Tax Savings till 31-Mar-21 Up & Above 80C, 80-D for all Private & Govt Employees
Ever dreamed about a time in the Indian Tax system (IT) wherein you could save more tax on your earnings by investing for your own essential purchases? That too, by investing is some existing IT brackets that give you a bigger tax-break this financial year (FY 20-21), up and above the defined 80C (1.5 Lacs), 80D (25K for under 60 years of age), etc. section limits as laid out by the IT Department of India. It’s possible! It is Section-10 that now offers you a widened advantage.
Here’s your chance! Considering the pandemic hit economy & a bid to boost consumption and sentiments of the private employees (after the central government employees were given the benefit of this in Oct-20), the Finance Ministry has been able to income tax exemption benefits of Leave Travel Concession (LTC)/ Leave Travel Allowance (LTA) cash voucher scheme to all private employees in India.
What do you need to do? Get to know your total LTA allowance for the 4-year block (2018-2021) from your employer, spend in equivalent of minimum 3 times of that for insurance products (ONLY with the online purchase) and then just submit the digital copies to claim the exemption as the filing of ITR happens. Note: All purchases that have 12% or above GST (Goods & Services Tax) implied on them, qualify for the highest exemptions for all spends up till 31-Mar-2021. This means all insurance products including: Life Insurance covers, base Medical covers, Mediclaim Top-ups, Accidental Riders, Temporary Disability & Total Permanent Disability, Corona Covers, etc. for you or your family are all under this. Note: You could purchase single or multiple products as well.
Example: Generally, 40K is the LTA given to you in every 2 years which means that you have to be able to spend INR 1.2 Lacs ( (i.e. INR 40K multiplied by 3) in total to get tax exemptions under this section (inclusive of GST). Note: The upper limit for claiming tax exemptions for this year is fixed at a maximum of INR 1.08 Lacs (i.e. INR 36K upper cap of LTC/ LTA multiplied by 3 times). This includes the GST spends also. If you spend lesser than 1.08 Lacs, say INR 90K, you would then qualify for reduced tax exemptions pro-rata basis of INR 30K for this year (which is INR 90K divided by 3). This literally means that basis your tax slabs (even if you are at the least @5% or highest @30%), your tax savings could be directly between 5.5% to 9.5% – which definitely become pure savings!
Further, another important advantage is that you save your leave encashment (which otherwise you would’ve lost if you took leaves to do domestic travel with your immediate family to claim LTC/ LTA). Depending on how your employer would treat this, you could encash them also – as a bonus! And let’s not forget other sundry expenditure that would’ve happened while you would have been on travel.
More savings above 80C & 80D till 31-Mar-2021 only
Technically, you may consider these savings as a ‘direct discount’ on your purchase, a ‘vital purchase’ that may have been held up at the back of your mind till now, till when this gift from the finance ministry came in. This opportunity just serves the purpose to go for that purchase now within the next week itself!
You, however, have to be wary of the fact that any existing insurance premium payments (renewals) would NOT qualify for this exemption and continue to be tax-treated as normally in 80C & 80-D exemption of yours. Interestingly, this scheme was opened to private employees in Nov-20 only, but the employers kept it under wraps will when they got certain clarifications from the CBDT department (Central Bureau of Direct Taxation) on the LTC/ LTA cash voucher scheme, which finally, have been notified now.
If you were thinking to travel domestically and produce bills to claim exemptions internally with your employer, realistically does not seem possible in the current era of Coronavirus. Rather, you have a better alternative now to purchase the essential Life Insurance & Health Insurance (also known as ‘mediclaim’) covers and getting a much valid reason to claim exemption. You save tax of a maximum INR 36K for this year clearly!
If you wish to seek more clarity and know all the products that qualify in insurance under this tax extension scheme, please drop in a query to us at:
Remember the time of 80s or 90s staying back in your Indian city or just wherever you grew up? Purchasing things always appeared much cheaper, no matter what sources of income you or your guardians had then. Did you ever look back financially? There wasn’t any ‘real occasion’ per se wherein you would’ve felt the need to cut expenses to buy ‘a thing of choice’. Rather the easier option, back then, was to just give up the thought of buying ‘that thing’ all together & move on. Actually, the focus was always to save money, more than reducing expenses. Times were sweet and giving up a thing of choice – was still an option!
In 2020, living with the monstrous coronavirus now, it’ll be right to say that ‘expenses have gone way too expensive’. Be cautious to understand that this ‘expense track’ could devastate you in no time, especially when you know that you’re living with the monster until the end of 2021, or maybe even after that. Already, the virus must have taken a colossal blow on your existing earnings whether in: salary cuts, business earning downtimes, slashed NRE/ NRO bank interests, lost rental incomes, etc. On the top, add a plethora of expenses out of nowhere, related to: hygiene & sanitizers, lifestyle with superfoods, medicines or supplements intake, higher usage on electricity or other utility bills (while working from home), children’s online education costs, etc. – which in reality you can’t shy away from in today’s time, like how you could in yesteryears. Times are unprecedented! We need deep retrospection and quick practical actions to avoid being thrown off-balance in this problem-equation: ‘Lowered income & higher expenses’, leading to an eventual financial breakdown. Trust us, slashing expenses would be the de facto ahead for your survival, till when earnings start to increase next!
We analyzed the problem scenario in detail. We realized that besides saving money if we could help you put off some unnecessary or ‘unknown’ expenses, cycle per cycle, you would be much better off to sail through these hard times. Every penny saved would count for you in the coming 2 to 3 years. This is the kind of timeframe you need at hand to re-shape as per the economic business cycle.
Over the last 3 months, randomly talking to about 227+ ‘People’ being: Persons of Indian-origin (PIO), OCI (Overseas Citizens of India), NRI (Non-Resident Indians) & Expats, those were not our clients, we realized that for managing Insurances or Investments held in India; they were doing some common & grave mistakes, unknowingly. This was definitely resulting in their expenses being higher than what would’ve been straight savings otherwise.
2 Steps to directly cut costs on Indian Insurances & Investments
2 mistakes we could immediately note to help answer for all fellow Indian-origin living globally, are as below:
Paying of Goods & Services Tax (GST):
People are mistakenly paying a high 18% Indian taxes on existing or new premiums for their Term Plan or Term-Life cover purchased from India (online or offline). This is a significant outflow of money, going out without them realizing that they are not liable to pay for this being outside of India.
Regarding their existing life insurance backed investments in India, they’re continuing to pay premiums, including 2.25% Indian taxes, without referring to their policy document at all. This could also be waived-off. Undoubtedly, the interest or investment growth rates on Indian products are decently high compared to their home countries, but that surely does not mean that one throws away money!
This particularly seemed damaging for the new investments (like: Money backs, guaranteed investments, income solutions, etc.), wherein the Indian taxes are 4.5% at the inception. This straightaway could’ve been waived-off, less they had a capable & licensed advisory to guide them through it. NRE/ NRO Bankers, unfortunately, are not bankable for wealth advice that includes taxation. Working with a Wealth Advisory should absolutely help all along to add value in your current situation.
Paying in Indian Currency (INR):
There isn’t an iota of a doubt that global currencies like: Dollars, Pounds, Dirhams, etc. are much stronger in value as compared to Indian Rupees (INR). It’s a grim mistake for people paying for their Indian premiums in INR, even now, when they could’ve paid far lesser, paying in their local currency. Come, what may, they could have easily saved 1.75% to 4% (depending on the country they are earning in), just on the currency-conversion side. Insurers in India are globally reputed, mammoth organizations with the highest standard of money safety, and accept payments in any currency of your choice.
Now, this changes the ‘money game’ completely in one’s favor, as it directly cuts the expenses of an investor (by curbing Indian Taxes, GST) and further, gives one’s overall investment a spiraling currency-effect (as lesser absolute premium gets paid out effectively in foreign currency). One easily cuts expenses to the tune of 4% to 22% each year, without moving an inch. This also means that the investment literally gains in the same percentage proportion. Example: If a term plan, annually costs you @INR 1,00,000 plus 18% GST, making it a total of INR 1,18,000 that you were paying through your NRO account or credit card, etc., now it should cost you a modest INR 1,00,000 only (waiving-off 18% GST) and which further goes down to @INR 97K, considering that the currency conversion benefit was 3% at the time of payment. This clocks 21% of expenses controlled. Period!
Note: It’s the worst mistake of paying the Indian premiums through your international credit cards. Immediately stop it.
Note: Besides the above direct losses till when controlled, you could do a host of other strategies to improve your investments’ return. You could also pause your payment temporarily, without paying any penalties. Consult a Wealth Advisory to know all your options.
Indians and Indian-origin people have the flexibility to consult BigRise Financial ™, an Investment, Insurances & Wealth Consulting organization that works in the space of financial planning for: Indian-origin (PIO) across the world including: Indians, OCI, NRI & Expats to get them innovative financial solutions from India. They bring world-class products and solutions from the world’s most renowned financial organizations to their clients.
Come 01-Oct-2020, get ready to shell-out an estimated 10% to 25% additional premiums on all medical insurance products in India, popularly known as ‘mediclaims’.
Whether you are an Indian or an NRI (Non-Resident Indian), you pay a higher medical cover cost in lieu of a host of guidelines, now being incorporated finally by most insurers in favor of the end-consumers. These directions were given out by IRDAI (Insurance Regulatory Development Authority of India) to all Health Insurers to comply with. With the implementation of these features & changes to be mostly completed by all health insurers by 30-Sep-2020 and made available for the new users or enrollments in a ‘health plan’, this definitely is going to cost much higher. Low prices could be booked in the next 3 days only! The added premium costs are mostly on account of the inclusion of modern treatments such as: balloon sinuplasty, oral chemotherapy, robotic surgeries, etc. or simply because of the inclusion of mental or neurodegenerative disorders (listed & approved ones), in the insurance plans.
Having said the above, medical insurance pricing still remains quite competitive and cheaper in India than compared to the rest of the globe. More and more NRIs, currently, are also looking forward to getting enrolled in a comprehensive health insurance plan in India, whether for self or family, considering their eventual return and settlement in India, to be able to use it. In the light of the global pandemic, the numbers of health insurances being bought in India have gone up more than 5 folds in August-2020 itself (compared to August-2019), especially because of the fact that Indian/ International air space is set to open up, and hence people would travel to India. With the highest risks of coronavirus being caught during the travel or on entering Indian ground, people do not want to take chances and want to enroll ahead of time sitting in their home countries. Health insurers are even making coronavirus coverage ready to be availed now, in just 15 days versus 30 days waiting earlier. Secondly, for the ones who already have health coverage, this is the apt time to increase your cover by just adding a medical ‘top-up’, over the top on your existing policy, which comes at 1/6th of the price that you pay for the same ‘sum coverage’ in your current medical base policy in India. This way you get a much higher cover by keeping the pricing low!
We highly suggest NOT buying medical policies online, by yourself and rather strongly recommend buying offline through the help & guidance of a licensed advisor.
Indians and Indian-origin people have the flexibility to consult BigRise Financial ™, an Insurance & Investment Consulting organization that works in the space of financial planning of Indian-origin (PIO) across the world including: Indians, OCI, NRI & Expats to get them cutting-edge insurance and investment options in India. They bring world-class products and solutions from the world’s most renowned financial organizations and insurers to their clients.
Did you have a close look at the total losses in your equity portfolio this morning? The world’s economy has tumbled. The markets are seeing unexpected crashes to lower and lower levels in times of Covid-19. Indian-origin investors across the globe have lost a sizeable chunk of their hard-earned money staying invested in riskier bonds & stocks of all varieties. The market-linked products have eroded their wealth even before they could react to taking decisions themselves or, in turn, their hired & heftily paid wealth advisory doing the same for them. On a war footing, it becomes pertinent for this jolted investor to take ground defying financial steps and draw out a clear path on where to invest next. YES, ‘invest’ even in this bad time.
BigRise Financial™ thoughtfully suggests that you immediately recreate an apt ‘purpose’ with your new array of investments in debt. It appears obvious that your investment sentiments have been hard hit, but honestly, if you do not rake up enough courage to invest all the more now in high performing debt investments, that too overseas, you may not stand a chance to recover your losses even in a decade – forget the gains and high returns. The early set of Indian-origin investors till now including OCI, NRI and Expats who have thoroughly considered these strategic financial planning directions and acted fast enough to execute prompt advice, let’s say in India and have created a big cushion for themselves already against the future market falls, averaged their investment purchase costs, assured decent yield & returns, created a decade long flow of steady incomes and most importantly, bailed out of a loss-making investment portfolio to a quick-start profitable one.
Without an iota of a doubt, you instantly need execution on the 3 steps below that reengineers your existing financial portfolio and sets you up for a winning run, again. Read on:
The First Step: Strategize to cut your equity or market-linked exposure
Over the last 5-6 years, if all you’ve been doing is chasing returns, guess what, you’ve lost them all in less than 5-6 months! Equities, stocks, mutual funds, linked products, etc. have been severed on the streets considering their high-risk proposition. All the sadder if you’ve been locally investing (or rather betting) in equity markets of developed geographies including: US & Canada, UK, UAE, Australia, New Zealand, etc. The reality? Growth does not lie in any of these over-developed countries. You have to be able to ‘think global’ and explore high potential markets (like India) that will help you get past this financial mess happening across the globe, on a strategic front.
Indian-origin by design, across governments, have provision to consult Financial Advisors qualifying in ‘Debt’, cross-country, and get a 2nd opinion on equity assets held in their portfolio versus their square-off against debt. Even if you have to book losses at the cost of bringing down your overall equity portfolio, it is worth a decision. Equities and market-linked products aren’t going up on the growth ladder at all for several years ahead and you should knowingly restrict your exposure to them at max. 25%. The money scenarios in the world on linked products are over! Let us take you through a ‘mind and fact’ exercise which will help you get directions to bail out of this gloomy situation of having a large equity portfolio.
Categorize all your equity & market-linked products on our proprietary 4-point, ‘2-year Equity Non-Performance Scale‘ as per each under-mentioned ‘Equity non-performance category’:
Not-so Promising: Returns between: +3% to -1%
Poor: Returns between: -1.1% to 10%
Extremely Poor: Returns between -10.1% to -18%
Devastating: Returns between -18.1% & higher
Clearly Tabulate:
Equity Name (equity or market-linked products)
TotalInvestedCapital (net invested in each product over time)
NetCurrent Final Value (today, against each product)
Net Loss (which is the difference between the ‘Net Current Final Value’ minus ‘Total Invested’)
Net Loss Percentage (which is ‘Net Loss’ divided by ‘Total Invested’ multiplied by 100)
Equity Non-performance Category (finally define a category seeing ‘Net Loss Percentage’, out of 4 types above)
You can derive the Grand Total Loss of your portfolio by summing up all the categories. At this point, you can take a conscious call to still retain the ‘Not-so Promising’ equity assets, hold and watch them for a while (say the next 2 years) but it is a piece of strong advice to sell or square-off the ‘Poor’, ‘Extremely Poor’ and the ‘Devastating’ ones. In any case, it is advised that you do not keep more than 25% of your money invested in equity & equity-linked investments at this crisis time. By now you have a clear idea of what your product and overall equity portfolio loss is.
Calculating at certain points in time – matters!
The Second Step: Knock-off your equity management liabilities
Investors have realized clearly that investing by oneself, without a deep knowledge of ‘finance’ as a subject would cause them more harm than good. It is a debacle to be investing money randomly, forgetting about it, or not finding enough time to monitor its growth and then finally waking up to a financial nightmare one fine day losing most of your invested capital. Your ‘self’ equity management indeed has taken a big hit on your investment portfolio. Then there is the other section of investors who have hired fee-based wealth advisories who haven’t been better-off either. The advisories have extracted hefty fees out of an investor’s hard-earned money and gained commissions on the top only to be turning the corpus negative in all these years. It is not sustainable for an investor to manage investments himself as it faces the risk of loss by doing things incorrectly. At the same time, since global equity markets are going to be affected for a long time from here, it does not make viable for you to slip money out of your pocket-hole and pay chunks of fee each month or quarter, etc. to these wealth advisories. In reality, you may never be able to recover your ‘Total Invested Capital’.
It makes sense that you take the utmost cognizance of the total money that you’ve lost towards a wealth advisory’s fee/ management and switch to debt-based advisories that do not charge you a single penny. Further, a robust financial advisory specializing in growth or guaranteed debt advising ends up surpassing several benefits and saving you: taxation, currency conversions, insurance cover costs, etc.
Ok, let’s do this. Obtain the total fee statement paid to your hired wealth advisory (as ‘Total Advisory Fee’) over the past 2 years and perform as under:
Add Grand Total Loss amount (from Step -1) and Total Advisory Fee to get the ‘Overall Loss’ on your equity portfolio.
Arrive at an ‘Overall Loss Percentage’ (by dividing ‘Overall Loss’ upon ‘Total Invested Capital’ multiplied by 100).
This now shows your final losses (‘Overall Loss;) including the advisory fee paid all along. Indian-origin investors doing management of their equity portfolio all by themselves were still better off (in losses) as they did not pay any wealth advisory management fee on the top to add to their woes. With the final figures in hand, in the next step, you would have to work with a Financial Advisor from India on guaranteed return debt strategies. Look for a non-fee based wealth advisory only which has a solid track-record on debt advising for Indian-origin overseas.
Indian-origin sets up to sail through this tough time
The Third Step: “Purchase debt overseas to add steady returns”
Debt is going a long way in high performance in this time of coronavirus and beyond. Sooner than you could think, it would be able to build a steady corpus, lump-sum, incomes, or simple flow of monthly or yearly returns for you and your family. As an Indian-origin investor, anywhere in the world, you should take fast steps to explore: Paper-Guaranteed Return debt instruments available for you to invest in India through your Global or Local/ NRE/ NRO bank accounts, sitting comfortably on your laptop in a video session with a licensed advisor from India. The governments and regulators give you the flexibility to exercise your OCI/ NRI rights, technically and financially, only if you knew the power of it. Your Indian-origin status is your financial passport to a wealthier tomorrow.
As you get in touch with a financial advisor in India, you could discuss in detail the equity non-performance list that you prepared from ‘The First Step’ and the ‘Overall Loss Percentage’ that you calculated at the end of ‘The Second Step’. Explore advice around your new investments (against new goals) or ‘guaranteed equity replacements’ (mapping older goals against your existing equity sells or squaring-off). In confidence, get your life goals mapped with tenure, obtain strategic directions in ‘payment spreads’, etc. – all of that as complimentary. The India-based guaranteed return papers mostly invest in government securities and bonds of the highest credit ratings, like: AAA, AA+ which currently are premier global standards in the ‘safety & security’ of investment papers. Further, these papers are backed by the world’s best and most credible life insurance companies making them very popular and highly chosen since last year when the market investments began to sink.
Basis the tenure that you wish to be invested for on these papers, you get a guaranteed return percentage & guaranteed IRR, completely non-linked to any factors of the market conditions, company performances, fund managers, or your hired wealth advisory’s performances. Returns on these papers are completely unaffected from global crises or pandemics, etc. You will be startled to know that several hundreds of Indian-origin staying outside India, invest in these world-class papers each month to get a range starting minimum 4.5% up to as high as 9.5% returns per annum, fixed income, guaranteed. Any day, an IRR of a minimum 4 is easily achievable and guaranteed at the sign up itself by the issuing life insurer. Other high-quality investments guaranteeing greater IRR are also available and only depend on the time you wish to stay invested for (ideally mapped to your life goal).
Indian-origin investors are Ready to Go!
These papers additionally come along with decently high life insurance coverage, say 100K versus the first 10K paid, at a ZERO or adjusted cost. This attracts PIO (Persons of Indian origin) to purchase them especially understanding their home countries have a significantly high cost for life covers. Global large-sized insurers allow the purchase of these premium investments by Indian-origin investors, currently based anywhere, even if they were born in their home countries and not India. These investments can be done online through any bank and are strongly guarded by the regulatory bodies in India. It becomes imperative that you carefully rework your financial goals and take advantage of adding these investments online to your financial kitty.
Ok, let’s do this. Draw a financial charter for yourself using our proprietary ‘Goal Planner with Guarantees’, choosing a ‘Goal Category’ as below:
Short-Term Goal (including: Steady income flows, substantiating for a job or business income loss, lump-sum money needs, etc.)
Mid-Term Goal (including: Home mortgage pay-off, buying a property or car, planning a business investment or expansion, etc.)
Long-Term Goal (including: Children education funds, buying larger house cash down, investing in a business, retirement planning, legacy creation for family, etc.)
Clearly Tabulate:
Goal Category (being short, mid or long)
Goal Description (like: Building post-graduation funds for a 4-year old, start parallel passive incomes, etc.)
Lump-sum Input (to invest at the investment inception)
Yearly Investment Contribution (to add to this goal)
Total tenure (to stay invested or when the final money output has to come)
Total Output (desired corpus, whether in lump-sum or income format at the end).
Basis all discussions and hard facts, the magic advising is done by the expert on debt who should take into consideration your investment and sync along with your past losses. Note: The more structured your goals are; the better your eventual debt portfolio would be. Whether it comes to recovering losses fast or connecting on time with your defined goals with guaranteed gains, both could be easily planned. An example of a structured goal is: Post-graduation education funds of USD 2 Million for a 2-year old child who would need total lump-sum corpus when he turns 21. If you have such simple clarity on your financial goals, along with the frequencies on which you could invest, you are bound to win in a landscape called ‘India’!
The crux of the article is that as an Indian-origin you should work on populating and arriving at your total net loss on your equity or a market-linked portfolio, factoring direct losses, as well as, your wealth advisory fee. In these testing coronavirus times, look forward to cutting your collective equity losses fast by investing in India-based debt (classified under the world’s top life insurers) through a Financial Advisor in India. Stop paying heavy fees to wealth advisory as you would not be able to break even your losses. Put together, you would be able to recover your losses fast enough by buying new debt investments, saving on wealth advisory fees, and gaining high returns from debt. Compared to developed countries, India is much aggressive in debt investment returns and Indian-origin placed globally could invest with ease, sitting wherever they are.
Indian-origin investors have the flexibility to consult BigRise Financial ™, an Investment Consulting organization that works in the space of working with Indian-origin across the world including: PIO, OCI, NRI & Expats to get them cutting-edge investment options in India. They bring world-class products and solutions from the world’s most renowned financial organizations and insurers.
As Covid-19 deepens its economic impact on the business world, the best of the business houses also seem to be falling flat on their finances, breaking down. Losses are mounting for companies on account of a complete shutdown in revenue-making activities and at the same time running overheads & liabilities that are building pressure on their cash reserves. News from across the world is pouring in with company shutdowns, salary stops & cuts, salaries stayed for the whole year, lay-offs, discontinuance of life and health insurance coverages, seizure on incentives, etc. The world seems to have come at a full stop!
BigRise Financial ™ estimates that job losses could continue to happen until Mar-2021. It’s a sad scenario that will push a large mass into the ‘unemployed’ category. Be it any industry, sector or job domain, job losses are inevitable. We commit to helping all Indian-origin across India/ Asia, UAE, UK/ Europe, US/ Canada, Kenya, Australia & New Zealand, operating right from our base in New Delhi, India.
What if you’d lost your job? If that’s written in your face, you would have to face it with formidable strength. A thing to be wary of here is that the last thing, after a job loss, you want happening with you is getting struck by an untimely mishap like: a family member contracting coronavirus & needing healthcare, death of a money earning member, job loss of a spouse as well, natural disasters striking, burglaries/ house-breaks, etc. This unexpected event could have a devastating effect on your financial stability. Regaining financial conscious if such an unfortunate event happens at this time, would be next to impossible. The fact of the matter is that the current ‘weak environment’ is so prone to the occurrence of these mishaps that even one single event (if it happens, god forbid) can leave you gasping for breath.
We recommend you our time tested Financial Path to be well planned ahead of an event in which your job is lost. We strongly suggest that you action these even if you had a job currently.
1. Consult and get a private pure Term Life Insurance Cover?
WHY?
The insurer covers income earners only: Life insurers need current and latest income proofs to issue you a cover. No earning credentials would push you to stay ‘coverless’. Consultation helps you to arrive at an apt life cover sizing.
To avoid family despair: Life cover is your family’s only hope in case you lose your earning potential and in an instance if death hits you on the top untimely, after the job loss. The environment currently has all the elements of high risk in it.
2. Get a private and adequate Health Cover for self & family
WHY?
Employer withdraws it: You have a limited group health insurance coverage through your employer that stays active till when you are working with them. Losing it obviously puts you and all your ex-employer covered dependents at a great ‘Medical risk’.
Avoid accidental spending of your savings: The last thing you could afford at this tough time is to be using your limited bank cash reserves on yourself or a family member’s illness.
Health status favors you currently: Covers are issued by a private health Insurer only until when you are fit. No one can guarantee you a cover if you contract coronavirus today or even if you develop a natural lifestyle disease like: hypertension, diabetes, thyroid, etc. caused by stress.
Crises to manage funds solves, if you plan well
3. Plan crisis-use funds, short & long term recurring incomes
WHY?
To serve immediate crisis: Set aside approximately 6 months of contingency fund to use towards all planned expenses. This fund should factor in the sum of all the various expenses that you are expected to encounter during this period including: groceries, bill payments, children’s school fees, telephone, gas, electricity, etc. Add 1.5 months extra equivalent funds on the top to this to serve as an ‘expense cushion’ for something unexpected or miscalculated coming your way.
To handle short-term recurring expenses: After putting away funds for ‘immediate crisis’, it becomes imperative to plan where to invest. Work with a debt financial planner to pick up best investments & allocate between 25% to 50% of the 100% funds that you have in your reserves, depending on your comfort. Dedicatedly plan this fund to generate incomes to handle expenses that arise post 6 months up till as much as 5 years. These expenses can include household & family expenses, unavoidable family events, business clothing for interviews, insurance premiums, mortgage installments, and all other expenses. Technically, the idea is to build an investment-led ‘income engine’ that translates a natural cash flow to you, like how you had with a steady job earning. This psychologically lifts your confidence & is the key to pass through this bad time.
To avoid any emergencies in mid-term ever: In the future, avoid getting trapped in a clumsy situation like today without an earning. Fire up the mid-term investment engines that generate money for you starting the 5th year while the world continues to sleep, clinging their cash reserves. Explore financially viable options with at least 25% of your balance reserves, while still retaining a min. 25% extra funds in hand as ’emergency expense cushion’. You can expect yourself to be doing a much better job in 5 years from here, and that this surprise income that starts would only bring you more in-hand earnings to support your lifestyle.
Note: If you also hold debt mutual funds (other than the above cash reserves), use a systematic way of deriving income out of it as well. The more the income sources through your investment, the more you would be at rest mentally, during the crisis time. Tabulate all these expenses using system tools to have a clear view of them and hence be better prepared during this adversity.
4. Stop or delay all unnecessary expenses & payments
WHY?
To have better cash flow in hand: Stop needless expenses which you’d overlooked in your account statement till when had a stable job earning. Things like: Extra TV subscriptions (mostly unutilized), various mobile app subscriptions, gym fees, fitness & wellness website payments, fine dining or frequent restaurant rounds, vacations or road trips, private cabs, overspends on online shopping, etc. have to be discontinued at once. You need much more money in hand to handle your basic needs now than crediting it into other providers’ bank accounts. However, keep yourself motivated during this rough patch by doing appropriate spends on recreations.
To avoid larger liabilities emptying your bank: All payments related to mortgages, other loans, insurance premiums, etc. should be explored for ‘formal delays’ speaking in harmony to the service providers of those. Explore moratoriums on these overheads without getting charged on interest and negotiated it with the provider explaining your current situation. Surprisingly, most of them could give you a breather between 3 months to even 2 years at no interest charges, depending on your past purchase & re-payment patterns. Don’t hesitate to write escalation mails to the management of these providers if the frontline staff is unable to help. You would see how the universe helps you if you get down to doing it with conviction. For the ones that do not get solved, negotiate to switch yearly liabilities to monthly/ quarterly without extra charges. Avoid usage of credit cards mostly as you could get extra charges levied on that.
Track your savings and expenses in a financial plan
Lastly, as you have a solid financial plan and strategy in place now and that your expenses are controlled, feel confident to see if you can engage yourself in any part-time revenue generator activity that matches your talent and skills. See, the idea is not to make a little earning here but to be sure that one’s skills are being sharpened throughout the job search time along with keeping one’s morale high. Continue to make a better CV, join recruitment groups on popular job and networking sites, add new skills to your resume learning them mostly free online or at a limited cost. Being ready with future career skills would land you in a new job much swiftly than your competition. Further, spending limited money wisely on education would be a valuable investment. Besides just making through a job with this planning, as a surprise, you may expect a decent hike too.
The crux of the article is that in the event of an Indian-origin losses job, he would promptly need to wisely execute a structured financial plan using his existing funds to generate incomes, as well as, cut or limit redundant expenditures to have enough funds in hand. Such planning would be critical to sail smoothly through a difficult time when you don’t have a job.
Indian-origin people have the flexibility to consult BigRise Financial ™, an Investment Consulting organization that works in the space of financial planning of Indian-origin (PIO) across the world including: OCI, NRI & Expats to get them cutting-edge investment options in India. They bring world-class products and solutions from the world’s most renowned financial organizations and insurers to their clients.
Coronavirus surely has created history! The scare has peaked amongst the India-origin investors worldwide when it comes to the dilemma of staying invested in equity or bond markets & watch their money grind down or not investing at this time at all, only to see inflation eat up their savings sooner than they realized. Having said that, investing in equity and market-linked investments isn’t suggested at all. It is out of question.
Here are the hard facts of the ‘investment world’ for equity and bond investments and why they will not perform for a long time. Before investing your capital next, do consider these realities & business dynamics expected to affect us all until the end of 2023.
COVID isn’t going anywhere. It would continue to financially crush the largest (large-cap) & the toughest of the corporations of the world. Added expenses to handle: Medical compliances, operations, churning of employees/ skills & talent, productivity losses, a challenged sales force, slow deal closures, dwindled margins & profitability, hampered import & export, etc. will kill a corporate’s earnings on the whole. On the other hand, the smaller (small cap) or the emerging businesses (mid-cap) will suffocate twice as much. As a matter of bitter truth, their survival itself is questionable as we move ahead in the coming months & years. Do you really see any ray of hope for the world’s equity markets?
Currencies of the world are eroding fast. Already, the graph today looks visually illogical when you compare the currency of a developed country versus that of developing one, where the weaker countries are looking ‘strong on currency’. The future for sure is unprecedented for the developed. A currency that looked rosy once may certainly not be the same, say 3-4 years from here. At the same time, if the developing nations recover faster in their fight with the corona-caused economic slowdown, guess what, the greatest of the currencies will falter. Industries where export and import was heavily involved or companies who survived on foreign earnings (like IT, steel & metals, oil & gas, textiles, engineering, etc.) are baffling to predict the losses they are in for, now or later. Which currency or industry could you really count on?
The banks are in a tizzy. Bad loans, write-offs, rate switch downs on existing loans, delayed interest payments, pressure on sustaining infrastructure costs to make everything digital, etc. is restraining them to offer any good to investors in: Deposits/ Fixed Deposits, whether locally or through NRE/ NRO accounts. Further, the government is taking rapid measures to bring down the interest rates to push up consumption and drive-up economies of a country. In reality, the sector which is going to be the most non-performing, as per our estimates, is going to be ‘banking’. Investors are beginning to contemplate: Are our monies really safe with the bank?
Now on the better side, one sector unanimously across the world has come up quite positively on the performance charts. It also promises to be the ‘best bet’ in the coming future. The surprise entrant here is the ‘Insurance’ sector. In here as well, the life insurance companies are aiming for a podium finish. A strong reason in practical support of this is the fact that global world-class insurance organizations recently have entered deeper in the most advantageous geographies & world markets to offer a new category of investments altogether referred to as ‘Guaranteed Return’ investments. This category literally from just being a ‘best bet’ as we stated qualifies as a ‘confirmed bet’. At the end of the day, this is the game of investment & growth and not just poker we can bet our money on.
India as a country offers the highest potential fixed income interest rates or guaranteed lump-sum maturities backed by paper-guarantees by large insurers on such investment papers. So, if you have suffered more than frequent blows in your past equity encounters, you may immediately consider consolidating and re-evaluating your portfolio holdings. Use BigRise Financial ™ proprietary: 4-point ‘Equity Non-performance Scale’ (another article) to arrive at your next debt investment decisions, dissolving non-performing equity & market-linked products and cleaning up your equity portfolio.
Understanding the complexities ahead of the stock and bond markets, risk ratings globally remain ‘very high’ basis the above 3 factors. Not diversifying or delaying the decision to purchase & take advantage of the ‘guaranteed returns’ category today, could drive negative returns on your overall portfolio. Your capital invested could also capsize.
Indian-origin including: OCI, NRI, Indians and Expats, internationally anywhere, could explore the following features of the guaranteed insurance-backed products:
Generally, investment starts with a minimum commitment of US $5K per year. The same equivalent can be paid in ANY currency including: Pounds, Dollars, Euros, Rupees, Dirhams/ Dinar, etc.
Fixed income or returns are paid monthly or yearly all of which are guaranteed (written on paper)
The rate of return is between: 4.5% to 9.5% per annum of the total invested. Option for lump-sum payout is also available.
Percentage returns vary depending on the tenure for which an investment is held for. The higher the tenure, the higher is the percentage.
Flexibility to choose the duration after which you need the fixed income to start coming in. You can start from the end of the 5th year onwards to delaying as much as long as 25, 30 years. Note: Tenure is to be decided after consulting the debt Financial Advisor, which is at a ZERO Fee.
Option to start variable (non-guaranteed) interest returns as quickly as Day-1, in case the horizon of investment is smaller. These are other classified debt assets. Interest rates are typically paid in the range of 4.0% to 7.5% and paid almost daily.
You may get an additional bonus on maturity of the duration as well which depends on the offering of the life insurer issuing the guaranteed-paper & the duration/ tenure you were invested for.
Flexibility to choose the number of years you plan to stay invested for.
Option to commit at the inception, the number of years for which the premiums would be contributed/ paid to the investment pool. Ease of paying ‘monthly’ is also given to smaller investments to encourage Indian-origin to do savings.
Most importantly, ease of doing online payments to your investment as is, from any country makes this favorable. However, you have to take a debt Financial Advisor’s assistance to execute it correctly. Advisory in debt is at NO cost at all.
Another most advantageous point is that payments for these debt investments could be done through your local bank or NRE bank accounts, in the currency of your choice. For INR payments, the NRO bank account could be used. This gives you currency exchange advantages (naturally and not by trading) and perhaps saves you 2.5 to 5% year on year. Add this to your fixed income returns and you’re much better than the rest!
Last but not the least, you get the advantage of a FREE or adjusted price insurance coverage along with the investment paper.
Note: All the debt fixed income guaranteed products are heavily safeguarded under the regulatory umbrella.
Indian-origin people definitely have the flexibility to consult BigRise Financial ™, an Investment Consulting organization that works in the space of working with Indian-origin (PIO) across the world including: OCI, NRI & Expats to get them cutting-edge investment options in India. They bring world-class products and solutions from the world’s most renowned financial organizations and insurers to their clients.
