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opt 3Having a girl child is a moment of great joy for parents! But planning for the darling daughter’s future is also something that is always top of the minds of Indian parents. Early and sound planning can go a long way in ensuring the future of your daughter. Following are some ideas that as a parent you could consider when planning for your daughter’s future:

Ensuring Medical Cover is in place:In an ever changing environment and the growing threats of lifestyle related health problems, children are no more immune to major health concerns. As such, having them medically insured should be on high priority. While a stand alone health policy might be excessive, including them in your family floater is a practical option. Depending on the policy you chose, the minimum age requirements can range from 91 days to 3 years old.

Investing for your Daughter’s Future:Indian parents today are still actively looking to fund for their child’s future. Additionally parents of the daughter are still largely expected to fund for the “Big Fat Indian Wedding”. Following are some of the investment options out there which parents could consider and evaluate basis their requirements:

 

 

  • Sukanya SamriddhiYojana: A government initiative to encourage Indian parents to invest specifically for their daughter’s future. It provides the highest guaranteed returns of all government investment schemes and is currently providing 8.4% p.a. tax free. Furthermore, contributions to it are eligible for tax deductions upto Rs. 1.5 lakhs under Sec 80C. While some might criticise its lock in policy, the other way to look at this that it is a significant tool to partially, if not fully fund, the most important requirements of the daughter i.e. Her Education and Marriage

 

  • PPF: Another popular government scheme. Similar to Sukanya SamriddhiYojana in providing tax benefits under Sec 80C. However the current tax free returns are 7.9%. With a 15 year fixed lock in policy, its highly advisable that the parents open the account during the daughter’s early childhood and invest regularly in it to achieve a sizable corpus.

 

  • Mutual Funds: A combination of Equity and Debt Mutual Funds are a great way to ensure both short and long term goals of the daughter are met. One needs to identify which type of mutual fund and subsequently which scheme under that type would be most appropriate to invest into basis the requirements.

 

  • Gold: An all time favorite for Indians. While traditionally Indians have always bought and kept physical gold, there are more convenient options now available. Gold ETFs and Sovereign Gold Bonds are becoming increasingly popular among Indian investors.Both track gold prices and have the added advantage of no storage/making costs and no risks of theft/tampering.

 

  • Child Plans: Various Mutual Funds and Insurance Companies provide plans that are specific for children. Most of these options have a stringent lock in period and take exposure in equity and debt markets.The lock ins on these plans may work in favor when parents are looking to match the lock-in with the daughter’s goals.

Estate Planning:As a minor, two aspects become critical in ensuring that whatever hard work that went into planning for the child does not go to waste in case of a sudden demise of one/both parents. A will helps to confirm who will be the legal guardian of the child in case of an unfortunate event. It will also ensure that the money meant to go towards the requirements of the daughter actually is received by her at an appropriate time and the wishes of the parents as regards their monies for the daughter are honored.

Parents are always concerned with providing for their children. As such, it is always advisable to start planning early on in the child’s life. Understanding the child’s near and long term needs is a good way to start planning. And the correct planning can ensure peace of mind and happiness for both the parents and the daughter.

 

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As was broadly expected, RBI cut policy rates by 0.25%, taking repo rates down to 6%. This was brought about largely due to the annual retail inflation in June to be the slowest for over five years and as expectations for inflation going forward remain at about 4%, a number that RBI seems to be comfortable with. In addition low core inflation, a good monsoon thus far and a reasonably decent GST roll out thus far. They also held the stance as neutral which was expected, considering that too many shifts in policy could impact long term credibility.

The good news is that the 6 member committee decision was not unanimous – four members voted for 25 bps cut, the fifth voted for a 50 bps cut and the last one voted to maintain status quo.  Hence repo rate got reduced from 6.25% to 6%, reverse repo rate from 6% to 5.75% and marginal standing facility (MSF) rate from 6.5% to 6.25%.

Big Image- What does the Monetary Policy mean for RBI monetary stance

Focus on the real rate of return

With interest rates remaining subdued, there is a tendency to want to take greater risk on the portfolio to achieve a higher absolute rate of return. We think that it is critical that investors focus on real rates of return ie the return after inflation on their portfolios. We believe RBI continues to keep its focus on real rates of return at 1.5% – 2%, which makes fixed income attractive at this stage. Avoid higher risk strategies in chasing a higher rate of return in the current environment, as the risk return trade off may not be favorable.

Your Investments

The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth. The neutral stance does not mean that there won’t be any future rate cuts, but it does seem like rate cuts going forward may be slow and investors expecting a repeat of the returns from bonds made over the last few years, are likely to be disappointed, if they have very high expectations.  The bond and equity markets had probably already priced in this 0.25% rate cut and thus they did not react  to this announcement. It may be a good idea to have bond fund exposure being weighted two thirds towards accrual/hold to maturity strategies and one third towards duration/dynamic strategies. With global bond yields in developed markets headed upwards, investors in equities may need to be careful, especially with equity markets priced to perfection.

Your Loans

The RBI decision to cut its policy repo rate to 6 per cent is likely to lead to a further cut in the lending rates, especially home and car loans by banks. New borrowers can expect EMIs to come down and which would also cut down interest outgo over the loan tenure. Banks may come also up with promotional offers till the festival season to attract more customers. Old borrowers under the MCLR would have to wait until the next reset period to get the rate reset as normally rates are reset once in a year. There is also an option for the old borrowers of switching the loan portfolio to another lender. The decision to examine how the shift to MCLR has worked, considering that most loans are still linked to the base rate, would be interesting to watch closely as RBI has set up an expert committee to look into how monetary transmission can be more effective.

Way Forward

With inflation being the focus of the RBI, the factors determining inflation as mentioned in the Monetary Policy include:

(a) The impact on CPI of the implementation of house rent allowances (HRA) under the 7th central pay commission (CPC); could be estimated to have a 1% impact on inflation over the next 12-24 months

(b) The impact of the price revisions withheld ahead of the GST; and

(c) The movement of food and fuel inflation.

Watch out for inflation, the movement of the Indian rupee and how the economic slowdown led by weak manufacturing and cape data, till the next RBI policy on 4th October 2017.

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HR Post 1 (2)Consultancy is the new age choice of profession. And being a consultant is right there amongst the top dream jobs!

One of the most upcoming fields in this professional niche is in the sector of Human Resources. Consultants in this sphere are referred to as Human Resource Business Partners.

A Human Resource Business Partner goes beyond the regular functions of the organization’s HR team. As such, HR Business Partners generally tend to be very busy as they handle important head hunting and hiring mandates. With bigger mandates and responsibilities comes a much nicer pay package alas with no time to look at personal finances!

But like all professionals, Personal Financial Planning should infact be at the top of the priority list. Why you ask? Let’s delve into the reasons.

Time Restraint: Like all consultants are occupied 24/7, a HR Business Partner is always vying for personal time. And when they do find some, the last thing on their mind is personal financial matters. In the catch up for personal things to get done, personal finances are a low priority. Yet should it not be the complete opposite of this? The importance of financial planning is not just related to finding out how much to invest and where. Financial planning and giving a structure to overall finances is aimed to attain peace in the thought that despite all other commitments, you are working towards insuring that financially your dreams and aspirations will be taken care of. And that is a great source of calm for a person constantly on the move.

Contract based Income: As a consultant, you are a contractual worker in essence. In other words, you are in receipt of the handsome income only as long as you manage to keep the contracts alive. Shouldn’t simple logic dictate your actions that this hard earned should be channelized for situations when no contract is available? Or in layman’s terms, creating a Contingency Fund for those truly lull periods in the industry. Wouldn’t you want to make this hard earned money work as hard as you so that your dreams of an early retirement or that fancy foreign holiday come true?

Insurance: While you may have already thought of the regular health and life insurance policies, what is worth considering are additional risk covers in terms of Personal Accident and Critical Illness Policies. These provide features which help augment income in case you cannot report in to work due to major accidents. In addition insurance that is worth considering for senior HR Business partners or top executives of HR Consulting firms is the Keyman Insurance Policies. (More on all these in the subsequent posts.)

What is it that you truly fancy doing with your hard earned monies that you worked so relentlessly for? Would it not be nice to know that your efforts can be enough to fulfil your life dreams? Most likely your answer would be a resounding YES! So then, what is stopping you? Mere inertia? An inherent fear of doing something wrong that can’t be taken back? Lack of knowledge on how to go forward? The questions are many.

And yet, the solution might be as simple as the professional choice that you have made for yourself. Why not consult an expert consultant from the financial advisory field? It is after all why you are hired right? So why the hesistance in doing the same thing for your personal benefit.

As fellow consultants and advisors we believe, like you, that specialization leads to credibility and expertise. And like consultants, we understand that trust is only gained through repeatedly providing sound and quality advice. Being credible and trustworthy is essential, more so in matters of personal finance.

Having a word with a Financial Advisor to make certain your hard earned wealth is doing the right thing may be a good idea and most certainly worth your coveted personal time.

Till then…continue the good job of quality consulting!

 

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The RBI has not changed the repo rates, maintained at 6.25% but has cut SLR rate by 50 bps.  RBI has indicated that it wait for more clarity on data on inflation going forward before taking any decision on monetary policy action. However with inflation in terms of CPI continuing to remain low, any rate hike action which the markets were fearing over the last few weeks seems less likely. Thus a rate cut which seemed off the table till a few weeks ago continues to be an alternative going forward, depending on multiple data points. GST rollout so far has been assumed to not affect inflation meaningfully, though it will need to be watched carefully.

Investments:

Investors having investments in dynamic or duration funds can benefit from falling interest rates if inflation continues to be low. Investors having long term goal durations of 5 plus years for their fixed income portfolio can continue to invest in the duration and dynamic funds, along with tax free bonds. For investments with 3 to 5 year horizons investors can consider investing in a mix of short term and duration funds. Investor having an investment horizon of 1 to 3 years could invest into ultra-short term and short term funds to avoid volatility in interest rates.

Loans:

As there is SLR rate cut by 50bps banks will have more liquidity for lending and to pursue credit growth opportunities. The bank lending rate may go down due to excess liquidity in the banks and to increase consumption. People having loans can look for refinancing opportunities as rates could continue to remain low going forward.

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Retirement 1Retirement is usually something that is not considered by most of us till we are nearing it, so naturally we do not plan for it, until it is probably too late. This general ignorance or lack of attention to retirement planning can have far reaching consequences.

Retirement planning in the simplest sense means preparing for life after the tenure of paid work ends.  This does not only include the financial aspect, but other aspects such as what to do during retirement, the lifestyle choices that one can take and what dreams one might want to pursue during the remainder of the years.

While the concept of Retirement Planning applies to pilots just as it does to other individuals, there are certain unique points that are exclusive to retirement planning for commercial pilots. These unique points are crucial while developing a retirement plan for a pilot.

Firstly, under the current DGCA rules, the retirement age in India has been pushed up to 65. This is an entire 5 years longer than the mandated retirement age in most other industries. This translates to more income earning years, probably at the highest salary slab of the industry, since usually pilots around this age are most likely to have their designations as Captain. This extra income earning period is crucial in formulating and ironing out the retirement plan before the pilot ultimately retires. The significant income flowing could be the difference between living a compromised and a fulfilling retirement.

One of the most important things a commercial pilot has to consider is Lifestyle Inflation. Because commercial pilots have one of the best salary packages amongst all industries, they tend to have more lavish lifestyles. And they are comfortably able to match up the ever increasing expenses that come alongside their lifestyle choices. But on retirement, the salary stops. Yet expenses continue to stay, with inflation only adding to it. But more significantly no one would want to compromise on their lifestyle they have become accustomed to. As such it becomes imperative to plan much ahead so that lifestyle compromises don’t become the norm during your golden years.

Just to drive home the impact of inflation, let’s take an example. Consider a pilot Mr. A, currently 30 years of age and has a monthly expenditure of Rs 12 lakhs every year (not a very high amount, from what we hear from our pilot clientele). Assuming he will retire at age 65 and taking an average of 8% lifestyle inflation till retirement,  the same Rs. 12 lakhs expenditure will inflate to approx Rs. 1.75 crores. In other words, to maintain the lifestyle that costs Rs 12 lakhs as of today, Mr. A would require Rs 1.75 Crores annually to maintain the same expenditure choices, forget upgrading!

Furthermore, pilots are used to having extremely busy schedules. So when retirement hits, they are unprepared to handle the ample time in hand. Hence they always look for options to keep themselves engaged. This could mean, taking long leisure trips or finding, researching on and investing lump sums in “exciting investment avenues”, committing money to be part of a start up or just following their long drawn passions or enrol at the local flying clubs just so that they can regularly indulge their lifetime love of flying. All this comes at hefty financial expenditures.

All of the above means that Pilots would need to plan and develop customized retirement plans for themselves to ensure a smooth flight during retirement.

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As a passenger, getting from point A to B simply includes sitting on your assigned seat and enjoying the flight till the destination. You are completely unaware of the preparation and planning that goes behind every flight.  A smooth flight is an end result of the meticulous preparatory work including facing any emergency.

All sorts of emergencies can happen during a flight. Engine malfunctions, instrument failures and unanticipated weather issues are just some of the emergencies pilots can face at any time.  In such times the long hours of training, learning from past experiences and pre flight preparations comes to the front and saves the day. Sometimes passengers are blissfully unaware of the issue and continue to enjoy the flight. All this all possible because one aspect, planning! More specifically, planning for an emergency.

Yet, more often than not, pilots in the Indian aviation sector seem to be unprepared for one kind of emergency that is their own personal financial emergencies.

Personal financial emergencies can be broadly classified into two types based on nature of emergency i.e. (A) loss of job or life and (B) unexpected big ticket financial commitments.

While both can prove to be a heavy toll on one’s finances, if we look back to the last 5 years of the Indian Aviation Industry, job losses have been a major theme throughout.

Now as a pilot you earn a handsome salary starting from a young age. Hence your lifestyle tends to be on the more plentiful side.  And this only increases in significant jumps as you climb higher in your career. As such expenses are always on higher side. Luxury cars, high discretionary expenses, significant EMI’s and top notch education for children. All well within your reach. That is as long as you continue to earn that kind of money.

But what happens if you can’t? What if salaries are not paid for months or worse, you are given the golden handshake. What then? Take a step back and think about this for a minute. Ask yourself, will I be able to continue to live the life I have led so far under such circumstances; at least temporarily till I can get things back on track?

A majority of pilots will fail to have an answer to this. And that’s far from ideal!

So what should you do now? How do you start preparing for such unforeseen events? A thousand questions and ideas might run through your mind. Maybe you can get it right, maybe not. But with the help of a trusted financial advisor, who knows the intricacies of the aviation sector, you could stand a much better chance of confidently facing such troublesome periods, safe in the knowledge that you were geared up for it in advance. Exactly like handling an emergency while flying a plane.

As professionals specialized in planning for the worse, it definitely be worth your time for us to meet and discuss how to enrich your life.

Till then, happy flying!

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