When to Splurge & When to Save

save n spendWhether money is of concern or not, we all want to spend our money wisely, which includes determining when to save and when to splurge. It’s hard to determine what to do when you’re investing in yourself, after all, you want to treat yourself to what you deserve, but you also want to ensure that you’re making wise financial decisions.

 

Let’s flesh out what’s worth splurging on and when to save your dollars.

Splurge:

Splurge on health care and dental care.

Splurge on health care and dental care. They will often have lasting results and it’s important to invest in yourself.

Save

Save when there is a comparable alternative such as going to the neighborhood salon or using at home salon services instead of visiting the high-end salons.

Everyone likes to treat himself or herself every now and then, but treats don’t have to break the bank. When you visit high priced salons and spas, you are typically paying for the experience, yet what you really are seeking is the result — refreshed skin or relaxed muscles. Beauticians at high end salon have also come from these small neighborhood salons and are equally well trained.

Splurge

Splurge on items that you will use continuously such as personal or household electronics.

I don’t know how many times a day you use your computer, but my life is on my computer and it’s something I’m willing to splurge on because the quality is the most important thing to me when it comes to items I use frequently. It’s important to note that cost doesn’t equal quality, though, but quality will often cost you a little bit more. So it’s important to budget for items you use regularly, such as your computer or your mattress. They get used daily and must stand up to the demand and you will also want a company that will provide prompt service.

Save

Save when it is something that you can easily do yourself and it would otherwise be a splurge out of convenience.

There are some things we can do ourselves, but we pay for them out of convenience and not lack of skill. Time does equal money, but when money is tight sometimes it’s best to do those tasks yourself such as cooking your own food rather than ordering out. A manicure can cost anywhere between Rs 400 to Rs 1000 but an at-home manicure kit will cost you less than Rs 100. If you add up your manicures and pedicures for the entire year, it adds up. This is money you can keep in your pocket!

In closing

When splurging, focus on items that you will use frequently or that will have a lasting impact on your quality of life. These are items that count and you want to make sure that they can live up to their demand and that they won’t cost you more in the long run. But it’s also important to keep in mind that cost and quality don’t necessarily mean the same thing.

Do your research before making any splurge purchases to ensure you’re spending your money the right way.

#Budgeting #Saving #GirlPower #AspirePFS # PersonalFinance #Mymoney

Adapted from: myfabfinance

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When to file revised ITR and how to do it

More than 34 million people filed their income tax returns (ITR) for assessment year (AY) 2018-19, till 31 July 2018, according to data available on income tax department’s e-filing website. The number must have increased by now with the due date to file ITR being extended to 31 August. If you are one of the people who have filed your return on time, but in the hurry to meet the deadline made a mistake while doing it, like mentioning an incorrect bank account or forgetting to disclose certain incomes, you need to file a revised return.

When you need to file a revised return?
If you discover any mistake or omission in the ITR you have filed, you are allowed to file a revised return under Section 139(5) of the Income Tax Act, 1961. “Returns can be revised to correct errors that might have happened in the earlier return filed or to include information that one inadvertently missed out providing earlier,” said Archit Gupta, chief executive officer and co-founder, Cleartax.in.

These mistakes can be omission or wrong reporting of any income or deductions, non-disclosure of assets and liabilities at the year-end in case income exceeds Rs50 lakh, non-disclosure of foreign income and foreign assets, filing of the wrong ITR form and so on. But each of these can be rectified in a revised return.

“Typically, in a rush to meet deadline(s), many taxpayers end up making some errors or omission while filing their tax returns. Mistakes might occur as a result of limited knowledge of the provisions of tax laws or due to lack of accurate information available at the time of filing the original tax return,” said Akhil Chandna, director, Grant Thornton India LLP.

Remember after an amendment in tax laws from the current AY, i.e., 2018-19, the window to file a revised ITR is open till the end of the relevant AY or before the assessment of return by the tax department, whichever is earlier. In other words, return filed for AY 2018-19 can be revised till 31 March 2019, or before the assessment happens, whichever is earlier.

“Mistakes might occur as a result of limited knowledge or due to lack of accurate information available at the time of filing… Filing a revised tax return may increase the chances of tax return being picked up for a detailed scrutiny assessment,” says Akhil Chandna.

Till last AY, i.e. 2017-18, returns were allowed to be revised till the end of one year from the end of the relevant AY. Therefore, a return filed for AY 2017-18 can also be revised till 31 March 2019, provided it was filed before the due date. Earlier a belated return (filed after the due date) was not allowed to be revised; now there is no such provision.

Consequences of filing a revised return
“There are no specific consequences of filling a revised return except that during the course of assessment proceedings, the tax officer may inquire about the reason of revised return,” said Sumit Maheshwari, partner, Ashok Maheshwary & Associates LLP.

While small changes like rectification of personal details or updating bank account details may not lead to any scrutiny by the taxman, significant changes from the income declared, or deductions or expenses claimed in the earlier return may be picked up by the department. “Filing a revised tax return may increase the chances of tax return being picked up for a detailed scrutiny assessment,” said Chandna.

“Returns can be revised to correct errors that might have happened in the earlier return filed or to include information that one inadvertently missed out providing earlier… The mode of filing and method of verification is similar to that for original return,” said Archit Gupta.

But if you have a genuine reason, there’s no need to worry. “One should be wary of reducing drastically the income offered to tax; else it may attract the department’s attention. However, as long as you have a genuine case and can justify your claim before the authorities; this is not a cause for worry,” said Gupta.

How to file a revised return?
“The mode of filing and method of verification for a revised return is similar to that for an original return. The only difference being the revised return will carry the changes proposed to be made and also details of the earlier return filed i.e. date of filing of earlier return and the acknowledgement number,” said Gupta.

There is no restriction on the number of times a return can be revised, provided it fulfils the stipulated criterion. However, one has to file the revised return in the same mode in which the original return was filed. That means if the original return was filed electronically, the revised return too has to be filed electronically. Similarly, if the original return was filed physically, the revised return should also be filed physically.

There is no separate form to file a revised return, but make sure you tick the space that specifies that this is a revised return. Also, mention the acknowledgement number of the original return. Once a revised ITR is filed, the original or the previous return is deemed to be withdrawn.

Credit: Valueresearchonline

Promise of high returns can backfire

High Returns backfire

A few things are too good to be true. A promise of guaranteed or unreasonably high returns should not be taken at face value as you may suffer painful losses.

Here are 6 important tips to avoid typical investment errors

 Beware of schemes that assure unreasonably high returns

 Never trust any written or oral promises assuring guaranteed returns in equity and derivatives markets

 Always have full knowledge about the product you intend to invest in

 Do not invest in any schemes run by an entity that does not have SEBI registration

 Never make cash payments to the stockbroker

 There are risks associated with trading in Future & options (F&O). Invest only if you are aware of the product & its risks.

Credit : NSE

Choose Step-up SIP to generate more wealth than conventional SIPs

step up sipThere is no doubt that the Systematic Investment Plan (SIP) is one of the best ways to invest our money systematically. It inculcates two very important principles of investing—discipline and long-term approach.

SIP has become the most popular tool for investing in Mutual Funds in the last decade because it helps us to invest small amounts every month and build substantial wealth over the long term. Not only that, it also helps us in achieving various financial goals like Retirement, Child’s Education and Marriage, Buying a house, etc.

There is no denying that SIP is a great investment tool and has done well for us. It has helped people build wealth in long-term and not many people have complaints with regular SIPs as they have learned that they will be able to reap the fruits if they invest for long term.

Why opt for Step up SIP?

A conventional SIP is good, but it should be increased every year to cope up with the inflation.

Our income increases year after year, so do our expenses; then why we should not increase our investments?

Many of us plan to increase the SIP amount every time we get an increment, but in reality, most of us fail to do so.

Also, starting a fresh SIP every year and managing the portfolio consisting of multiple schemes/folios will become a cumbersome job.

This is where Step up SIP comes into the picture. Step up facilitates an automatic increase in the SIP amount by a fixed amount at a predefined period.

Benefits of investing through step up SIP:

  • Step up SIP helps you to easily achieve your long-term financial goals in time.
  • Entails an automatic increase in the amount you save and invest.
  • Helps in aligning investments with the increase in inflation.
  • No need to plan for fresh SIP investment every year with the rise in your income.
  • Flexible, as you can stop the step up SIP at any given point of time.

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Looking at the above table, Step up SIP looks impressive and has built more wealth for investor compared to regular SIP.

Let us look at the above example and understand what helped Step up sip in generating more wealth for the investor?

  1. Every year there is an increase in the monthly investment amount of Rs. 500
  2. Power of Compounding, which helped the money grow faster

So an additional investment of Rs.11.40 Lacs over 20 years will garner an additional gain of Rs.35.60 Lacs for the investor.

Opting for Step-up SIP is now essential for every investor which will help them to achieve various financial goals on time and align their investments to cope up with the inflation.

Happy Investing!!!

Credit: Prudent Connect

Exit strategy for insurance products

Exit Strategy for Insurance Products

We receive a large number of queries from investors asking for advice on their portfolios. On the insurance side, one of the most common problems we encounter is the existence of Ulips and traditional products (endowment and moneyback plans) that are meant to serve as two-in-one, investment-cum-insurance products. We, on the other hand, firmly believe that investors should keep insurance and investment apart, and that their interests would be best served through a combination of term plan and mutual funds. You can read the article Say no to endowment policies and ULIPs for further clarification.

Why go for term plan-MF combo
The term plan-mutual funds combination is financially the most efficient. Ulips levy a number of other charges besides the fund management charge (that a mutual fund also charges) and mortality charge (that a term plan charges). They levy a premium allocation charge (PAC), an administrative charge, and so on. The cost structure of Ulips is also complicated. While charges levied under endowment plans and money back policies are unknown, charges under linked policies are clearly mentioned in policy brochures and policy document available on company website. Investors are either unaware or they do not take the pain to go through the policy details before making a final purchase. Insurance companies, agents and advisors take advantage of the ignorance of investors and sell policies which are not really helpful.

Therefore, in the first place, the mutual fund-term plan combination scores by having a lower and more transparent cost structure.

Another problem with Ulips is that an insurance company offers only a limited number of fund options. If the funds offered by the insurance company underperforms, the investor does not have the option to exit his current fund and invest in a high-return fund from another company (until the lock-in period is over). On the other hand, if he invests in mutual funds, he can easily exit his current underperforming fund (most mutual funds do not have an exit load after one year), and choose to invest in any one of the hundreds of funds available in the market.

Traditional products such as endowment plans and moneyback plans too have drawbacks. The biggest is that they offer simple interest, whereas if you invest in a mutual fund or even in a PPF, your investments grow through compounding. As we well know, the effect of compounding is powerful, especially over the long term. The second disadvantage of traditional products is that they have a high allocation to debt products. This, too, affects their returns: over the long term, as we know, returns from equities trounce those from debt.

Another disadvantage of insurance-cum-investment products belonging to insurance companies is that despite paying a hefty sum of money as premium, the family could still be under-insured. Since term plans are inexpensive, one can buy an adequate amount of cover through them.

What should you do
Exit and bear the losses upfront: If a person has invested in a Ulip or in traditional products, and especially if he has paid the premium only for two or three years, the ideal solution would be for him to exit these policies right away. In the older Ulips, there was a lock-in period of three years, which has now been extended to five in the new Ulips. If an investor exits from an old Ulip after paying two premiums, he will lose out on his premiums completely. If he exits an old Ulip after three years, all he is likely to get is the third-year premium; the myriad charges in Ulips would eat up the rest. According to Pune-based financial planner Veer Sardesai, ‘Over a 20 to 25 year span the investor is better off exiting these policies, even if it means entirely forfeiting his premium, and going with the term plan-mutual funds combination.’ However, only investors who are financially savvy would perhaps agree to pursue this course of action.

Stay put: At the other end of the spectrum, you would have investors who are not at all financially savvy. They would have little knowledge of term plans (because agents do not push them) and mutual funds (especially in smaller towns, there tends to be greater awareness about insurance products than about mutual funds). Such investors would be wary of these options.

These investors would prefer being in a Ulip rather than in a term plan-mutual fund combination because a Ulip, being a product from an insurance company, would offer them a greater sense of security (especially if it is from the public-sector behemoth). Such investors could stay put in the Ulip. Even if the Ulip is not a financially-efficient product, it would still benefit these investors by offering them equity exposure, which would boost their returns over the long term.

The middle path: Next, you have investors who are financially savvy and who understand the logic behind promptly exiting a Ulip or a traditional product. Despite this, they might shy away from the option of writing off their premiums in the Ulip entirely. Very often the premiums they have paid are as high as Rs1 lakh or more per year, so bearing the loss upfront becomes difficult.

For such investors, Sardesai suggests the middle path of making the policy ‘paid up’. Enquire from the insurance company the minimum period for which premiums must be paid. Pay till then and then stop. Thereafter, the policy will continue to exist. The insurance company will deduct its annual charges from the corpus that has accumulated within the policy and keep it alive. The paid-up policy would offer a lower sum assured, but the investor would at least be saved from throwing good money after bad. The advantage of this course of action is that the investor feels he has not lost his money entirely, though if one were to do the mathematical calculations, the first rather than this third option would be optimal.

As you can see, once you have entered these high-cost insurance-cum-investment policies, there can be no painless exit. Taking your losses upfront, especially if you have not been in these policies for long, would be the best course of action if you are keen to get your financial portfolio back on track.

Credit: Valuerearchonline