FAMILY BUDGET

Generally speaking , A budget is a financial plan for a defined period of time, usually a year. This is usually the case for corporates. In personal finance or in case of a family, a budget is the sum of money or salary earned and the summary of intended expenditures. It may include a budget surplus, providing money for use at a future time, or a deficit in which expenses exceed income.

A personal budget or home budget is thus a finance plan that allocates monthly personal income towards expenses, savings and debt repayment. Past spending and personal debt are required to be considered when creating a personal budget.

Why is the budget the start point for personal finance or for a family, I like to suggest it for three reasons one is for regular monitoring, evaluation and review at the end of the month and then the course correction as required. Once made a regular practice it also can be used as a strategic plan for the year or years ahead. Second reason is that unless measured improvement in any thing is difficult to achieve. Third reason is that if correctly made it can be used to shift the focus from expenditure to savings. Shall be dealing with it in details in the blog posts to follow . This is very important as life after retirement is increasing both due to early retirement and increase in life expectancy. Added to this are other factors like increasing educational costs,late marriages by next generations and dependency on the parents due to rising home costs.

Having seen the importance of preparing the budget for a family preparing it is relatively simple but some thing so simple is found to be difficult and prepared by very few and correctly implemented by even fewer families. Family budget is required to be used as a tool for improving family finances and ultimately achieving financial independence or freedom as I like to call it and I plan to discuss a few key aspects of it in the next blog in trying to make it easy.

The personal finance chain is very simple earn -budget -save-monitor-review-invest - grow savings and live happily doing it and in old age. Many simple things are not easy to implement hence the need of a teacher if you agree you are welcome to visit and enroll in www.moneymonk.me but otherwise for those who can manage it by themselves tis week ‘s blog on budget in  http://moneymonk-joe.blogspot.in/ will be useful .

Your feedback and comments are most welcome too.

  

SOME EXAMPLES BASED ON REAL LIFE CASES OF SUFFERINGS BY NOT TAKING TERM INSURANCE

Hi near and dear ones,

With this blog I plan to close the subject of insurance, to move on to other subjects concerning financial freedom, inclusion and awareness.

Here I plan to discuss a few examples based on real life cases how people suffer by not paying attention to taking adequate cover. Aim is not to scare people but even if such scare can cause near and dear ones to pay attention to this important aspect the purpose will be served.

In India present government introduced and implemented a long overdue welfare measure by getting many poor people to open their accounts with the banks as well as introducing insurance cover of four Lakhs for less than a rupee a day in case of accidental death and two Lakhs in case of death for any reason. As some of you know we had plans to move to rural areas and make some contribution to the quality of education and thus stayed for one year to experience it ourselves but did not find it suitable and migrated to US to be close to our children and grand children. We were staying in a village then when this scheme was introduced and motivated many to take benefit of it. Now we heard of a sad story of a person who did not keep enough money to pay the yearly premium in his bank account and unfortunately died in an accident and could not get any benefit. The family is devastated and is finding it difficult to make a living due to loans taken in trying to save him after the accident. Please do remind all around you to open bank accounts,take these insurance covers and also ensure that renewal premiums are deducted from the bank account. Many will be spared from such sufferings. In rural areas and among poor and uneducated there are still people who have not taken action to take benefit from this very good scheme.

The other case is of an army officer who decided to leave the service early and did not have any term insurance and unfortunately died leaving his wife and children in financial distress ,as group insurance stopped and family pension then was grossly inadequate even to make a hand to mouth living for the family as this happened when services salaries and pensions were very poor in the period of 1973 till very recently. These have now improved but group insurance still stops when one retires leaving such people exposed to risk which is not covered . As group insurance also are in my opinion not adequate to cover risk fully.Services people remain exposed to partial risk even when serving and need to consider covering the gap by taking term policy while in service which suits them. More exact advice can be given to those who enroll on www.moneymonk.me  as every person has an unique life and financial position Thanks to increasing life spans there are many years to live after any retirement and services personnel need to be aware of this aspect depending on their personal and financial life situation and position.

I have allotted considerable time to this activity and will be happy if more services and ex servicemen make use of it. Its not free but you get to decide how much to pay only because anything offered free is not valued is my belief.

From the next blog I plan to look at another important aspect of financial planning "Budgeting"

GETTING OUT OF WRONG INSURANCE POLICIES AND INTO THE CORRECT ONES

A very large percentage of people I find are in a situation in which for what ever reasons they have landed into insurance policies which don’t cover the real risk. They either don’t know how to correct this or take it as fate accomplice and continue. Let me address the issue trying to cover a large percentage of the population.There are three types

1. Those with policies of which premiums have been paid for more than 5 years

2. Those with periods less than five years

3. Those who have paid lump sum one time premiums.

Suggested remedies are

1. Those with policies paid for more than five years can simply discontinue paying further after taking a suitable and affordable pure term policy which covers all or maximum risk and start investing the money thus saved. If needing help I will be glad if you come through my web site www.moneymonk.me

Best advice is possible when individual life and financial position is known.

The amount paid can be refunded immediately when you get a smaller amount or after the policy matures when you get a larger amount which is preferable depends on if and how well you can invest it,know it or learn from me if you like.

2. Those who have paid premiums for less than five years have a difficult decision to make as they need to sacrifice the premiums paid or discontinue when the policies become more than five years old and take path as mentioned above. Even in that case don’t delay taking a pure term policy but plan and manage your budgets and savings.

3. Hard luck for those who have paid one time lump sum premiums but all the same better late than never take a pure term policy to suit your risk.

4. Services personnel. For those serving in Army, navy or Air Force its a rather more difficult call to take. Services have their own group insurance covers for which are not good enough to be considered as pure term covers, adequate to cover the risk. Hence services personnel need to take pure term policies for uncovered gap between the ideal and group cover as explained in my previous blog.

5. Another aspect peculiar to services is that the group insurance cover drastically reduces when you retire, this is particularly sad for those taking early retirements than those serving maximum terms. With increased life expectancy, late marriages and children born still later even those retiring after completing full service also need to give it a thought.

6. Last but not the least must mention the yeoman work done by present Indian Government by making insurance cover available for rupee a day for  4 Lakhs of sum assured through the banks as this is a major cause of poor people not able to get out of their poverty if there is an unfortunate death due to the sickness or accident among the unemployed, poor, less educated and rural people. It has taken 70 years since independence but again better late than never. In the next blog I will give a few examples based on real life cases how badly and sadly inadequate risk cover affects people based on true life stories.

Also useful may be for some www.mcxtra.com      

DOES INSURANCE COVER YOUR RISK?

Human being though generally rational in their behavior are known to take irrational decisions in life, even in matters which affect their near and dear ones. One such area is life insurance.

Life insurance is logically meant to cover the risk to the life of a bread earner which will affect the the family finances adversely and add to the emotional loss due to death of a near and dear one with dependents. This is more severe when the death is at an early age when family and children are fully dependent on his or her income for their day to day living and survival. Nuclear families make matters worse.

Dealing and interacting with many I find that most do not have adequate risk covering insurance. On the contrary their savings are eroded and locked in low growth endowment policies with high premiums.

Same people who buy a fresh car insurance or renew it every year and feel lucky if they had a year of accident free car use, don’t apply the same rational to their life which is much more precious for the family and risk too is high.

Most people are confident and rightly so, that if they are lucky to be alive they will be able to manage to earn and look after their families but fall prey and don’t take the right insurance which is pure term insurance covering complete or maximum risk in case of death due to any accident or sudden health issues.

What should be the right pure term policy cover ? As a thumb rule the sum assured should generate interest income equal to the salary or income of the individual. As an example ideal pure term policy assuming 6% interest rate for a person earning 50 thousand per month should have a pure term policy of 1 crore(10 million). Depending on the age the premium is affordable as such policies have low premiums and in case some one finds it difficult he can go for a lesser amount but interest earned must cover at least the monthly family expenditure.

In most cases I find people paying more premiums and yet having very low risk cover. The reasons are faulty marketing of insurance , lack of financial awareness and getting fooled by the lure of getting some money back in the long term and of course the commissions on endowment policies are much more than the term policies. Lack of financial awareness and education is the root cause.

Having got into this situation which is not in the best interest of the family ,we will discuss how to get out of it and have the risk better covered in the next week’s blog  

Moneymonk

www.moneymonk.me

   

My dear and near ones,

Thanks for all your birthday wishes and here is a small return gift from me.

Response to my web site www.moneymonk.me is more than expected planned to take on 50 in the first year already enrolled are 25 in three months. Starting a blog rather reviving it a fresh as encouraged by the interactions with those enrolled on www.moneymonk.me felt the need to broaden the scope and write a weekly blog covering some general aspects.

That scope of my efforts has been enlarged to cover two more aspects besides Financial Freedom , these are Financial Awareness and Financial Inclusion.

I really wish all the people were rich at least for a short time by some magic to make them realize that while money is essential to a limit, happiness is not directly connected with wealth.

Relating it to the fact that a single digit percentage of population today owns a very large share of global wealth.This is changing for the worse too and needs to be addressed.

A very large population is not included in the global financial system too. While super rich are leaning towards charity and some financial inclusion efforts may bear good results, is it enough? Financial Inclusion efforts all over the globe today are limited to make those excluded from Financial System bankable or make loans available to those who have nothing to offer as security.

Can we and should we not be doing more to make this a better world for human beings and future generation?

Do we want the future world and generations to live a life of dignity, self respect and honor or to live on charity ??

How can we educate our future generations to aim more for happiness than money and find a right balance between need and greed?

How can we educate children to have a better understanding of gender issues ? How can we prepare them to live a happy complimentary life of happiness pairing up with the other gender partner and not get into unnatural and unnecessary competition mistakenly thinking it to be an equality issue?

These and similar issues I plan to discuss on my weekly blog

http://moneymonk-joe.blogspot.in/

Last but not the least a few clarifications as regards my web site are as under

There is no fixed fee or charge for those who enroll,if they are in agreement with my concept and wish to learn from my experiences to achieve their financial freedom they are welcome. Its not free mainly one lesson I want to teach is learning to value every thing in life be it commercial or relationships. I also believe that any thing offered free is not valued. Fees per session after the first introductory one are decided by the student as Guru Dakshana and never questioned by me, there are no standards , bench marks or currency type decide, choice is entirely theirs. In times to come I plan to scale it up and make it a non profit enterprise.

Another issue is of age, while those starting early stand to benefit more and can look forward to early retirement , its never too late for others, every individual has a unique life situation and financial position so you can take it forward in a better way with my help from where you start. The concept has many psychological and behavioral aspects to learn to be able to link it to happiness and age is not a barrier when in search of happiness.

Hope you will find time and benefit from these weekly blogs

Yours 

Lt Col Prakash Joshi 

Moneymonk