Financial literacy is still missing among many Indians despite more than 75 years of the country’s independence. Lack of immaculate personal finance and budgeting is taking a toll on many’s financial lives. Taking loans for fancy desires, that too at an expensive interest rate, has become the norm for many. But while they realise their financial mistakes, the damage was done! They become shocked and annoyed. Additionally, the immense purchasing power of credit cards has pushed many into a merciless debt trap, causing defaults and labelling them willful defaulters in the eyes of banks and NBFCs.
Similarly, investing less and that too in an instrument not aligning with investment objectives is another cause for worry. The same thing applies to choosing insurance products. The lack of adequate coverage in exchange for a much lower premium puts people’s financial health at stake in case of untoward incidents. One must consult a personal finance advisor or read a personal finance book before making financial decisions.
Personal Finance and Budgeting for Different Financial Products
Be Calculative While Taking Loans for a Better Personal Finance
Loans after all are a liability for you. Choose it wisely and only when you need the same. Let’s talk about personal loans, which can be availed for numerous purposes such as weddings, education, travel, health emergencies, and buying laptops, iPhones and other accessories, etc., for a maximum of five years. While a personal loan is warranted for some of these purposes, having it for iPhones and depreciating assets doesn’t make sense. The expectedly higher interest rates, coupled with poor resale value, does not make personal loans worth applying for the said purpose.
Personal loan interest rates, for that matter, range from 10-25% per annum. The eventual interest rate, which determines to a great extent your repayment summary, will depend on your income, credit score and repayment capacity, among other factors. More Income, higher credit score and enhanced repayment capacity lead to lower interest rates and vice versa. However, do compare personal interest rates online to choose the right offer.
Home loans are important to have. With that, you can buy your dream home. However, one needs to research property and loan prices carefully before arriving at this critical decision. Home loan interest rates, which keep changing with the change in the RBI policy rates, currently stand at 8-9% per annum. Factors determining home loan interest rates include your income, profession, credit score, property value, etc.
Use Credit Cards Appropriately to Enjoy Financial Harmony
Credit cards come with a world of benefits such as rewards, cashbacks, discounts, complimentary lounge access, and several other privileges. But while buying from credit cards, don’t lose sight of your capacity to pay back the bill on time to avoid default. Often people fall into the debt trap by paying the minimum due, which is calculated at around 5% of the outstanding credit card balance plus goods and services tax (GST), on time to avoid late payment and the charges that follow. But by doing so, they do more harm than good. The credit revolves at an expensive rate of 30-40% per annum. Don’t follow the practice of minimum due payment.
Sound Investments Make Your Personal Finance Plan a Super Hit
Investing early and in an instrument that aligns with your investment objectives will mean happiness for you. To ensure enough for emergency and retirement goals, invest in top-performing stocks either directly or through equity mutual funds. Direct investments in stocks are advised to only those who know the pulse of the market and can manage their portfolio on their own. Someone who doesn’t know how to make smart investment moves can rely on the expertise of mutual fund managers. Maintaining a financial discipline to achieve all your future goals.
Insurance – The Financial Protection Every Financial Advisor Will Suggest You
Insurance acts as a safety net for you and your family in case of any unfortunate incident. Insurances are broadly classified into life and non-life insurance. Life insurance will further classify into term insurance, unit-linked insurance plan (ULIP), endowment plan, moneyback plan, annuity plan, etc. Except for term insurance, each one of these is an investment–cum insurance plan. Whereas term insurance is a pure protection plan. A pure protection plan comes into play when the policyholder dies during the policy term. The insurance company pays the sum assured to his/her nominee. Whereas investment-cum insurance plans come with both protection and investment yields. However, the protection cover is much less here.
Health insurance, on the other hand, protects you financially upon a health emergency striking you or any of your family members. Often people wonder whether they should take a medical loan or use health insurance to deal with health emergencies.
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