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BASIC TRUTHS OF FINANCIAL PLANNINGON INEREST RATES
1) The real rate of return will go up y as
much as 8% p.a when the tax benefit component (Sec 80 C/Sec 10 Benefits) is taken into
account.
2) Monthly Saving of Rs. 1,500
for 20 years (3.6 Lakhs) can make you a millionaire at 9% interest rate.
3) Your real wealth is erod3ed
if the yield on your investment is less than the rate of inflation.
ON EMI/CREDIT CARDS
1) EMI is the best way of comparing the effective rate of return charged on loans.
Moreover, if the interest rate goes up by 1%, EMI can go up by as much as 2% to 7%.
2) If your EMI payments exceed 40% of your income, you are most likely to face
difficulties in meeting your EMI payments in future.
3) You are in a danger zone if your credit card life style payment exceeds 40% of your
income.
ON SHARE MARKET
1) Investment does not mean investment in
cpital market alone.
2) Profit on regular purchse
and sale of shares will be treated as business income and will be subject to normal tax
rates and not as capital gains..
ON INSURACE
1) Any person whose family depends upon his
earnings needs life insurance cover.
2) If your risk free
investment income is more than your normal expenses, you really do not need any life
insurance cover.
3) It is ideal to have
insurance cover for about 10 times of your annual normal expenses.
4) If your annual insurance
premium is more than 10% of your income, you are likely to face difficulties in paying
premium in future.
Financial Planning will not be
complete without an understanding of these basic truths.
Good luck
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