[Hagaru]

TurboTorque! Thank you for your well written thread on financial planning. A good chunk of our society is still not as aware and this may help a lot of people start their Journey!

Originally Posted by TurboTorque

The initial few years into my job, I did not seriously think about saving and investing, all I was planning and aiming to buy my first bike and car.

• When I got an internship in 2011 with a stipend of 15k, I bought my first bike, a Hero Honda Karizma, with an EMI of 8k for 9 months. The EMI was almost 50% of my stipend and managed the remaining 7k for my stay and food.
• After a year into my regular job, I bought my first car, a Hyundai 1.4 CDRi Sportz MT, for close to 9 lakhs on-road including accessories, with an EMI of 15k. This EMI was about a 25% of my salary.

When I think about financial planning, I think that buying my first bike was okay, I wonder if buying the car early in my career was the right choice. If I had invested that money in two plots of site in my hometown, it would be worth almost 1 crore today. There was no real need than a want to fulfil my childhood dream. If I keep my finances aside, I enjoyed owning this car, doing a lot of road trips, and having unforgettable memories with friends and family. Anyway, whatever has happened has happened. My unsolicited advice to youngsters who just started their careers is not to buy big-ticket items early in their career like I did.

This may not be completely relevant to the rest of your thread, but I would like to share some thoughts on this. Please do not feel guilty about spending on a motorcycle or a car. Assuming you didn't have any critical commitments to worry about, I think it is completely okay to indulge a bit in experiences while we are young.

Like you mentioned, you have unforgettable memories with your road trips. These are memories you will hold for a life time, and will look back on and smile.

I don't mean to suggest everyone should take the biggest loan they can and buy the brand new M5 to create memories, but I don't think there's a reason to be hard on yourself to indulge in yourself a little at a young age.

[dearchichi]

Originally Posted by TurboTorque

I would like to share my learnings and experiences in personal finance and how I am managing my finances with fellow BHPians

Thank you TurboTorque for such a comprehensive summary of your approach to your financial planning. Your link to the JagoInvestor sheet was particularly helpful.

Here are a few comments from me:

1. Stashing money in SB/FD accounts isn't effective, both from the perspective of returns and taxation. MFs would be a better choice.

2. Having separate accounts or folios for each goal may help in organizing the finances towards goals, but I prefer an overall debt/equity ratio for the whole corpus, derived from individual goals, and withdrawal from either buckets as needed.

3. Having one's spouse as a joint (either or survivor) holder of SB and MF accounts helps in seamless access in case of unfortunate events. It also helps in reducing taxation during the withdrawal/retirement phase.

4. Accessing accounts (financial and personal ones like Gmail etc.) of a spouse using passwords passed along to them after the primary holder's demise may not be legal unless explicitly declared so.

5. I've never understood the reasoning for emergency funds. Having MFs that allow for quick redemption, a month's expenses in the SB account and credit cards with a high aggregate limit should suffice for any eventuality.

Thank you.

[arb]

An open question on Sukanya Samriddhi Yojana (SSY). Considering as a parent I start investment in Year 1, and first major expense for UG happens around the 18th year is it prudent to invest in SSY given the 21yrs as time frame and presumably lesser corpus in comparison to MF?

Keeping these assumptions -

• SSY is assured @8% returns
• SSY having EEE
• MF with such larger horizons can be considered to average @12%
• 80C limits are breached by existing investments/etc, neither SSY or MF as ELSS is considered for this comparison.
• Leaving aside SWPs, consider MF redeemed after 21 yrs at once, incurring tax liability at 12.5% for gains.

Using Groww calculators, my inference is as tabulated


Per my analysis, I prefer the MF route. Am I missing something?

Dear anyone, if you have not started on your own fiscal wisdom journey, try @TurboTorque's fantastic writeup, simple and easy to implement! It is never late to start, as long as you persist. Wisdom is in persistence.


Best,
~ArB

[Yossarian]

Originally Posted by arb

An open question on Sukanya Samriddhi Yojana (SSY). Considering as a parent I start investment in Year 1, and first major expense for UG happens around the 18th year is it prudent to invest in SSY given the 21yrs as time frame and presumably lesser corpus in comparison to MF?

The key is risk management. I would look at SSY to be the debt portion of my daughters goals. It gives a risk free and high post tax return. For the rest in terms of long term gains I use a mix of equity MF's (Small, mid and large) to give a big chunk of the gain taking more risk in the early years and changing allocation as the goal nears.

[deep_bang]

Originally Posted by dearchichi

1. Stashing money in SB/FD accounts isn't effective, both from the perspective of returns and taxation. MFs would be a better choice.

The following post has a very good explanation of why MFs are better than FDs:

https://www.team-bhp.com/forum/shift...ml#post5863494 (The Retirement Planning Thread)

Originally Posted by dearchichi

2. Having separate accounts or folios for each goal may help in organizing the finances towards goals, but I prefer an overall debt/equity ratio for the whole corpus, derived from individual goals, and withdrawal from either buckets as needed.

Agreed. Although I mentioned that each goal should have a debt:equity ratio defined, the actual implementation of this does not restrict 'how' you hold those funds. In fact I also prefer to have lesser number of accounts as it's a hassle managing too many accounts (whether SB or demat accounts or folios)

[Raghu M]

Originally Posted by Fuldagap

73% is insanely impressive number.

My ELSS nos. from the date of investment are more than 300%. I stopped investing my SIP in an ELSS fund and wanted to wait for the lock in to finish. After 3 years, I looked at my returns and was shocked. I put in 1,20,000 INR through 5K installments and stopped investing in 2021. Now the value of the fund is 4,00,000 INR. I understood the power of compounding, I am expecting very healthy returns by 2030. Will wait till then and move it to SWP and pull out money if needed but otherwise, the initial investment is going to stay for at least another 20 years.

[Aviator_guy]

Originally Posted by arb

An open question on Sukanya Samriddhi Yojana (SSY). Considering as a parent I start investment in Year 1, and first major expense for UG happens around the 18th year is it prudent to invest in SSY given the 21yrs as time frame and presumably lesser corpus in comparison to MF?

Originally Posted by Yossarian

The key is risk management. I would look at SSY to be the debt portion of my daughters goals. It gives a risk free and high post tax return. For the rest in terms of long term gains I use a mix of equity MF's (Small, mid and large) to give a big chunk of the gain taking more risk in the early years and changing allocation as the goal nears.

Another thing is the lock-in period which ensures that person stays invested for long term and not end up redeeming due to other personal situations. That's the main purpose of schemes like PPF, SSY etc. Not everyone may have rigor and discipline to stay invested in other investment options.

[sagarpadaki]

I think with SIP's, XIRR is a more relevant number than absolute returns or CAGR. As a thumb rule, any fund with XIRR greater than 12 or 13 percent is a good return

[TurboTorque]

Originally Posted by Aviator_guy

I have been contemplating this insurance for me and family. If you don't mind sharing, could you please share more details about policy /company etc.

After I realised that I needed to buy a separate health insurance policy with a larger sum assured around the beginning of 2021, I read a few blogs, reviews, and e-books online to understand the details of health insurance and available options.

The next question was how much sum assured do we need for a family of 3? There was no straight answer as it depends on individual lifestyle and affordability. In most cases, the probability of claiming the insurance increases in one’s 40s and 50s. Since I was early 30s, the probability of I am claiming the insurance would be around 10 years from today.

For example, if I buy a policy with a sum assured of 10 lakhs today, due to inflation, that 10 lakhs will be worth approximately 3.85 lakhs in 10 years (with 10% inflation rate). Would 3.85 lakhs be sufficient for a family of three? I felt it may not be sufficient. At the same time, I could not afford a policy with a sum assured of 25 to 50 lakhs as it would be too expensive.

Also, one might argue that we can increase the sum assured later when we need it. But the problem is that after few years if one of the insured members in the policy develops health issues, it will be difficult to increase the sum assured. Because the decision to increase the sum assured lies with the insurance company and is subject to the health condition of all members insured in the policy. If in case if there is any health issue, they might reject the request to increase the sum assured. Due to inflation, it is important to buy a large sum assured when we are young and gradually increase it to decent sum assured. It will help us as we age.

This is when I came across the super top-up policy. This will help us to reduce the premium while still allowing us to buy policy with larger sum assured. We can find lot of information about super top-up policies online. So please refer the same to understand more about it.

I decided to buy a 1 crore sum assured with a 10 lakhs base and a 90 lakhs super top-up policy. I started searching to shortlist the insurance policy by considering the below points:

• No room rent limit
• No co-pay
• No geo limit
• Good claim ratio
• Good networking hospitals
• Lesser waiting period for pre-existing diseases
• Reasonable premium

I shortlisted the following 3 insurance policies:

• Star health:
  • Base: Comprehensive Health Policy
  • Super top-up: Super Surplus Insurance Policy
• HDFC Ergo:
  • Base: Optima Secure
  • Super top-up: my:health Medisure
• MaxBupa:
  • Base: ReAssure
  • Super top-up: Health Recharge

I rejected Star Health because it had a single private AC room rent limit and the premium was expensive. HDFC Ergo did not offer a 90 lakh super top-up plan.

Also, in 2011, IRDIA had issued guidelines on portability of health insurance policies that we can port our policy to any insurer. The new insurer would provide the benefit relating to waiting period for pre-existing conditions that we have gained with the old insurer and also provide the sum assured of old policy.
Please find the complete rules at https://irdai.gov.in/web/guest/docum...umentId=368747

The goal was to buy a large sum assured with a lower premium that provides all the important features as we can always port to another insurer later due to the portability rule. So, we decided to go with MaxBupa health insurance because it offered no room limit, no co-pay, a lower premium, and a decent claim ratio.

Base policy: NaviBupa ReAssure 2.0 (MaxBupa was changed to NaviBupa recently)
https://www.nivabupa.com/family-heal...insurance.html


Super Top-Up: NaviBupa Health Recharge
https://www.nivabupa.com/family-heal...y-floater.html


As of today, I paid following premiums:


When I was renewing my policy this year, they gave me the option to upgrade from Reassure 1.0 to Reassure 2.0 with an additional 5 lakh increase in the base policy sum insured. Since I was blessed with a 2nd daughter this year, I upgraded the policy and this upgrade increased the premium amount. Also, since I crossed 35 years age, the premium amount increased further. The new Reassure 2.0 provides the following additional features:

• ReAssure "Forever": First claim paid triggers ReAssure, forever. It is unlimited.
• Each claim under ReAssure "Forever" will be up to Base Sum Insured.
• Lock the Clock: Pay premiums as per your entry age, till a claim is paid.

If you read reviews online about health insurance policies, all of them have positive and negative reviews. I do not have personal experience with claiming super top-up policy, nor have I heard anything from my friends or close circle. We will know only when we try to claim. After buying a policy with larger sum assured, we will have the following 3 options:

1. Pray that we do not face a situation where we need to claim the policy.
2. Hope that the insurance company will approve the claim when we really need it.
3. Get rich enough not to worry about claiming the insurance.

I hope this helps you.

Originally Posted by dearchichi

5. I've never understood the reasoning for emergency funds. Having MFs that allow for quick redemption, a month's expenses in the SB account and credit cards with a high aggregate limit should suffice for any eventuality.

Consider this situation: If the market crashes like during the COVID time and we get an emergency, would we be comfortable selling our mutual fund units at a loss? Or if we lose our job due to a layoff and don't find another job for 6 months to a year, would we be comfortable selling our MF units?

We cannot predict when or what kind of emergency we might face. It is always better to set aside 6 months to 1 years of expenses in non-equity assets.

[Fuldagap]

Originally Posted by Raghu M

My ELSS nos. from the date of investment are more than 300%. I stopped investing my SIP in an ELSS fund and wanted to wait for the lock in to finish. After 3 years, I looked at my returns and was shocked. I put in 1,20,000 INR through 5K installments and stopped investing in 2021. Now the value of the fund is 4,00,000 INR. I understood the power of compounding, I am expecting very healthy returns by 2030. Will wait till then and move it to SWP and pull out money if needed but otherwise, the initial investment is going to stay for at least another 20 years.

I believe you are quoting absolute returns which are good only for making one feel good. However, calculating the actual compound interest accumulated for your investments will make the real picture clear and genuine.

When I saw 73%, I thought it was compound interest. While in equity investments even 300% is not unimaginable, it takes a lot of efforts, prompt action and a bit of luck and bravado to see numbers like 73% or 300% or even more. Asian paints stock is one such example.

MFs generally translate into 12-14% per annum return. I had some MFs that I sold after a healthy 25% return over a period of approx 10 years.

Originally Posted by sagarpadaki

I think with SIP's, XIRR is a more relevant number than absolute returns or CAGR. As a thumb rule, any fund with XIRR greater than 12 or 13 percent is a good return

True.
Absolute returns that apps show to innocent people are a marketing gimmick. I really thought 73% was compound interest in the above post.

[Raghu M]

Originally Posted by Fuldagap

I believe you are quoting absolute returns which are good only for making one feel good. However, calculating the actual compound interest accumulated for your investments will make the real picture clear and genuine.

When I saw 73%, I thought it was compound interest. While in equity investments even 300% is not unimaginable, it takes a lot of efforts, prompt action and a bit of luck and bravado to see numbers like 73% or 300% or even more. Asian paints stock is one such example.

MFs generally translate into 12-14% per annum return. I had some MFs that I sold after a healthy 25% return over a period of approx 10 years.

True.
Absolute returns that apps show to innocent people are a marketing gimmick. I really thought 73% was compound interest in the above post.

I get your point but compare any other investment vehicle available to us right now and MFs will beat them hands down. I have a portfolio of close to 70 lakhs, so pretty much all the slice and dice that one can do in terms of absolute returns and CAGR has been done. To invest at the right time forms the key but SIPs are the easiest way to move away from that analysis. I invest lumpsum from time to time (June 4 was an example), so I know how much I am making and profiting.

[dearchichi]

Originally Posted by TurboTorque

Consider this situation: If the market crashes like during the COVID time and we get an emergency, would we be comfortable selling our mutual fund units at a loss? Or if we lose our job due to a layoff and don't find another job for 6 months to a year, would we be comfortable selling our MF units?

We cannot predict when or what kind of emergency we might face. It is always better to set aside 6 months to 1 years of expenses in non-equity assets.

Since MFs do not imply only equity instruments, yes, that's what I plan to do. Also, expenses for 6 months of loss of income is not an emergency situation, but one that could be planned for by setting aside a corpus.

Emergencies, as I understand it, equate to emergency access to funds.

[Aviator_guy]

Originally Posted by TurboTorque

I decided to buy a 1 crore sum assured with a 10 lakhs base and a 90 lakhs super top-up policy.

The goal was to buy a large sum assured with a lower premium that provides all the important features as we can always port to another insurer later due to the portability rule. So, we decided to go with MaxBupa health insurance because it offered no room limit, no co-pay, a lower premium, and a decent claim ratio.

Base policy: NaviBupa ReAssure 2.0 (MaxBupa was changed to NaviBupa recently)
https://www.nivabupa.com/family-heal...insurance.html
Attachment 2683326

Super Top-Up: NaviBupa Health Recharge
https://www.nivabupa.com/family-heal...y-floater.html

Thanks for sharing Super top-ups seems quite economical!

I'm wondering if we can mix match the base and top up insurance i.e. buy base insurance from one company and top up cover from another? Or do both the policies have to be from same company and bought at the same time? Also, let's say someone already has an existing base policy, can he just buy top up cover separately?

During a large claim, can multiple base insurance (personal and corporate for example) be used to cover the deductible of super top up?

[TurboTorque]

Originally Posted by Aviator_guy

I'm wondering if we can mix match the base and top up insurance i.e. buy base insurance from one company and top up cover from another? Or do both the policies have to be from same company and bought at the same time? Also, let's say someone already has an existing base policy, can he just buy top up cover separately?

Yes, we can buy a base policy and a super top-up from different companies. It does not need to be bought at the same time as well. The super top-up policy is an independent policy that will have some deductible which we can either pay in cash or cover with the base policy. So, one can buy the super top-up policy separately

But what I understand is that it is always advisable to take the base and super top-up from the same insurer to have a cashless and hassle-free experience during the claim process. Otherwise, if the super top-up policy is from a different company, cashless claims might be rejected and you will have to pay cash upfront and reimburse it later.

So, one can buy the super top-up policy separately either from the same insurer as the base policy or from a different company.

Originally Posted by Aviator_guy

During a large claim, can multiple base insurance (personal and corporate for example) be used to cover the deductible of super top up?

As far as I am aware, yes, we can claim from two insurance policies (personal and corporate) as long as hospital expenses exceed the sum assured of both policies and using that as a deductible for a super top-up policy. But, the problem is that we might not get the cashless option for all three claims (personal, corporate, and super top-up).

For example, if one has both personal and corporate insurance policies with a sum assured of 5 lakhs each and a super top-up policy with a deductible of 10 lakhs and their hospital expenses are 20 lakhs, they can claim 5 lakhs from the primary insurer and 5 lakhs from the secondary insurer and then claim 10 lakhs from the super top-up policy.

But, the problem is that cashless claims will only be available for the primary insurer and we will have to pay an additional 5 lakhs in cash and later reimburse it from the secondary insurer. We may or may not get cashless claims for the super top-up policy.

To sum up,

• We can buy base and super-top from different companies. But cashless claims may or may not be available for super top-up policy. We will have to pay upfront and reimburse it later.
• We can claim multiple base policies if hospital expenses exceed the sum assured. But we will have a cashless claim only from one of the base policies and will have to pay upfront and reimburse it from the secondary insurer.
• It is advisable to take base and super top-up from the same insurer to have a cashless and hassle-free experience during the claim process. Also, have a base policy sum assured that is the same as the deductible in the super top-up.

@All BHPians, All of these are based on my understanding. Please correct me if I’m wrong.

[akhil_007]

Thank you TurboTorque for sharing your journey.

Investment style is like a tailored suit and hence varies from person to person. I don't want to make it more complex by adding more details except for 1 thumb rule. And that is

-AVOID REDEEMING MUTUAL FUNDS- there might be lot of reasons, aspirations, YOLO moments, FOMO situations. Having burnt my hands redeeming MF's for some needless purchase, I am not going to repeat the same mistake again.

PS: XIRR on my portfolio was upwards of 30% over 5 years