Notes from Money Matters Workshop - a NLAG community initiative

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Speaker: Mr. Vimalathithan Natarajan

Transparency on finances with Spouse is very important (Secrets kill intimacy)

Financial discipline

Training your self to conform within a plan with regards to your finances. A plan on your spending and your saving.

You need to set the rules!

Needs vs Wants

Needs are things that we must have in order to survive.
Wants are things that we like to have but one can live without it. Eg. Eating out in expensive places, branded goods

Financial accountability

In the early stage, need to have a credible, older go to person for sharing your financial plans
In families Husband & Wife should work together on all aspects
There should be complete transparency & honesty with our spouse
If they aren't convinced, don't do it
There is wisdom in the presence of many counselors (Proverbs 11:4, 15:22, 24:6)

3 to 6 months of your monthly income as a contingency fund...

Live with contentment

Short-term plans 1 to 3 years

Medium-term plans 3 to 10 years

Long-term plans are 10 years and beyond

When disaster strikes - beware of the loan shark & the debt trap

Need for a loan

 Is it an absolute need
Can you postpone the expense decision, can you save enough for the need?
Can you talk to someone to whom you are accountable

Bad expense decisions

* Impulsive buying
* Buy one get one free offer
* 0% EMI
* Great billion dollar sale
* 50% discount
* Latest product

Swipe today suffer tomorrow

Credit card use...

* Spend now pay later
* Unchecked spending
* Minimum balance
* Point benefit (Travel, discounts) from a need based spending
* If you lack discpline use a Debit Card instead

Now you see him now you don't...

* Friends seeking financial help (you are an Angel when you help with cash and a Devil when you ask for it back when you are in need)
* Giving loans to others, risk involved
* It is OK to say NO

Can we avoid these...

* Genuine emergencies (medical), Medical insurance, understand the expectations
* Family wedding loans (cut your coat according to the cloth)
* Don't start your marriage with a negative balance
* Invest in your marriage, but not on your wedding day. Fix your wedding budgets.

Insurance... stick to pure risk term insurance

Decoding personal income tax...

Up to 2.5L no tax
2.5 to 5L - 5% tax exceeding 2.5L
5 to 10L - 12,500 + 20% exceeeding 5L
Above 10L - 1,12,500+30% of total income exceeding 10L

Income tax update: Budget 2019-20

* Nil tax on income upto Rs. 5L
* Standard deduction of Rs.50,000 has been allowed for salaried taxpayers
* TDS threshold on rental income raised to Rs. 2.4 lakhs from Rs.1.8 lakhs
* TDS threshold on interest on bank and post office deposits

Health insurance Section 80D Annual Upto 55,000

ELSS... Equity linked savings scheme...specified by Govt..regulated by SEBI.. mutual fund with a 3 years lock-in period.. style of management of fund is very
different... no redemption pressure... slightly passively managed...not actively managed like a normal mutual fund.. put money only for tax savings, but not for long-
term investment...

How is this different from SIP? Systematic investment plan...

0% EMI... is a marketing tool, which makes you to buy instantly. If you don't pay EMI, it'll impact your credit score. 6 months or 9 months tenure... I am paying 10K
per month assuming I am not paying interest...

Entreprenuer.. business income should be different & your personal income should be different...
when is the right time to take a home loan...

Tax reduction... salary income, business & profession income, speculative income, income from other sources, capital gains, ...

SIP advice... next session in detail

2nd session:

Equity and Money market

All about investing... Gold, Real Estate, FD in Banks, Equities - 4 asset classes
Importance of assets allocation

How much of money to put into these 4 asset classes is called asset allocation?

In the short term, equity can be volatile, but it reduces over a period of time...

Short-term risk of volatility of equities will not be painful in long-term...

Inflation - The Silent Killer:
* How inflation has eroded the purchasing power of money over long term?
Average Government inflation - 8%
Average HNWI inflation - 12%

Simple interest - is the interest earned on the principal from the date of investment
Compound interest - is the interest earned on the interest from the date of investment
Internal rate of return IRR - is the return earned on various amounts of investment done on various dates

Gold Asset Class View:
* Consumption asset or Investment asset
* Last 20 years - Gold has given 8.21% return... last 10 yrs 3%... last 5 yrs..0.3% return

1990 ... 25% mutual funds

Real-Estate Asset Class View:
49 months of inventory at our country currently... so much of supply, real-estate how can it go up? Next 5 to 10 yrs, real-estate is going to be
tough from investment perspective..

"Real Estate is now a bubble" - Raghuram Rajan, Ex RBI Governor

Demonetization effect on residential real estate
* Cash has the same significance to Real Estate as FIIs have to Equities
* In any Real Estate deal, the cash component accouns for 10% - 20% in residential real estate deals, more than 20% in commercial real estate and can go as high as 50%
* 60% in land deals (this also varies geographically with certain cities having a higher cash component than others)
* Demonetization of high value currency notes has led to evaporation of the cash (i.e. black money) creating a disturbance in the real estate sector

Interest Deductions 80EE... 50,000 - Amount of loan taken should be Rs.35 lakhs or less and the value of the property does not exceed...

Equity Asset Class View:

What is a Mutual Fund.... A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities...

Net asset value: Total Market value of asset / Total number of units = Net asset value

Equity, Fixed Income, Money Market -- 3 types of mutual funds

Equity mutual fund categories.. very transparent ... Market Cap... Large Cap Gund, Large and Mid Cap Fund...

The power of compounding...

Advantages of SIP...

Financial Discipline
Power of Compounding
Rupee Cost Averaging
Convenience
Flexibility

* Ensures that your money is invested in the equity market periodically
* Enables you to invest in every phase of the market
* Gives you the advantage of putting some amount of money periodically i.e. monthly, quarterly, half yearly, or annually
* Any investor can go for SIP because the minimum investment is Rs.500
* Achieve long term goals and financial independence
* Stay invested for a longer time period to get the true benefits

Closing...
Malachi 3:8-12
2 Cor 9:6-7
Luke 6:38
1 Tim 6:6-11
Psalms 127:1

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