of the family and have many dependents, an inexpensive term insurance plan is your best bet. Even as you work towards building wealth, you don’t put your loved ones at the risk of destitution, should something happen to you.

Also if you are older but have to provide for home and children and perhaps have mortgage and car loans etc. outstanding, you’d do well to increase insurance cover via a term plan for the duration of these loans to ensure that in your absence unpaid loans don’t add to your family’s miseries. Read more of this post

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Legacy Drawer

April 13, 2011 1 Comment

Dave Ramsey talks of the Legacy Drawer.It’s a drawer that houses all of the important information your family needs in case something happens to you.It might be the last gift you will give your family, so it’s worthwhile making it a good one.

The drawer should be somewhere in your home and contain everything your spouse or family needs to know if you aren’t around—anything that has to do with your financial life should be in that drawer. You must organize it in a way that anyone can find a specific document in 30 seconds. All files should be clearly marked, in order, and easy for a grieving family member to find. There’s no need to go into extreme detail when creating your Legacy Drawer. Simply include the appropriate documents in an easy-to-understand format, and you’re good to go!

Here is a list of things your Legacy Drawer should contain :- Read more of this post

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5 Financial Homilies To Reconsider

March 10, 2011 1 Comment

Financial advice always needs to be nuanced.What is good for one person in a certain situation many not be so good for another in a different situation. Unfortunately people are always looking for simple advice and rules of thumb.If we over-generalize on generally sane financial advice we can come to a sorry pass.

Here are some common homilies that need some reconsideration:

1. A house is always a good investment:A house is a tangible investment that you could potentially live in.You could rent it out and make some money.Maybe it will help you save tax.Maybe you could invest in one to save for retirement.Generally saving for a house to live in is good in that it gets a family to start saving.But at the time of buying a house it’s important to remember that you are buying a house and not a home.So do not go sentimental and over pay.Buying a house requires a deal of legwork and hard-headed thinking.Overpay and you will have to worry about the fluctuation in market prices.Try to buy an encumbrance-free house at a discount.It adds a greater measure of safety to your investment.Buy when the markets are down to safeguard yourself.Next how you pay for the house makes a big difference.Try to put down a large payment to save on the total interest you will pay.Shop around for a good loan if you need one.Read the fine print.Check if there is a penalty on prepayment.Lower rates matter.Also check if the interest is calculated on a declining balance.Check for hidden costs starting from the processing fee,the lawyer’s fee and structural engineer’s fee and insurance.When you consider the EMI you want to pay, don’t be too optimistic.Pay increments and bonuses might not come on time.Remember that over longer periods something is bound to go wrong.It’s the way of life.Also if you pay too much of your income into house payments you will not have any money left over to diversify into other assets and derisk your investments. Read more of this post