Personal Finance

Preface
Money
Simplified
Financial Planning
for Youth
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Services Pvt. Ltd.
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Contents
The Indian youth has never had it so good. On the
consumption side, the choice of goods and services
available is unprecedented. And as far as income is
concerned, given the booming economy and its ever
improving prospects, opportunities have never been
better! So, the youth is earning a lot and spending a
lot! It's definitely a happy situation to be in!
In times like these, when everything seems to be going
right for so many, there is a tendency to ignore that one
great habit - saving money. The rationale is simple since the future looks great from here, why set aside
money for future needs and contingencies. But, in our
view, this is an ideal time to save money as surplus
monies are high. Rather than spending this money on a
product or service you do not really need, you would
do well to invest the same to provide for some future
critical need.
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In this issue of Money Simplified we discuss this and a

lot more, including the investment avenues available
to the youth. And yes, we also discuss the concept of
spending wisely and the very popular tool to fund
purchases - credit cards!
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info@personalfn.com
We are certain you will benefit from this issue of the

Money Simplified. We encourage you to write in to us
with your views and feedback.
Contact No.:
022 - 6799 1234
Fax No.:
022 - 2202 8550
Happy investing!
Team Personalfn
31st October, 2007
The importance of investing wisely cannot be overstated.
Investment avenues for youth-------------------------------------------8

Young investors have a wide range of options to choose from.
Importance of life insurance ------------------------------------------- 12

It is important to get life insurance at an early age.
The importance of tax-planning --------------------------------------- 18

Tax-planning can be a synonym for wealth creation.
How much real estate must you own? ------------------------------ 21

Your real estate investments must not be governed by price.
Use your credit card smartly ------------------------------------------ 25

A lot of the negatives about credit cards are related to expenses.
How to spend wisely ----------------------------------------------------- 28

Spending wisely is the key to financial well-being.
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to specific investment objectives, investment strategies, financial situation and the particular needs of any specific person who may receive this
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Content:
Abhijit Shirke
Dharmesh Chauhan
Himanshu Srivastava
Irfan Husain Rupani
Vicky Mehta
Rahul Goel
Youth and Investing -----------------------------------------------------------3
Copyright: Quantum Information Services Private Limited.
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Financial Planning
Youth and Investing
Ideally, just how spending comes
naturally to you, the youth, so must
saving and investing. Think about it.
You are able to finance your spends in
present times. But to ensure that you
are able to at least maintain the same
spends in the future, you need to earn,
save and invest today! The "spends"
here is the money you have to spend to
maintain your standard of living.
Why you must invest
When it comes to the standard of living
there are some points to note.
One, if the basket of goods you consume
today costs Rs 100 per day, the same
will cost you Rs 134 five years from now.
This is basically the impact of inflation
(assumed at 6% per annum here), a
scenario in which there is too much
money chasing too few goods; this
results in an erosion in the value of
money. So, to maintain the same standard
of living, you need to spend more money
in the future.
Two, the standard of living itself is a
moving target. You will aspire to improve
your standard of living (for instance,
mode of transport over time will change
from a bus, to a cab to even your own
car). And over time as you have
dependents, their spends too need to
be taken care of. So you will need to
spend a disproportionate amount of
money to improve your family's standard
of living.
3
You probably already got the point.

Maintaining one's standard of living is
not a very challenging feat; all one needs
to do is be employed and do well. The
annual increments will compensate for
inflation and more. But what is critical
here is how you deal with this "more", in
other words the surplus, as this will
decide whether your standard of living
changes over time or not.
Let's step back a bit here. A rise in the
standard of living does not necessarily
mean wasteful expenditure. It could mean
among other things an annual foreign
holiday instead of a domestic one;
sending your children to the best
colleges; or even a farmhouse for a
luxurious retirement! The aim is to
accumulate wealth that will help you
accomplish most of what you wished for!
When it comes to the surplus, you need
to focus on two things at this early stage
in your life.
One, maximise the surplus by cutting
wasteful expenditure. Remember every
Rupee invested today is more valuable
than a Rupee invested tomorrow. The
more money you put aside at the start of
your investing cycle, the more
disproportionate the benefit on maturity.
Here's a simple illustration. Suppose you
need Rs 1 million (i.e. Rs 10 lakhs) 10-Yrs
from now to fund some expenditure. This
is how different the scenario will look if
you had to invest for that need today, or
five years down the line.
Financial Planning
Two, invest the surplus in Maturity value of Rs 1 m, 10-Yrs hence
instruments which are best suited Return
Maturity Value (Rs)
to your needs and profile. While 8%
2,158,925
in present times this appears to 15%
4,045,558
be the easy part, in reality, this is
where a significant amount of time needs When investing monies for long-term
to be invested. This is to ensure that the needs like children's education or
monies you have saved and invested retirement or even a simple goal like
by making short-term sacrifices actually becoming a crorepati say 15-Yrs from
delivers the anticipated return over the now, it is necessary that you not only
understand which assets suit
To achieve Rs 1 m, 10-Yrs from now
your risk profile the best; but also
Time to goal (Yrs)
Amount to be invested (Rs those assets which are suited
5
497,177 best for such tenures. Later in
10
247,185 this guide we will discuss each
asset class in some detail so that
Assumed Return - 15% pa
you are able to understand them
better.
period of holding. Here is another
illustration to give you a sense of the
impact returns have over time. Suppose
you invest Rs 1 m today for a period of
10-Yrs, in assets which yield either 8%
of 15%. The difference in the maturity
values is palpable!
Therefore, if you want to have a wealthy
future, you need to save as much as you
can as early as possible and then, invest
the same wisely. The latter ofcourse is
easier said than done.
Setting objectives
Before you begin to invest money, you
need to have clear objectives. The lack
of clarity on this front can often lead
you to take decisions that are ultimately
not in your benefit. Spend as much time
as is necessary to think about the
objectives you have and then prioritise
them. This will help you achieve your
objectives. Well thought out objectives
go a long way in contributing to the
success of the plan itself!
Now, let's take the goal of becoming a

crorepati 15-Yrs from now. Suppose
you are an investor who has never taken
on much risk; the preferred investment
avenues for you have been the small
savings schemes (also called post office
schemes) like Public Provident Fund
(PPF) and others like RBI Bonds and
fixed deposits. All these avenues are
very safe, and therefore, the return they
offer tends to be on the lower side. In
present times such a portfolio would
generate a return of about 8% per annum
(pa) pre-tax, and assuming you are in
the highest income tax bracket, about
6% post-tax (the return on PPF is taxfree and hence the higher than expected
post-tax rate).
To achieve the goal, you will need to set
aside Rs 34,854 every month for 15-Yrs;
or you could set aside Rs 429,628
annually.
Financial Planning
Financial Planning
appetite!
How to become a crorepati

Case 1
Case 2
Case 3
10,000,000
10,000,000
10,000,000
15
15
15
Aggressive
Amount you wish to accumulate (Rs)
Time to meet your target (Yrs)
Moderate Small Saving
Solution
Assumed Return (Pre-tax) (%)
15.0
12.0
8.0
Assumed Return (Post-tax)(%)
15.0
11.5
6.0
15
15
15
210,171
279,244
429,628
16,414
22,127
34,854
Tenure (Yrs)
Annual Saving Reqd (Rs)
Or simply, Monthly investment of (Rs)
Now, since the return is assured, the

chance of this plan not achieving its
objective is very low. For a risk-averse
investor this appears to be the best plan.
However, when one is investing for time
frames as long as 15-Yrs, the ideal asset
classes to invest in are equities, real
estate and maybe even precious metals.
Of these equities should probably
account for the largest chunk of the
asset allocation.
Selecting from various investment
avenues
Equities are assets which carry high risk.
There is a possibility that not only you
may not earn a return, but, you may
actually lose your capital! Well, all this
is undoubtedly true. The why should
you, someone with a moderate to low
risk appetite invest in equities?
The fact is that over long-tenures
equities have consistently outperformed other asset classes. In fact it
5
is often said, and rightfully, that they

are the best tools to beat inflation and
generate wealth over time.
Of course, people have lost money by
investing in equities. But that almost
always can be traced to their having
either succumbed to a mania or a tip,
surrounding either the entire market or a
sector or a particular stock that promised
stupendous returns in the shortest
period of time. Later in this guide we
discuss more on equities and mutual
funds.
If you are a disciplined investor, and are
not prone to succumbing to greed and
fear depending on short-term movements
in the stock market, then you must
educate yourself to take on this
additional risk of investing in the stock
markets. Of course, if you do not have
the skill to pick the best stock or fund,
you can always employ the services of
an honest financial planner; but what
you cannot outsource is your risk
And the benefit of being invested in

equities is palpable. Our long-term
expectation of return from this asset class
is 15% pa. So in the unlikely event that
you invest all your monies in the stock
market in your quest to become a
crorepati, the comparable amount you
will need to invest is only Rs 16,414 per
month for 15-Yrs; or you could set aside
Rs 210,171 annually! Broadly, your
contribution to the plan, as compared to
the very low-risk option discussed
earlier, would halve! That's the power of
equities.
The solution is not always a 100% lowrisk portfolio or a 100% high-risk
portfolio. In fact for most of you a
blended asset allocation will work best.
But even then, equities will and should
account for the largest chunk of this
portfolio. In the table, the moderate plan,
which is basically a mix of high-risk and
low-risk assets, is something that will
appeal to a lot of you.
Now you know that for your own future
interest you need to start saving and
investing wisely. And also that if you
want a wealthy future you need to start
taking on some risk when it comes to
investing. Of course the risk that you

take on should be well understood and
even in the worst-case scenario should
not jeopardise the financial security of
your family.
To conclude, here are some must-dos
for you:
One, be clear about your objectives;
think about what you want to achieve
in life and then prioritise. Once you are
clear on this the financial planning
activity will be a lot simpler.
Two, employ the services of an honest
financial planner to handhold you as
you go about planning for the future.
You are likely to be busy with work and
will not be able to devote the necessary
time to this activity. An honest financial
planner will help you fill in this gap and
ensure that you are on target to achieve
your goal.
Three, as early as possible in your
working career, take life insurance (the
pure risk variety - term insurance) for a
tenure of about 30-Yrs. Pure risk
insurance is very affordable and will
protect your family's needs in case you
are not around.
Financial Planning
ITC
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Investment avenues for youth
IN A NUTSHELL
Investing is important as it can help provide for one's future needs.

The need to invest stems from two major factors i.e. inflation and
lifestyle.
Typically, a wide range of investment avenues is available to investors.
The investor's risk appetite should determine which investment avenue
is chosen.
Equities have the potential to deliver better than other avenues
over longer time frames.
Young investors have time on their side and should consider investing
a significant portion of their portfolio in equities.
A basic principle of investing is that the

investment avenue must match the
investor's risk profile. For example, a high
risk investment avenue would suit a risktaking investor. Also the investment
should aid the investor in achieving his
financial goals and objectives. For
example, if the investor wishes to save
money to buy a car in a stipulated period
of time, then his investments should help
him achieve that predetermined goal.
Young investors have an edge over
others on account of their age. In other
words, a young investor has more time
on hand as compared to a middle-aged
investor or one who is closing on
retirement. This in turns affords young
investors greater flexibility while making
investment decisions.
In this article, we discuss various
investment avenues available to young
investors and the various facets of each
avenue.
1. Equities
You must have heard your friends and
relatives mention investing in the 'share
bazaar' or 'stock markets'. Actually they
are referring to equity investing. Simply
put, equities represent a share in the
capital of a company i.e. ownership in
the company. Hence an investor who
invests in a company is also referred to
as a shareholder.
When a company is listed on the stock
exchange, its shares can be freely bought
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and sold by investors at the prevailing

market price. Over shorter time frames
(say less than 3 years), equities can be
volatile (read high risk) investments.
Factors like market sentiment come into
play and contribute towards distorting
the price of shares. However, over
longer time frames, the company's
valuation (its true worth) determines the
market price of shares. Hence it is
important that investments in equities
be made with a long-term perspective.
Sadly, in most instances, you are likely
to hear about people trying to make a
quick buck by investing in equities. Rest
assured, this is the wrong approach to
equity investing.
A common problem associated with
equity investing is the method of
selection. Often, investors rely on 'tips'
to decide which company to buy into.
They are essentially relying on hearsay
and in a way, gambling and hoping to
get lucky. Equity investing in the true
sense requires research and in-depth
study. The investor must understand the
prospects of the company, the factors
that affect the same; he must have an
understanding of the economy, interest
rates, political and legal environment,
and a host of other factors. Clearly
equity investing is like a full-time job
that is best left to experts.
Despite equities not offering assured
returns or safety of capital, they have
the potential to add value to the
portfolio. Over longer time frames
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equities have historically delivered
higher returns as compared to other
avenues like fixed income instruments,
gold and real estate. As a young
investor, given that you have age on
your side, equity is a must-have in your
portfolio. However, instead of directly
investing in equities, it is recommended
that you invest in the same via the mutual
funds route or even, very selectively,
the unit linked insurance plan route
(more on that later in the article).
However, the stability in fixed income

instruments comes at a price. Since the
returns are locked-in, you will not be
able to gain from any subsequent hike
in interest rates. Also inflation (a
general rise in price levels) hits fixed
income instruments the worst. The real
return on investments (i.e. rate of return
on investment less rate of inflation) that
represents the actual earnings made by
an investor, takes a hit when inflation
rises.
2. Fixed income instruments

As the name suggests, fixed income
instruments offer assured returns. Hence
you, the investor are aware as to how
much return your investment will
generate and over what time frame. Fixed
deposits, small savings schemes (Public
Provident Fund - PPF and National
Savings Certificate - NSC, among others)
and bonds are examples of fixed income
instruments.
Ideally, fixed income instruments are

best suited for investors with a low to
moderate risk appetite. If an investor
affords higher priority to stability of
income and capital protection, fixed
income instruments are his calling. As
a young investor, a smaller portion of
your portfolio should be invested in
fixed income instruments to impart a
degree of stability to the portfolio.
A differentiating factor between equities

and fixed income instruments is the
safety of capital. In an equity
investment, the capital invested (i.e. the
money invested by you) is at risk. When
equity markets crash, forget earning a
return, you may even lose a part of the
capital. Conversely, investments in fixed
income instruments from credible
institutions and companies offer safety
of capital. For example, assume that you
were to invest Rs 10,000 in a fixed deposit
that offers 10% return for a 1-Yr period.
On maturity (a year hence), you will
receive Rs 1,000 as interest income and
the original investment i.e. Rs 10,000.
9
3. Mutual funds
While investing in equities and fixed
income instruments, you (i.e. the
investor) directly invest in the
aforementioned avenues. Mutual funds
put a layer between you and the actual
investment. Mutual funds collect
monies from a large number of investors
and this common pool is then invested
in line with the fund's investment
objective. Each fund has a
predetermined investment objective
that determines where and how the
monies will be invested. Also the
investments are made by an expert i.e.
the fund manager. The fund manager
with his expertise and experience is
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equipped to make more informed
investment decisions vis--vis retail
investors.
Of course, the opportunity to invest in a
mutual fund and gain from the fund
manager's expertise comes at a cost.
Investors in mutual funds have to bear
costs in the form of loads and expenses.
Often mutual funds are wrongly equated
with chit funds. The two are about as
similar as chalk and cheese. Mutual
funds are professionally managed and
regulated by entities like SEBI (Securities
and Exchange Board of India) and AMFI
(Association of Mutual Funds in India).
Apart from letting experts handle the
investments, the mutual funds route
offers another advantage - a wide range
of options to choose from. Equity funds
(invest in equities), debt funds (invest
in fixed income instruments), balanced
funds (invest predominantly in equities
and a smaller portion in debt), monthly
income plans (invest predominantly in
debt and a smaller portion in equities),
sector funds (invest in equities from a
single sector), index funds (invest in
stocks from a benchmark index) and fixed
maturity plans (mutual fund equivalent
of fixed deposits) are just some of the
offerings that investors can choose from.
Clearly, mutual funds have a lot to offer
to you as an investor. And the same
should be the preferred vehicle for
making investments.
4. Unit linked insurance plans
Insurance products like endowment
plans are tools for taking care of future
expenses and therefore combine long

term savings and insurance. These
plans assure a corpus to the family either
through the maturity benefit or in the
case an unfortunate case of
policyholders demise. Hence you
should not let tax saving or just returns
influence your decision of buying an
insurance plan.
Having said that, unit linked insurance
plans (ULIPs) is one offering from the
insurance segment that combines
investment with insurance. In fact, it
would be fair to state that ULIPs are
more inclined towards investments
rather than insurance. ULIPs invest in
both the equity and debt markets. Hence
their performance is market-linked. A
well-defined sum assured (i.e. the sum
that your dependants will receive in the
sad event of you meeting with an
eventuality) takes care of the insurance
aspect. ULIPs have been dealt with in
greater detail in a separate article.
The importance of a sound investment
advisor
Conventionally, the neighbourhood
agent was the individual that most relied
on for making investments. This
gentleman armed with application forms
and an agency from the local post office
was like a one-stop shop for
investments. However, the present
investment scenario is a lot more
complex and requires a different set of
expertise on the investment advisor's
part. Peddling forms and collecting/
delivering cheques are of secondary
importance. Now, an investment
advisor's primary role is to offer
10
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unbiased and expert advice. More
importantly, the advice has to be right
for the investor in question i.e. the
advice should be based on the latter's
needs. In other words, a 'one-size-fitsall' approach won't work.
On your part, you should ensure that

you are associated with the right
investment advisor at all times. He could
well be the individual who plugs the gap
between you achieving or not achieving
your financial goals and objectives.
IN A NUTSHELL
With time on their hand, young investors have a lot of flexibility

while investing.
Equities can be risky over shorter time frames, but over longer time
frames they have the potential to reward investors.
Fixed income instruments are best suited for investors who afford
greater importance to stability of income and safety of capital.
Mutual funds offer the opportunity to indirectly invest in equities
and fixed income instruments.
Investors in mutual funds can gain from the fund manager's expertise.
The mutual funds segment has a number of offerings, each suited to
a varied need.
ULIPs combined investing and insurance in the same avenue.
The complex investment scenario necessitates the presence of a
competent investment advisor.
Interview
Life Insurance
Importance of life insurance
A lot of people go through their entire
lives before understanding what life
insurance is all about. There are several
reasons for this - the most common is
that no one really informed them about
it. Another equally common reason is
that those who did inform them (read
insurance agents) gave them inadequate
information so that they could sell them
what they wanted rather than what was
best for clients.
Anyone who has been reading the
Money Simplified regularly (we are in
the fifth year now and there are plenty
of regular readers) has no excuse. Life
insurance is one of the only tools where
you create an asset at the start (life
cover) as compared to other options
where your savings build up over a
period of time.For the benefit of the firsttimers; life insurance is all about
providing for the future in a way that

your absence does not hurt your family
members financially. For this you must
first, as accurately as possible, estimate
the value of your life. This is called the
'Human Life Value'. One of the methods
of calculating your human life value is
to sum up all expenses along with your
future liabilities that your family
members will have to pay off in the
unfortunate event of your death. Once
you have done that you must take a life
insurance policy to give you an
insurance cover equaling your human
life value.
Let's understand how the Human Life
Value (HLV) is calculated with the help
of an illustration. Vivek is a 32-Yr old
software professional. He is married; at
present he does not have any children.
He has some liabilities mainly in the form
Viveks Human Life Value
Particulars
Vivek's age
His wife's age
Life expectancy of Vivek's wife
Number of children
Household expenditure
Of the above, how much is spent on Vivek
Expected inflation in household expenditure
Outstanding loans
Other liabilitiesRs
Medical expenditure
Rate of return on low-risk securities/deposits
Human Life Value
11
Yrs
Yrs
Yrs
Rs
Rs
%
Rs
Rs
%
Rs
32
28
70
40,000
15,000
5
3,000,000
500,000
8
10,999,917
12
Life Insurance
Life Insurance
of loans as also regular household
expenses. This is how his HLV is
calculated:
It is important to note that calculating
the HLV is not a one-time process. It
must be reviewed regularly. For instance,
in Vivek's case, if things were to change
over the years - for instance, more loans,
higher expenses, children, then he would
have to revisit his HLV calculation.
As we explained before, life insurance is
all about providing for your HLV so that
your family members are not left to fend
for themselves in your absence. Life
insurance allows individuals to opt for a
life cover broadly through two plans,
viz. term plans and endowment plans.
To draw a parallel between term plans

and other forms of life insurance,
consider the premiums paid out on
medical insurance or a vehicle. The
premiums are paid out regularly with the
explicit intention of being compensated
in the event of any loss (to health or
vehicle). If there is no loss to health/
vehicle in a particular year, then there is
no compensation. However, you must
keep on paying the annual premium
because you don't know when your
health/vehicle will deteriorate.
A point to note is that the way life

insurance premiums are structured,
opting for life insurance policy at an
earlier stage of your life works out
cheaper.
If you have understood how medical

insurance or vehicle insurance works,
you will appreciate how term plans
work. When you opt for a term plan you
are required to pay an annual premium
over a pre-determined tenure, till you
encounter an eventuality (put bluntly,
till you pass away). On death, your
survivors will receive the sum assured
that has been promised to them. On
survival, you will receive nothing.
Term Plans
Term plans simply provide a life cover,
nothing more, nothing less. To
understand this better, consider the two
likely scenarios while opting for a life
insurance plan; the individual either
survives the tenure or does not survive
it. Term plans and endowment plans
(explained later in the article) differ in
the way they tackle both these scenarios.
However, term plans differ from medical/

vehicle insurance in one important
aspect. While medical/vehicle
insurance are annual contracts and must
be renewed every year, a typical term
plan tenure is usually much longer (the
number of years varies across life
insurance companies). However, once
you have taken a term plan, the premium
stays the same till the end of the term.
Term plans are relatively straightforward;

they pay-out the sum assured only if
the individual does not survive the term.
If he survives the term, he gets nothing.
Endowment Plans
If you have understood how term plans
work, you have already got a fairly good
idea of how endowment plans work.
13
Endowment plans differ from term plans

in one very critical aspect i.e. maturity
benefit. Term plans do not pay out the
sum assured if you survive the term; you
receive the sum assured only if you meet
with an eventuality over the tenure.
Endowment plans, on the other hand,
pay out the sum assured under both
scenarios - death and survival, so long
as you have paid the premiums regularly.
Instinctively endowment plans appear
more worthwhile because they pay out
the sum assured regardless of whether
you survive the term. You get a sense
that paying those premiums worked out
for you.
Before endowment plans get your
thumbs up, it's important to consider a
few points. Endowment plans do pay out
the sum assured (along with profits) but
this comes at a cost to you. Since
endowment plans have to pay out the
sum assured regardless of whether you
survive the tenure or not, the insurance
company builds this into the cost of your
insurance plan i.e. the premiums you pay.
So a part of your endowment plan
premium is apportioned towards savings
while the other part is towards a life
cover. What the insurance company
provides you (either on death or on
maturity of the tenure) is not just the sum
assured, rather it also provides you a
return/profit on the sum assured. It does
this by investing the premiums in assets
(stock and debt) and paying out the
return to you on death/maturity.
Like we mentioned, endowment plans do
give you the sum assured with

accumulated profits under both
scenarios - death and maturity. And they
are a good avenue of investment for
those with a low or medium risk appetite
and seeking a combination of insurance
and savings.
Unit-linked Insurance Plans (ULIPs)
The ULIP, a variant of the endowment
plan, is another insurance product that
is much misunderstood. Unlike term
plans and traditional endowment plans,
ULIPs invest in stock/debt markets (you
have the option to choose the
allocation). Since equity/debt markets
fluctuate on a daily basis, the
performance of your ULIP gets linked
to the markets. The value is captured by
the NAV (net asset value) of the ULIP. If
you find that ULIPs are similar to mutual
funds, then you are right, at least to the
extent that both are market-linked.
ULIPs unfortunately, have been sold as
pure investment when they are actually
a combination of long-term savings and
insurance in that order. This is because
if getting a life cover is really critical then
subjecting your insurance monies to the
fluctuations of stock markets is not a
very prudent thing. For instance,
imagine how Vivek's family will be placed
if the value of his ULIP falls sharply to
coincide with his death. Hence, if your
objective for taking insurance is life
cover only then a term plan would suit
best as compared to an ULIP.
Another reason for the mis-selling is
rooted in the fact that many a times,
either on account of insufficient due
14
Life Insurance
diligence on part of the individual or lack
of communication by the insurance
agent, the expense structure of the ULIP
is not understood by the individual.
Having said that, the expense structure
of certain ULIPs could make their
expenses comparable to mutual funds
over the long-term.
While ULIPs can add value to the
individual's portfolio, in our view it
would be a mistake to opt for ULIPs as
your frontline life cover policy. Rather,

that is a role most suited for a term plan.
We have compared term plans to
endowment plans and ULIPs. Term plans
work out the cheapest and it is
something that all individuals must
consider taking, especially at a younger
age. A ULIP can play the role of
enhancing your investment portfolio
and bridging the shortfall, if any, in your
life cover.
Money Simplified: Get your own copy!

We are delighted to have you benefit from the Money
Simplified, which is arguably India's most popular financial
planning guide!
Over 160,000 users have registered for the Money Simplified
so far. And here's the best part, each one of them likes it so
much that on an average, they share their copy with atleast
four of their friends. Given the scale of this distribution
undertaken by our subscribers (!), there is a fair chance that
you have received this copy from a friend.
Did you know that Money Simplified is published
monthly?
Yes, it is a monthly guide. And, it is absolutely free!
IN A NUTSHELL
Before opting for a life insurance plan, calculate your Human Life
Value.
The Human Life Value can be calculated by adding up your liabilities
along with all expenses that need to be paid off.
Life insurance is all about providing for the future in a way that your
absence does not hurt your family members financially.
Opting for life insurance at a younger age is cheaper.
Term plans are the cheapest form of life insurance. They do not pay
out the sum assured on maturity.
Endowment plans and ULIPs pay out the sum assured on maturity.
While generally ULIPs have higher expenses, the expenses on certain
ULIPs are competitive vis--vis mutual funds.
Term plans are a must-have for all individuals looking at taking life
insurance. A ULIP can be considered from an investment perspective.
Here's how you can get your own copy?

We will be delighted to inform you of the release of
future issues of the Money Simplified. All you need to do is
click on the link below and provide us with your email ID.
We do not require any further information as of now.
Click here:
http://www.personalfn.com/investment/ms/eml.asp
Your Privacy
We respect your privacy and will take all measures to protect
the same. Your email will never be shared with any third
party.
Welcome to the world of smart investing!
Money Simplified - The smart way to plan your finances
15
16
Personalised Services from Personalfn

Who are we? We are
www.personalfn.com is one of India's leading financial planning initiatives.
We are a part of Quantum Information Services Pvt.
Ltd., which is one of India's most experienced
research houses (set up in 1990). Quantum also offers
equity research via its online initiative,
www.equitymaster.com.
Our offerings
Personalfn helps individuals plan their investments
so that they can meet their financial commitments
(like retirement, marriage and child's education)
Research on mutual funds and debt instruments
Tools like the Asset Allocator and MyPlanner which
empower individuals to plan and track their finances
Our publication
Personalfn also publishes the Money Simplified, a
free-to-download monthly guide to help you plan
your finances better.
Contact information
To benefit from Personalfn's services, please call us at
Ahmedabad - 6450 5215 / 5216 Bangalore - 6535 9899 / 9900
Chandigarh - 653 5304 / 5305
Chennai
Hyderabad - 6591 8423 / 8435 Jaipur
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- 650 1396 / 650 1397
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- 6799 1234 / 7536 New Delhi - 6450 5302/5303
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- 6602 9448 / 9732
Alternatively, write to us at info@personalfn.com or visit

www.personalfn.com
17
Interview
Tax-Planning
The importance of tax-planning
For most individuals tax is a four-letter
word. How many individuals willingly
part with their hard-earned money for
taxes? Not many! Mention paying taxes
and all those age-old arguments about "what do we get that we should pay
taxes?" surface. While that is a topic
which can be debated for eons, few would
dispute the utility that tax-planning can
offer.
What is tax-planning?
Tax-planning amounts to making
investments or contributions in line with
prescribed guidelines that lead to
reduction in tax liability. Simply put, the
tax liability is computed as a percentage
of the income. As per prevailing tax laws,
certain investments and contributions
have been earmarked for claiming tax
benefits. When these investments and/
or contributions are made, the same are
reduced from the income while
computing the tax liability. As a result,
the tax liability is reduced. No marks for
guessing that lower taxes are a welcome
break.
Section 80C
Now that we have discussed what taxplanning is, the next step is to discuss
how the same should be conducted.
Before that, an introduction to Section
80C is necessary. While there are a
number of sections in the Income Tax Act
that offer opportunities for tax-planning,
the most popular and pervasive one is
Section 80C.
You can claim deductions under Section
80C for a variety of investments - for

example investments in tax-saving
funds (ELSS), Public Provident Fund
(PPF), National Savings Certificate
(NSC), infrastructure bonds and taxsaving fixed deposits. Similarly,
contributions towards provident fund,
life insurance premium, repayment of
the principal amount on a home loan,
payment of tuition fees are also eligible
for Section 80C deductions.
How tax-planning can lead to wealth
creation
The Section 80C limit has been set at
Rs 100,000 in a financial year. This
means you can invest upto Rs 100,000
every year in the stipulated investment
avenues or utilise the sum for paying
life insurance premium, repaying a
home loan and claim tax benefits. Now
the same has a two-pronged effect.
First, you save tax at present, and
second, by investing the monies, you
are creating an asset/income for the
future. For example, investments in taxsaving funds, PPF and NSC will yield
returns in the future. Life insurance
premium repayment will mean that your
dependents will be provided for in your
absence. Finally, home loan repayment
will lead to creation of an asset (a
housing property).
Let's not forget that we are talking
about investing Rs 100,000 (which is a
significant sum) every year. Simple
maths tell us that Rs 100,000 invested
every year at 8.0% per annum (pa) over
18
Tax-Planning
a 15-Yr period will amount to a
substantial Rs 2,715,200.
How to create wealth
Now that we have discussed taxplanning, its benefits and how it can help
create wealth, let's come to the
interesting part - how to create wealth.
We discuss some of the major investment
avenues that offer Section 80C benefits
and should form a part of your taxplanning portfolio.
1. Tax-saving mutual funds
Tax-saving mutual funds (also called
equity linked savings schemes - ELSS)
are equity funds that offer tax benefits
under Section 80C. Essentially, like
equity funds, these funds also invest
their corpus in equities. However, the
differentiating factor is the 3-Yr lock-in
and the tax benefits. While in a regular
equity fund, the investor is free to sell
his investment whenever he wishes to,
in a tax-saving fund, the investor must
stay invested at least for a 3-Yr period.
Also, investments in a regular equity
fund aren't eligible for any tax benefits,
but investments in tax-saving funds are
eligible for Section 80C tax benefits.
Tax-Planning
Yr period. The scheme requires recurring
investments i.e. annual investments are
necessary to keep the PPF account
active. The minimum and maximum
investment amounts are Rs 500 and Rs
70,000 respectively pa. Investments in
PPF are eligible for Section 80C
deductions. Also the interest income
from PPF is tax-free.
At present investments in PPF offer a
return of 8.0% pa, compounded
annually. However, this rate is subject
to revision; hence, investments in PPF
may yield a higher or lower return going
forward, depending on how rates are
revised.
You can make smaller contributions to
the PPF account. The same will help you
build a risk-free corpus for the future.
For a young investor like you who has

time on his side, tax-saving funds should
be the preferred tax-planning
destination. They will aptly match your
risk appetite.
3. National Savings Certificate

National Savings Certificate (NSC) is
another assured return scheme.
However unlike PPF, it isn't recurring in
nature. Hence, an investor is required
to make a lumpsum investment that
matures after 6 years. The minimum
investment amount is Rs 100, while there
is no upper limit for investing in NSC.
Interest income from NSC is paid on
maturity; the same is also taxable.
Interest accrued on NSC is considered
to be reinvested; hence, it is eligible for
reinvestment under Section 80C.
2. Public Provident Fund

Public Provident Fund (PPF) is an
assured return scheme (i.e. it offers
guaranteed returns) that runs over a 15-
Investments in NSC offer a return of

8.0% pa, compounded half-yearly. This
rate is locked-in at the time of making
the investment. Hence investment is
insulated from any subsequent rate

change.
tax-saving fixed deposits is chargeable

to tax and subject to TDS (tax deduction
at source).
You can make investments in NSC for a

6-Yr period to gainfully invest one-time
surpluses and to provide for needs that
will arise over a corresponding time
frame.
Tax-saving fixed deposits can be utilised

like NSC, to meet future needs that will
arise over a predictable period.
4. Tax-saving fixed deposits

You must be aware of fixed deposits
offered by banks. Tax-saving fixed
deposits aren't very different. These are
fixed deposits, wherein investments
upto Rs 100,000 are eligible for deduction
under Section 80C. Generally, Rs 100 is
the minimum investment amount. Taxsaving fixed deposits have a 5-Yr
investment tenure and no premature
withdrawals are permitted.
At present, most banks offer a rate of
return in the range of 8.0%-8.5% pa. A
higher rate of return (additional 0.5%) is
offered on investments made by senior
citizens. Also the interest income from
In conclusion, remember that taxplanning is not just another dreary chore

that has to be conducted annually. On
the contrary, it's an opportunity for
wealth creation. Give the tax-planning
exercise its fair attention and time.
IN A NUTSHELL
n
n
19
5. Unit linked insurance plans

Unit linked insurance plans (ULIPs) are
the most "happening" offerings from the
life insurance segment. Simply put,
ULIPs are market-linked avenues that
combine insurance and investment.
Premiums paid on ULIPs are eligible for
deduction under Section 80C. ULIPs
have been dealt with in detail in another
article in this guide.
n
n
Tax-planning helps in rationalising the tax liability.

More importantly, if properly conducted, it can help in wealth
creation.
Investments and contributions of upto Rs 100,000 under Section 80C
are eligible for tax benefits.
Tax-saving funds are market-linked avenues that can make an apt fit
in young investors' portfolios.
PPF offers the opportunity to build a corpus over a 15-Yr period in a
risk-free manner.
NSC runs over a 6-Yr period and can be used to invest short-term
surpluses.
Tax-saving fixed deposits from banks are also eligible for tax-benefits.
ULIPs combine insurance and investment in a single avenue.
20
Interview
Real Estate
Real Estate
How much real estate must you own?

For a lot of investors, at least in the
Indian context, physical assets like real
estate and gold have traditionally held
much significance. And the sharp run
up in their prices has further ignited
interest in these avenues. While having
real estate and gold (among other assets)
in your investment portfolio is critical,
this must not be dictated only by the
prospects of making a gain. Rather, how
much real estate you must own (which
is the subject of this note) must be
governed by factors that are unrelated
to its price.
So why and when should you buy real
estate? Before we answer these very
critical questions let's first understand
some very basic points about investing.
Asset allocation
Any discussion on investing must begin
with what is known as a portfolio. An
investment portfolio (since it's related
to your investments) is a list of assets
that you own in a certain proportion
(referred to as allocation). So all assets
put together in a particular allocation are
referred to as asset allocation.
A typical portfolio must include equities,
debt, real estate, gold and cash in a
particular proportion. Notice that real
estate does form part of the asset
allocation, but it features alongside other
assets like equities, debt, gold and cash.
There are reasons why there are several
assets in your portfolio. Once you
appreciate these reasons, it will become
21
clear why owning real estate is important

but owning it alongside other assets is
even more so.
Every asset, like equity/debt, is governed
by different factors, which have an
impact on its price performance over the
long-term. To understand this better
consider debt (like corporate bonds,
government securities, debt funds),
which is closely linked to interest rates,
inflation and the economic health of the
country among other factors. Then
consider equities, which are governed
by, apart from the abovementioned
factors, performance of corporates/
companies.
Notice that although there is an overlap
to some extent between the factors that
govern the performances of debt and
equities, there are also factors that are
exclusive to each asset. On the same
lines, real estate has factors that are
exclusive to its performance. Over the
long-term, the exclusive factors set apart
the performance of one asset from
another.
What is an asset cycle and how it works
The domestic and global economies are
dynamic and are constantly witnessing
changes. These changes trigger a factor,
which in turn impacts the price
performance of a particular asset. If this
impact is sustained, it will give rise to a
cycle in that asset. If the change is
positive it will lead to an upturn in the
price of the asset; on the other hand if
the change is adverse, it will lead to a

downturn. Since there are several
factors at play at the same time, various
assets are under different stages in their
cycles.
This explains why at times equities are
on a high, but gold isn't or why being
invested in debt is more profitable than
being invested in equities or why real
estate prices are on upswing but equity
markets are depressed. While in theory
at least, it is possible that all asset
classes are witnessing the same cycle
at the same time, in practice this is a rare
phenomenon (surprisingly, that rare
phenomenon is what we have been
witnessing over the last few years!).
Why asset allocation helps
Now consider an investor who does not
understand how asset cycles work,
which is why he is invested heavily in
real estate with only limited investments
in other assets. At a time when real
estate prices are on an upturn and other
assets are on a downturn, the investor
will benefit. But when the trend reverses
(i.e. real estate prices decline and prices
of some of the other assets rise), he will
not only part with the gains he made on
his real estate investments but will also
forfeit the opportunity to earn returns
on other assets.
That is why it pays to be invested across
various assets in a defined allocation to
benefit from the various asset cycles.
Since you do not know beforehand
which asset is going to be in which
stage of its cycle, it is futile trying to
time your entry from one asset to another
based on the asset cycles; this rarely

works and in any case is too time
consuming (you also need very accurate
research to tell you beforehand which
asset will see a downturn and which one
will witness an upturn). It is more
preferable to be invested in several
assets in a pre-determined allocation so
that no matter which asset is in which
stage of its cycle, as an investor you are
well-placed to clock a return in line with
your risk profile and in tune with your
long-term investment objectives. This
is like placing your eggs in various
baskets or as it is referred to in investing
parlance - diversification
As an investor if you have a preference
for real estate then its time to 'change'
your bias in light of this note. Rather,
you should remove all biases for any
asset. On the contrary invest in various
assets according to a pre-determined
plan/allocation.
At Personalfn, we maintain that you
must have enough real estate/property
for:
1) your own residence and business, if
any, and,
2) to give away as inheritance (which
for someone of your age is quite some
time away)
Typically, for most individuals property
must account for roughly 50% of assets.
Owning anything significantly higher
than that can prove self-defeating, as it
will expose you to the uncertainties of
real estate without adequate backup (in
the form of other assets like equities,
debt and gold).
22
Real Estate
Real Estate
Real estate: A case study

To give you an idea, let us consider
Kumar, a 26-Yr male, unmarried, who is
in his first job. According to the
Personalfn's Asset Allocation Review,
this is how his asset allocation should
appear:
Kumar's Asset Allocation
FD/Bond
10%
Equities
30%
Gold
5%
Cash
5%
Property
50%
Kumar is unmarried now, but in time

plans to get married, he must therefore
consider buying a property on priority.
Personalfn's Asset Allocation Review
recommends that Kumar must aim at
having 50% of his money in real estate.
He should invest in stocks/equity funds
(30% of assets) as equities can add
considerable value to a portfolio over
the long-term. He must invest in fixed
deposits/bonds (10%) for stability; in
gold (5%) mainly for diversification (and
not for generating above-average
returns as many investors are tempted
to do now when gold is at a high). He
must maintain 5% in a savings bank
account for emergencies.
While this is our estimate for Kumar, it is
not too different for other individuals.
For instance an individual (in the 45-55
year old age group) who is married with
children must also aim to have no more
than 50% of his assets in property.
23
It is however important to note that in

present times when one buys a property,
it is very likely that it will account for a
lot more than 50% of the total value of
one's assets. In such instances it does
not mean that you do not buy your first
residential property because you will
exceed the 50% mark; what the Allocator
tells you is the ideal allocation for you is
this and that over time you must reach
it. So, when you buy a property in
Mumbai, probably property will account,
for let's say, 80% of your assets. In such
instances the incremental monies you
invest should be in other assets (equity,
debt, gold) so that over time their share
increases and you reach your ideal
allocation.
in a reputed company are just two of

them. Various banks have various
parameters with varying importance
accorded to each parameter. It's best to
check with the banks while applying for
the loan.
Buying property on a home loan

Since it's likely that you are in an early
stage of your career, your salary is
probably not enough (add to this the
prohibitive property prices) for you to
purchase a property outright.
Fortunately you do not have to rule out
buying a property for this reason. For
salaried individuals in particular there is
help in the form of home loans.
If all this sounds very confusing,

consider taking advice from your
chartered accountant or tax advisor. He
Many banks offer home loans and

salaried individuals stand a good chance
of qualifying for one. This is because
most banks prefer the steady income of
a salaried individual to the irregular cash
flow of a businessman, for instance. And
if you are working in a reputed company
(as defined by the bank) then your
chances of getting the loan are
enhanced. Of course, there are various
parameters on which home loans are
approved, being salaried and working
Individuals who are looking at buying

property on a home loan have another
reason to be pleased. Home loans are
eligible for tax benefits:
a) Interest on home loans is deductible
from income upto Rs 150,000 under
Section 24 (b).
b) Principal amount of upto Rs 100,000
is eligible for deduction under Section
80C.
can help you with the details particularly

while filing returns when your home loan
breakup (in interest and principal) must
be defined.
So while it is pertinent to invest in real
estate, individuals must curb their
enthusiasm for it to ensure that their
investments in real estate are always
aligned to a well-defined and wellbalanced asset allocation plan.
Of course, drawing up an asset allocation
plan is not that simple. This is where an
honest and competent financial planner
comes into the picture. At Personalfn,
we always urge investors to hire the
services of a professional financial
planner who can help them devise a wellbalanced asset allocation plan with a
defined allocation for real estate across
various life stages.
IN A NUTSHELL
n
Do not opt for property because prices are higher and it is easy to
make gains on property.
Owning any asset including property in unduly high proportions can
be self-defeating especially when prices fall.
Investment in property and other assets must be in line with a predetermined plan referred to as asset allocation.
All assets have a cycle and trying to enter and exit an asset based on
its cycle is time-consuming and often volatile.
Property must be held primarily for your own residence and to give
away as inheritance.
Those who can't buy property outright, can consider taking a
home loan.
The principal and interest amounts on the home loan are eligible for
tax benefits
24
Credit Cards
Interview
Credit Cards
Use your credit card smartly
Traditionally, Indians have been quite
averse to buying on credit. Don't look
too far; just ask your dad if he purchased
as much on credit, as you probably are
now, thanks to your credit card. Your
dad probably never owned a credit card
and if he did, he probably preferred to
use it only in emergencies. But that was
in the past; among the many customs
and trends that have undergone a
change over the last few years in the
country, credit card usage probably
ranks very high.
Technically speaking, a credit card is an
unsecured loan. This means that unlike
a secured loan, which is advanced by a
bank/financial institution against a
security like property for instance, a
credit card is offered without any
security. In a secured loan, if the
borrower fails to make good on his
principal/interest commitment, the bank/
institution can seize the security as
compensation. In an unsecured loan like
a credit card that is not possible. Hence
banks take necessary steps to ensure
that only those meeting certain
parameters are qualified to use their credit
card.
Without getting into how you can
qualify for the credit card, let's
understand how you must use your card
once you have qualified for one. Credit
cards have their pros and cons, which
explains the good and bad that get
reported about them. Not surprisingly,
many of the negatives that get written
25
about credit cards are related to

expenses, hidden or otherwise, that the
user did not know (or was not informed)
at the time of opting for the card. To
avoid distress at a later date, we have
listed down some points that you must
note while using the card:
1. Term and conditions
How many times have you read this
before - read the terms and conditions
carefully before signing up for anything.
For every product you purchase or
service you opt for, always read the
terms and conditions and that includes
credit cards. If you find anything in the
terms and conditions of the credit card
that was not conveyed to you or is
contrary to what was conveyed to you,
then seek a clarification from the bank.
If you are not satisfied with the
clarification, dump the card.
It's important that you read up on the
terms and conditions before you use the
card and not after. Once you use the card,
it is assumed that you have read the
terms and conditions and have accepted
the same.
2. Annual fees
It is common for banks to waive off the
annual fees/membership fees in the first
year (cards are usually issued for at least
two years). The second year fees are
usually charged. It is possible that you
are promised that the second year's fees
will be waived off as well. The only way
to find out is to check with the bank in

the second year. It is possible that the
bank may waive off the fees based on
your track record of making timely
payments. If the bank does not waive
off the fees in the second year, you can
cancel the card. However, if you wish to
cancel the card in the second year ensure
you do so before using it, because using
the card indicates that you have agreed
to pay the fees/charges for the second
year's subscription.
3. Lifetime free cards
Offering 'lifetime free credit cards' is a
relatively new trend in the credit card
industry. While there was a time when
most banks charged annual fees on their
credit cards, the industry is graduating
to a level where annual fees are being
phased out. In effect, clients are being
given lifetime free cards i.e. no annual
fees are charged. However, its best to
double-check with the bank what the
executive has promised you about all
annual fees being waived off.
4. Minimum payment
One detail you will find relatively well
highlighted in your monthly account
statement is the Minimum Payment Due.
This is the minimum amount that you
must pay for the purchases done in that
month so as to not attract a penalty for
default on payment of card dues. We
would recommend that you pay the entire
sum to the extent possible. Buying on a
credit card is okay till the time you pay
your bills religiously. The moment you
carry forward your payment to the next
monthly cycle, you will have to pay
interest on the unpaid amount along

with taxes. In the final analysis this turns
out to be very expensive.
5. Payment by EMI
On the same lines, whenever you make
a large purchase (usually over Rs 10,000,
although the amount varies across
banks) you may get an offer from the
bank to opt for the EMI (equated
monthly installment) facility to make the
payment. This facility does not come
cheap and the interest on the EMI is
prohibitive. Again to the extent possible,
we recommend that you make the
payment before the due date in one go
and give the EMI facility a miss.
6. Borrowing cash is expensive
Credit cards can be used for making
purchases on credit as also for
borrowing cash. While making
purchases on your credit card (so long
as you pay on time) is okay, borrowing
cash on your credit card is a very
expensive affair. Avoid borrowing cash
on your card; use the card to the extent
possible for making purchases.
7. Insurance benefit
Many credit cards are known to offer an
insurance cover. We recommend that
you ignore this benefit and go for the
core offering - credit card. If the card
has features that suit you, then you can
opt for it even if there is no insurance
cover. On the other hand, if the card
features are not to your liking then reject
it regardless of the insurance cover. In
any case, on most occasions the
insurance cover is usually linked with
26
Credit Cards
so many terms and conditions that it is
very difficult to claim the same. It is
altogether another thing that the
Interview
Spending
insurance cover is unlikely to be
sufficient for you.
IN A NUTSHELL
n
Credit cards have their pros and cons. A major negative with credit
cards is related to the expenses.
To have a better idea of the card expenses, read the terms and
conditions carefully before accepting the card.
Check with the bank everything that is promised to you by the
executive who sells you the card. If you are not satisfied, dump the
card.
To the extent possible use the card only to make purchases; avoid
withdrawing cash and other facilities like the EMI option because it
is very expensive.
Make your entire card payment before the due date.
How to spend wisely

In a guide targeted at the youth, to ignore
spending would be akin to committing a
cardinal sin. Today's youth have higher
disposable incomes as compared to their
counterparts in earlier generations. The
same has resulted in a significant change
in lifestyles. Objects that were
considered luxury goods say a decade
ago have become necessities for the
present generation. In fact, the young
population has been a major contributor
to the India growth story. It is widely
believed that spending habits of the
youth will play a major role in vitalising
the economic cycle, going forward.
However, there is a need to understand
that spending in an unrestrained and
haphazard manner could spell disaster
for your finances. Spending should be
done with a degree of discipline and
planning. We present four tips which
will help you master the art of spending.
1. Spend in line with a budget
Remember the longstanding method of
making a budget and then spending in
line with the same. That is still the right
way to go about spending. Having a
clearly laid-out budget will help you
prioritise your spending. For example,
the highest priority must be accorded to
investments that have to be made in line
with investment plans and commitments
like life insurance premiums. Only when
the high priority needs have been taken
care of, should the balance funds be
used for other expenses. Although the
27
idea of abiding by a budget for spending

may seem "uncool", it is nonetheless,
the right thing to do.
2. Track expenses
Again, tracking where you have spent
your money may not qualify as an
interesting way to spend time, but it is
important nonetheless. It will provide
you an unambiguous picture of your
cash flows; this will put you in better
control of your finances. More
importantly, it will provide you an
insight into your spending habits. This
in turn can help you understand the
areas that account for a significant
portion of your expenses and give you
the opportunity to do a reality check on
their utility.
3. Don't succumb to impulse spending
It is now considered trendy to hangout
at malls, coffee shops and lounges. And
window displays and latest
blockbusters are known to test the
resolve of even the strongest. A young
individual with access to disposable
funds can be rather vulnerable in such
a situation. Resist the temptations and
don't succumb to impulse spending.
This is especially pertinent if the
spending will come at the cost of your
monthly investment towards your
retirement/home building corpus.
Always try to spend in line with your
budget.
For example, while its good to take your
28
Notes
Spending
friends to the movies or for a dinner once
in a while, we recommend that it not be
overdone. Movies/dinners can be very
expensive propositions these days,
which means that you stand to gain
significantly if you cut down these
outings even by say 20%.
For example, even if Rs 1,000 were to be
saved on these outings and invested in
a diversified equity fund over 20 years
as a one-time investment, it would
mature into Rs 16,366 (assuming 15%
compounded growth).
4. Beware of credit cards

Easy availability of credit cards has
provided a major boost to spending. A
credit card gives you access to high
spending limits; also it liberates you of
the worry about handling cash. But
credit cards have their downsides as
well. For example, making the "minimum
payment due" could get you entangled
in a debt trap and force you to make
interest payments at obscenely high
rates. In fact, credit cards are so
pervasive in the present day context that
we have chosen to dedicate an article to
the same in this guide.
IN A NUTSHELL
29
Today's youth have higher disposable incomes as compared to their

counterparts in earlier generations.
Spending in an unrestrained and haphazard manner could spell disaster
for one's finances.
Always spend in line with a clearly laid-out budget.
It helps to track expenses regularly.
Resist various temptations and don't succumb to impulse spending.
Use the credit card sparingly and for the right purpose.
30

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Preface

In this issue of Money Simplified we discuss this and a

We are certain you will benefit from this issue of the

The importance of investing wisely cannot be overstated.

Investment avenues for youth-------------------------------------------8

Importance of life insurance ------------------------------------------- 12

The importance of tax-planning --------------------------------------- 18

How much real estate must you own? ------------------------------ 21

Use your credit card smartly ------------------------------------------ 25

How to spend wisely ----------------------------------------------------- 28

Download previous issues of Money Simplified. Click here!

Youth and Investing -----------------------------------------------------------3

Copyright: Quantum Information Services Private Limited.

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