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 Tax filing is not only a legal but a moral responsibility. It earns you the dignity of consciously contributing to the development of our nation, and you want to build financial credibility and keep a clear track record in the government's tax books. Moreover, it validates your credit worthiness at financial institutions and makes it possible to access finance when needed. Let's step up and become responsible investors and citizens of India.
+====== Read This Before Lending to Friends and Family  ======
+For many, 'Service to man is service to God' is a maxim. Lending a helping hand to someone in need is a duty.
+However, it is easy to misplace altruistic values. Even friends and family can act in bad faith at times. The hard-hearted aren't afraid to take the warm-hearted for a ride.
+One of our clients recently lent Rs 1 lakh without thinking twice to a relative who was facing a medical emergency. Although the relative promised a timely repayment, he never got around to it.
+But the worst part was when our client learned there was no medical emergency at all. Our client later bumped into his relative...who was driving a new car...and realised he was had. All attempts to recover the money went in vain. Someone he trusted and helped had betrayed him...
+Dear readers, lending to friends and family is a common practise and can be very noble. But it's important to lend mindfully and responsibly. And emotions must be kept at bay. Here are some important considerations before lending to friends and family...
+Get a reference/background check: Lending money demands a background check, even for relatives. Be sure the borrower is creditworthy. Acquaintances and common relations can provide references that will help you get a better sense of the borrower's financial history and current obligations. This will also help you gauge just how much you should lend, if at all.
+Your own finances: Being generous and kind is virtuous, but you need to evaluate how your altruism impacts your own finances. In helping the wellbeing of others, you don't want to jeopardise the long-term financial wellbeing of your family and dependants. Before you lend, ensure it won't hinder your financial goals. Also make sure you have a sufficient contingency reserve in place in case the borrower fails to meet the terms of the loan.
+Set repayment terms: Avoid any misunderstanding and ambiguity about timely repayment and get the terms and conditions of the loan in writing. This will infuse the borrower with a sense of responsibility. Don't worry about what the borrower thinks; be firm as you come to their rescue. Glossing over the details only jeopardises your long-term financial wellbeing. Don't hesitate to impose a penalty for late payment, so that borrower takes the repayment plan seriously and doesn't take you for granted.
+Follow up: Friends and family don't always show an urgency to repay borrowed money. But if you've signed a repayment schedule, don't let it slide. Follow up regularly. It is better to get your money back late than never.
+Now, if you aren't comfortable lending in the first place, avoid boasting about your financial status or flaunting it any manner. People may try to capitalise on this information and show up on your doorstep asking for help - most likely out of genuine need but perhaps also to swindle you.
+And if you are approached and still aren't comfortable lending, you can help by offering advice. For instance, if they're a salaried individual, you could counsel them to approach the human resource department for an advance salary. Similarly, if they have investments, you could suggest they could consider a loan against their investments. They could also bank on gold, a safe haven during times of economic uncertainty.
+'Neither a borrower nor a lender be; for loan oft loses both itself and friend,' wrote Shakespeare in Hamlet. So if you aren't comfortable lending to friends and relatives, politely but firmly decline citing Shakespeare and your policy against loaning to friends and family.
+====== Has Your Insurance Agent Taken You For A Ride? ======
+A highly successful engineer at a global investment bank in Mumbai is waiting in his plush lakeside office for his PersonalFN investment consultant (IC) to arrive. He's prepared a list of questions and has all relevant documents handy. He needs clarity on his insurance policy, which he'd purchased two years ago without giving it much thought. Now it's starting to pinch him. After paying twenty-four months of premiums, he's still not exactly sure how his policy works.
+Today's meeting had been scheduled for July 1, but he pushed it up to June 27. Why?
+Well, about a fortnight prior, our engineer had approached PersonalFN to see about a personalised financial plan. He hadn't intended to make a financial plan for himself...until he came across PersonalFN's article on insurance planning. He didn't waste any time. He knew he needed expert advice and got in touch with an IC at PersonalFN.
+At the first meeting, his IC gathered the information he needed to create a sound personalised financial plan for his client. Being open-minded and task-oriented, our engineer shared crucial information about his goals, ambitions, investments, expenses, and other monetary commitments.
+Now, our engineer had always been sceptical about his insurance premiums. So he asked his IC to have a look at the policy. The IC decided a separate in-person meeting was in order. But as the day of the meeting approached, our engineer became anxious. He had a feeling his mistake was becoming very costly. So he moved the meeting to June 27...a few days before his next premium was due.
+June 27, 2016, 5pm...
+The IC reaches the engineer's office right on time, and after brief small talk, they get down to business. Our engineer wants to know if he's wasting Rs 20,000 every month on the policy. The IC has to break the news: Yes, he'd bought a policy that added little value to his financial needs. The most disturbing part, though, for the engineer is that his insurance agent seems to have promised something that the policy might never actually pay.
+According to the agent, the policy had a tenure of 35 years and an annual premium of Rs 2.47 lakh. And this would fetch returns of Rs 5.2 crore at maturity. The basic sum assured was Rs 1 crore. But according to the agent, the company would also pay a bonus of Rs 4.2 crore at maturity (in addition to the assured Rs 1 crore). So if something were to happen to our engineer before that that time, his family would receive Rs 1 crore and the prorated bonuses.
+How our engineer interpreted it...
+Our engineer thought Rs 5.2 crores would be the minimum amount he would get at maturity. His insurance agent led him to believe the bonus was guaranteed and could go even higher at the discretion of the company.
+But now, for the first time, our engineer was now hearing that no insurance company promises bonuses or pays fixed amounts every year. But another nasty surprise was in store: His existing policy, despite costing Rs 2.47 lakhs every year (and would continue to for 33 more years) wouldn't have satisfied his insurance requirements for the rest the policy's tenure.
+Our engineer isn't the first face this problem, and he won't be the last. Very few people know how much insurance cover they need and what policy they should buy.
+Our engineer had bought an endowment policy - that is, a policy that is not market-linked. These policies are costly not very transparent.
+He should have bought a term plan - a pure insurance cover with no savings component. At his age, it would have cost him Rs 10,000 to 15,000 for a cover of Rs 1 crore. He wouldn't get bonuses at the end of the term, but considering the poor returns of the endowment policy, the term plan would have been much better.
+The most common mistake people make is not buying pure insurance. Insurance agents would rather you buy endowment and money-back plans.
+Commission-driven insurance agents try to gauge the financial position of their prey. As soon as the agent found out our engineer was a young 28-year-old guy earning a hefty package and shouldering no significant responsibilities, he dangled the 8.0% tax-free returns the policy could generate.
+What our engineer should have done...
+As he has no financial dependants, he should have either started with a smaller amount or completely avoided insurance until he got married. Remember, you always have the option of buying more coverage.
+Despite earning Rs 1 lakh per month, our engineer had no investments apart from having a few fixed deposits. So instead of buying insurance, he should have started investing his savings in fixed deposits, gold, and equities in a proportion consistent with his preferences and risk appetite.
+Takeaways...
+Many insurance agents promote plans that earn them big commissions - not only upfront but recurring commissions as well. That's why you should carefully study the product before committing your hard-earned money. Keep in mind that insurance is a long-term contract. An abrutp end to the agreement can cost you a pretty penny.
+Fortunately, our engineer realised his mistake in the first two years. Of course, he is going to lose much more if he cancels the policies, but the potential losses would have been steeper when one calculates payments being continued for 5-6 more years.
+If you have any insurance needs, term insurance is the way to go.
+====== Why You Need a Succession Plan for Your Business ======
+'Start with good people, lay out the rules, communicate with your employees, motivate them and reward them. If you do all those things effectively, you can't miss,' says Lee Iacocca, the American automobile executive behind the Ford Mustang and later the Chairman of Chrysler.
+Small businesses have the potential to hit the BIG league. The problem is many founders are reluctant to expand their horizons. They keep business controls to themselves or family members.
+But at some point, decentralisation will be necessary for the business to make it BIG. Founders will need to assign authority and trust employees to execute. Without doubt, skilled and competent HR is critical to business success. After all, employees can be your most valuable assets.
+Though it might not show up on the balance sheet, building a team and ensuring its happiness can go a long way. It can help you run a business professionally on auto-pilot mode...and ensure succession planning.
+'Succession planning helps build the bench strength of an organisation to ensure the long-term health, growth, and stability.' - Teala Wilson
+Have you considered...
+What will happen to your business in the case of any unforeseen event?
+Who will take charge of the business after you've hung up your boots?
+Succession planning is a process. It takes effort, time, skill, and patience. It can take years to groom a successor - whether they be external, an employee, or even a family member.
+In India, many businesses are family owned. And in the absence of a legal testament, when the head of the family business dies, the eldest son will automatically take the reins. Moreover, due to the extended or joint family system in India, all members of the family contribute and play a vital role in the family business. In light of this, here are some questions that need answers:
+Are your children the best choice to run the business - do they have the inclination, acumen, experience, and skills to run it successfully?
+Are more capable and experienced non-family members better suited for the job?
+Will the stakeholders be happy with your successor?
+In today's business world, you must keep all stakeholders satisfied. That includes the shareholders, creditors, employees, and customers. Your succession decision will not only affect the future of your business, but the livelihood of your employees, creditors, customers, shareholders, and customers. Succession planning will dictate the future of your business. Not to mention your family.
+Poor or no succession planning has led to many family disputes and ruined many promising business ventures.
+Here's a step-by-step guide to succession planning for your business...
+Identify your successor: As a business founder, promoter, or owner, your aim is to grow your business BIG over the long term and secure the earnings for the benefit of your family and stakeholders. If you want your business to continue to operate with the right spirit after you leave, you'll need to carefully evaluate all the available options so that you leave your business in the right hands.
+The objective is to choose the candidate who is capable, committed, and willing to take up the responsibility. If your eldest son wants to pursue another career or is not interested in heading the business, then don't hesitate to assign the responsibility to a worthier candidate. Take the case of Tata Group, where Mr Cyrus Mistry was appointed as a successor to Mr Ratan Tata through a long-drawn process. Similarly, Mr Vishal Sikka was appointed head of Infosys after the retirement of founder Mr Narayan Murthy.
+In absence of a successor, you can even think about transferring your business to a family trust, through which you can allow your family members to continue to participate in the profits of the business.
+Grooming your successor: The successor-to-be should be introduced to each and every aspect of the business and should also be involved in all important business meetings and decisions. If you have overseas operations, different candidates could be groomed to head the various overseas branches. During the grooming process, it is imperative to assign authority and loosen your grip on the business.
+Being open and transparent: It is necessary to be open and clear about succession with all stakeholders and family members. This will help you identify any resistance...not to mention the most capable and interested candidate. Lack of communication is often the cause of unnecessary disputes leading to family disintegration. Acknowledge the opinions of family members in succession planning. A family constitution may help strengthen understanding and resolve any potential conflicts.
+Writing a proper will: It's easier to avoid succession-related disputes when the first level of inheritance of the family business is between a father and his sons. Thornier problems arise when the business is jointly managed by the father and his brothers and the next generation of each of the brothers start to join the business. There may be kin in the next generation who aren't willing to, or may be too young, to join the family business. So how would one split up the business in this case? In the absence of proper succession planning, family businesses undergo partition or disputes at this stage. The owners of the family businesses should construct a legal will and testament to avoid family disputes later on.
+The founder, promoters, or owners, in consultation with the family members, should ensure the will states their wishes on inheritance. They may even appoint an Executor of the Will. Large family businesses often take professional help to write the family constitution and put in place the right legal structures to avoid legal disputes among family members.
+To avoid any misuse of shareholding, some family businesses will keep their shareholdings in a trust, instead of holding the shares in individual names, so that other family members may have the right of first refusal if family members want to sell. Some families even look for a mixed structure of will and trust for succession planning. Any such disputes and conflicts can be avoided by seeking proper professional help while succession planning.
+Mentoring your successor: After you have assigned authority, when the successor is familiar with the business dynamics, vision, value, and culture of the company, mentoring is the last important step. You should be available to guide your successor through dilemmas. Like Mr Narayan Murthy, it may even be necessary to come out of retirement to mentor the company's successor.
+Succession planning is complex, but it is a must for the long-term sustainability of your business. It will ensure a smooth transition of ownership. Professionals may aid in the strategic and efficient succession planning of your business.
+====== Retirement Planning #5: 5 Steps to a Peaceful Retirement... ======
+How do you ensure a blissful retired life?
+Retirement planning is actually a simple exercise. The only requirement is a disciplined investment approach, which can be summed up in the following five steps.
+Determine how much you will need every month during retirement
+Many people underestimate how much money they need for a hassle-free retirement. And just a few years into retirement, they realise they will run out of money at the rate they're going. It can be a horrifying realisation.
+Just as we have daily, weekly, monthly, quarterly and annual targets in our working life, consider retirement as a mission and set monetary goals. For example, if you want to retire in twenty years, you need to calculate how much you'll need to fund all of your expenses after retirement. Don't worry if you don't know how to calculate that. You may use PersonalFN's online retirement calculator to find out your target retirement corpus. Once you know your aim, you can set your pace.
+Start now
+If you want self-sufficient golden years, it's crucial for you to stay focused from the day you draw your first paycheque. If you think you are already a few too many cheques behind, start right now.
+Now, if you think you can catch up by investing higher amounts, you are probably miscalculating. Here is an example that might clarify things.
+Mr Turtle and Mr Hare are the same age and will retire at 58. Mr Turtle is a disciplined investor who put Rs 5,000 away every month since he was 25. On the other hand, Mr Hare will start investing for his retirement when he turns 45. He thinks if he invests Rs 15,000 per month for 13 years, he will have adequate funds to retire peacefully. Check out the table below. This is the power of compounding and the magic of starting early.
+ 	Mr Turtle	Mr Hare
+Present Age	25	45
+Amount invested per month	Rs 5,000	Rs 15,000
+Assumed rate of return	10%	10%
+Corpus at the age of retirement (58)	Rs 15,575,375	Rs 4,808,995
+Do not start late assuming you can compensate for lost time by investing more. The right approach is to start with a smaller amount but invest regularly and top up your investments whenever you manage to save more.
+Mind your asset allocation
+Your risk appetite and how long you have till retirement will determine your asset allocation. Asset allocation refers to how much you invest in various asset classes such as debt, equity, gold, and real estate. These asset classes have different risk considerations and return potentials. So you need to strike the right balance.
+For example, Mr Cautious can invest 70% in fixed income instruments, 15% in gold, and 15% in equity. On the other hand, Mr Aggressive can invest 70% of in equity, 15% in gold, and 15% in fixed income instruments. Asset allocation is one of the most important parts of a peaceful retirement.
+Rebalance regularly
+If you start early and invest regularly, you might not pay attention to the performance of your investments, considering the long wait till your retirement. But this could undo all your hard work and forethought. It is imperative to review the performance of your investments regularly. Just how regularly will depend on your asset allocation. If you have more investments in equity shares and equity mutual funds, you might want to revisit the portfolio once a year. If you have more exposure to real estate or gold, you may not review your portfolio as frequently.
+Buy a health insurance policy when you are young
+You may not need an explanation to understand the impact of rising healthcare costs on your retirement planning. Unless you buy an insurance policy, you will have to pay for medical expenses out of pocket. And frequent and high medical costs can severely erode your retirement kitty. To avoid such an erosion, buy a health insurance policy when you are young. If you postpone this till your 50s to save on insurance premium, you run a risk of not getting any coverage from the insurance company as they prefer not to cover elderly people with pre-existing ailments.
+A few concluding points...
+Avoid breaking into your retirement kitty. If you are short a few lakh rupees to buy a new car, consider postponing the purchase until you have saved enough for it. Similarly, foreign trips and luxurious indulgences should fall low on your priority list.
+Cut down on unnecessary expenses wherever you can and channel the additional savings into your retirement corpus.
+If you have a high exposure to equity and real estate assets, you should gradually cut down the exposure as you near retirement. Every year after you turn 50, for example, you could reduce your equity exposure by a few percentage points, ultimately to 0%-10% by the time you reach your retirement.
+'Retirement from job does not mean retirement from life! It is the beginning not an end.' - Ravi Samuel
+====== Estate Planning #3: Why Everyone Should Consider Estate Planning? ======
+Editor's Note: After discharging their responsibilities towards dependents, many people dream of a blissful retired life - and some even plan for it.
+But your responsibilities don't end there. Long-term wellbeing of your loved ones comes with prudent 'estate planning' - and it would be unwise to ignore it.
+Through this new series we attempt to take you through the nitty-gritties of sensible estate planning. We recognise that during your golden years you require peace of mind, and want to see your family in joy and peace.
+Hence, we bring to you a holistic perspective for effective estate planning.
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+In this world nothing can be said to be certain, except death and taxes. - Benjamin Franklin
+Benjamin Franklin, the renowned polymath, author, political theorist, civic activist, statesman, and diplomat has so aptly quoted. But despite being aware of this fact, most people avoid thinking about it, or defer estate planning to another day.
+What is Estate Planning?
+Estate planning, in simple terms, refers to the passing assets / investments down from one generation to another. You decide how much of your estate - be it property(s), car(s), personal accolades, financial investments, etc. - you want to pass on to whom and how, after your demise.
+It is a dynamic process that needs to be reviewed at regular intervals to absorb any changes that might happen in our life or in the laws of the country.
+Why do you need to plan?
+Dying intestate (i.e. without a legal Will in place), can leave various complications for your family. There could be serious disputes among family members over your estate that can devastate the peace and happiness you've always sought for your family.
+In a ruthless and materialistic world we live in today, people unfortunately behave like hounds, wanting to grab a bigger pie. The tragic sagas, of families being disrupted over money matters is rather disturbing...and what's alarming is that such stories are unfolding every day. A scenario has evolved where one can't have complete faith in his/her own family members.
+Here's a tragic saga of Mr Suhas's family...
+Mr Suhas, was a flourishing businessman. As an enterprising individual he earned a healthy sum, but never planned for his family's future financial wellbeing. He perhaps, thought that his business would suffice to all the needs of family members - his two sons Raghu and Shyam, and his wife Sunita (a housewife).
+He envisioned growing his business to a scale where Raghu and Shyam would inherit and run it successfully and make way for his retirement. In this endeavor, he had been taking loans, but the family was not well apprised about the whereabouts. Then came a time when there was a slip between the cup and lip. A few of his ventures failed. He began to siphon funds from his successful venture to unsuccessful ventures in an attempt to bring them around. But that didn't help either, and as a consequence his successful business too was overthrown.
+The family went through hardships. Mr Suhas was shaken and had lost confidence. With banks and other creditors knocking the door for money, he was under constant pressure. That time his children - Raghu and Shyam, were merely in college; there was very little they could do. In a few years of constant pressure, Mr Suhas suffered a massive heart attack and he breathed his last - leaving his family with assets and liabilities to handle. It was an irreparable loss to the family. Raghu and Shyam were almost in their late 20s and mid 20s respectively, a ripe age when this untoward incident happened.
+As time passed, both started having arguments over property and unsettled debt. The environment in Mr Suhas's family got unsavoury by the day, and the happiness once fancied, never materialised. It was a sorrowful scene for Mrs Suhas to see them both fighting like hounds. Till date the situation hasn't resolved.
+Never say you know a man until you have divided an inheritance with him. - Johann Kaspar Lavater
+Hence in such times, the aforesaid quote of Swiss poet, writer, philosopher, physiognomist and theologian, Mr Johann Kaspar Lavater seems apt, when even blood relations fail to act rationally.
+Being optimistic is a good thing, but it is vital to anticipate the unexpected and take necessary steps towards estate planning - while we build wealth to sustain ourselves and our families.
+You need to involve your family in financial matters...
+It is imperative that you involve you family in financial matters. In addition to taking their views on matters such as planning a vacation, shopping, etc., involve your family members in crucial aspects of life - such as financial planning and estate planning - and discuss them with enough depth and comprehension.
+The following points will help you recognise the eminence of discussing your financial affairs with family:
+Involving your spouse: In our country, most financial decisions are taken by the bread earner or the head of the family. In this process, the views of the spouse (usually the wife) are generally not taken into consideration. This may be because the spouse lacks financial knowledge or interest in the financial affairs of the family. However, as irrelevant as this may sound to you, it is extremely important to include your better half while planning or reviewing your financial plans. You might be surprised at the inputs your spouse may provide while planning your finances. While her views regarding each goal and how she would prefer them to be realised might be different, her opinions about various subjects can bring a great deal of clarity and another perceptive to you while thinking about the long-term financial wellbeing of your family.
+Creating awareness among children: You see, children learn a great deal by observing. Many of you would agree that today's generation are very smart and fast learners. They have the enthusiasm and curiosity to learn. Therefore, discussing with them will create curiosity in their minds and help them understand financial matters better.
+Schools today are educating teaching children on personal finance; but as a parent it is vital that you too involve children while taking financial decisions for the family, especially the ones that will affect them, and instill in them the value of money (no matter what your economic status is) and morals. As parents, the earlier you create financial awareness and values among your children, the lesser mistakes they would make as they grow up.
+Make it a team effort: 'Together Everyone Accomplish More'...that's pretty much what team work can do. So, if you as a family approach financial matters as a team it would bode well for the long-term financial wellbeing. But enough discipline and efforts from all the family members is necessary. Discussing and developing a plan of action together will increase the chances of bringing your wishes to fruition. Without team work between members, financial wellbeing can be at risk.
+Financial independence: Involving your family in financial matters can help them become financially independent in the long run. It will help them to appreciate the importance of budgeting, financial planning and estate planning. Remember that while you involve your family, pass on all vital information to your family members. Also, be open and honest regarding the financial history of the family. Let your experiences, whether favourable or unfavourable be a learning lesson for them. Let them not be under a fallacy that may have ramifications. This will avoid the confusion and stress that may occur in the future.
+Please note that discussing money matters with family is not a taboo. Thus, start sharing all financial issues with your family before it's too late. Don't follow what Mr Suhas did, who didn't share much details with his family member although he imtended the best.
+If you aren't confident, take help of an expert who stands as guardian, judiciously guiding you and your family.
+====== Estate Planning #4: Write a Will  ======
+Where there's a Will, there's a way. - Benjamin Franklin
+A Will is a legal declaration of the author's (the testator's) intentions for his property after his death. A Will can:
+Provide clarity to the asset distribution process among loved ones
+Avoid family disputes, provided the prescribed distribution is explicit and rational
+Make provisions for minors and children with special needs
+Disinherit troublemaker relatives
+Address the transfer of online assets
+Address the transfer of offshore assets
+Be presided over by an executor of your choosing
+Specify funeral wishes
+Prevent financial and legal grief
+Bring peace of mind
+Be considered the cornerstone of estate planning.
+Who can make a Will and when?
+Anyone who is 18 years of age or older, of sound mind, and free from coercion, fraud, and undue influence can prepare a Will.
+Most people think they are too young or don't need to prepare a Will. But unwanted complications are common and you don't want to leave your family with grave inconvenience.
+We all know life is unpredictable - best to prepare a Will when you are young and in the pink of financial and physical health. You don't need to wait till you are wealthy or 65. With old age comes physical and mental problems. People become incapacitated or even lose their ability to comprehend. A Will created at such an age, when a person might not be in their right senses, could create misunderstandings, doubts, and disputes in the family later. That's why we advise you to prepare your Will when you're young and fit. Remember, you can always revise your Will as your assets grow.
+There's no specific age at which you should draft your Will (as long you're a 18 or older). But if any of the following circumstances apply, you should consider writing a Will right away...
+Married or in a committed relationship:
+A Will can pervade financial security to your partner, strengthen your bond, and usher in peace and happiness.
+Have a family:
+If you have children or dependents to support, the responsibility rests on your shoulders. Along with financial planning, consider writing a Will during the 'accumulation phase' of your life and revisit it regularly to accommodate any changes. This will avoid complications later. Think of the long-term financial wellbeing of your family.
+Divorce or remarriage:
+In the case of a divorce, an existing Will may need to be rewritten considering alimony. Likewise, in you remarry, you may need to amend the existing Will. Of course, if you don't have one, you should write one right away. For instance, a remarried couple could have children from a previous relationship...and you'll want to safeguard the interests of your loved ones. You can also specify how would like to deal with matrimonial home, an inherited property, and a host of other finer issues.
+Terminal illness:
+God forbid, but if you are diagnosed with a terminal illness, and you haven't written a Will, you need to do so before health deteriorates. You don't want to add financial and legal grief to your family's emotional grief...
+Here are some questions to consider while writing a Will:
+To whom would my assets be passed if I died intestate (i.e. without a will)?
+Who would look after my child/children if something were to happen to me or my spouse?
+Who would become the legal guardian of my children?
+Have I apprised my spouse and children to my assets and investments?
+Will children living abroad face inheritance taxes?
+In the case of an inter-caste marriage, what are my rights regarding family property?
+What are my and my family's rights regarding ancestral property?
+Who should I appoint as the executor, or trustee, of the Will?
+And so on...
+The disadvantages of not writing a Will are many:
+Your family won't know where your assets are or how much you left behind, which can cause stress in a time of grief
+Other family members and a court could decide who will look after minors
+There will be no executor, no guardian...and appointing another person could risk delays, additional expenses, and even a loss
+There could be bickering in the family over assets
+Your spouse and children could be left fighting legal battles
+Your assets will be distributed as per the laws of your religion rather than your wishes
+Assets you wanted to keep within the family could be sold
+In the case of a common disaster, where your whole immediate family passes away, your assets may be passed on to relatives who you may have never spoken to or weren't on good terms with (rather than passing them on to charity, for example)
+Transmission of moveable and immoveable can get expensive and time consuming
+The list is far from exhaustive, but we're sure you can imagine many complications that could arise in the absence of a valid Will. So we repeat: Plan ahead and make a Will.
+====== Estate planning #5: Write a Will - Part Two  ======
+Today, a host of online portals can help you write a Will quickly, cheaply, and confidentiality.
+But should you write a Will online?
+Well, if you have a small family (husband, wife, one child) and you have no controlling interest in any business but earn a salary, you can consider making a Will online if there aren't any complexities involved.
+Most online Will writing portals are backed by legal services firms. They typically tie up with financial services providers for credibility and client access.
+The concept of an online Will is slowly gaining popularity with nuclear families today. In most cases, the process is very simple:
+Create an account on the service provider's website
+Log in and enter your information into a prescribed form
+Legal experts will then scrutinise the form
+Your Will be drafted and delivered via email (or in some cases, even at your doorstep)
+You will then have time to revise the Will if you find it's not drafted as per your requirements or to account for any changes in circumstances.
+Some Will writing portals offer add-on services such as Will registration and the appointment of the executor, but they are binding on the customers.
+If you are considering writing a Will online, www.willeffect.in offers a good service.
+Now, for more complex cases - you are a citizen of another country, ancestral wealth involved, assets are substantial, several legatees must be accounted for, you are raising grandchildren or step children, you've remarried, you foresee the Will might be contested, you have a business, and so on - it may be wise to take the offline route with the help of an expert, an estate planner or attorney.
+Who should stand as witness to the Will?
+You'll need a witness to your Will. Select yours carefully. The best practice is to have a trusted doctor or lawyer witness and sign the Will. It is not mandatory for a witness to read the contents of a Will before signing it. Their role is only to confirm that the Will has been signed by the testator in their presence.
+However, if your Will is vague, one may have to review the intention of the Will (which the court will look at). In this case, it may be better to have a close confidant as your witness. But note that a beneficiary cannot be a witness, nor should a witness's spouse be a beneficiary. However, a beneficiary can be the Will's executor. A Will should have at least two witnesses.
+Who should be the executor of the Will?
+The executor is in charge of carrying out the tenets of the Will. It's a role of great responsibility. Only a trustworthy, meticulous person with a reasonable grasp of financial matters should be named the executor of your Will.
+An ideal executor will:
+Be in touch with the beneficiaries of the testator, keeping them informed
+Record all estate transactions and decisions
+Petition the court if any terms in the Will are unclear
+Keep the affairs of the estate confidential
+Avoid conflicts of interest
+Meet all required deadlines
+The executor of your Will should stand for high fiduciary standards, as the estate beneficiaries can sue the executor in case of:
+Conflict of interest
+Failure to prudently distribute the assets of an estate
+Dealing with the estate on their own accord
+The sale of assets
+Inappropriate decisions
+Losses incurred from irresponsible decisions
+Leaking confidential information
+Irregularity in maintaining records
+Unnecessary delays in settling the estate
+Any other problem
+Before you nominate an executor, seek their permission. If they refuse the responsibility after your death, the court might have to appoint an administrator.
+If you can't decide on an executor for your Will, you may hire a professional such as a lawyer or chartered accountant. Increasingly, testators are considering 'professional executorship and trust companies', which by law have perpetual successions and are independent experts in the domain. That is, outliving your executor the issue of individual biases will never be an issue.
+You might consider the opinions of your spouse and children while selecting an executor. And once you do choose your executor, inform that person as well as your family of the location of your Will to avoid uncertainty later.
+Registration of Will
+It is not mandatory to register a Will. But if you wish, your Will can be registered with the registrar by paying a nominal registration fee.
+To register your Will as a testator, you and your witnesses must be present at the registrar's office. If the registrar is satisfied with your documents, an entry will be made in the register and you will be issued a certified copy. If the registrar refuses to register the Will, you can file a civil suit in a court of law (with jurisdiction), and the court will pass a decree of registration of the Will if it is satisfied with the evidence you furnish. But remember, a suit can be filed only within thirty days of the registrar's refusal.
+Note that once a Will is registered, it is in the custody of the registrar. It cannot be tampered with, mutilated, stolen, or destroyed. And if you want to amend a registered Will, it's better to re-register a newly drafted Will.
+A registered Will does not provide legal sanctity, nor does it give any special status. A Will can always be challenged in a court of law. Registration merely serves as evidence of the genuineness of the Will.
+Can liabilities be a part of the Will?
+No, liabilities cannot be part of a Will. Including liabilities in a Will would mean you expect your obligations to be met by your successors; but in reality, not even your loved ones would ever take them up. A Will with a liability can never go through. In fact all it can leave back is an unsavoury environment. Hence, while you may indulge in credit, ensure that you stay within your limits and the long-term financial wellbeing is not jeopardised. After all, you envision that your loved ones live happily and in peace, isn't it?
+====== How to Break the Shackles of the Financial Industry  ======
+I am not an investment professional. I have never made any money managing other people's money. I went from rags to riches the old-fashioned way: by working hard and then investing my income as carefully as I could.
+Because I'd done well on my own, I never considered seeking financial advice. Then a funny thing happened. I woke up one day with the thought that I should have a 'professional' manage some of my money.
+I interviewed two firms. One was a boutique business based in New York City that a friend recommended. The other was a private banking facility for one of the world's largest brokerages.
+The boutique firm was happy to take $100,000 of my money to get started. The other company wanted a minimum of $10 million. They both had fancy offices and pretty marketing brochures. But such frills scare me. They make me think 'Gee, these guys must be charging their customers a lot to afford all this stuff.'
+Notwithstanding my trepidations, I worked with both of them for about six months. I answered their questions about my tolerance for risk (little to none). I listened to their presentations. And then I did something that I bet few of their clients ever do.
+I started asking them questions. And I kept pushing them to explain why I should believe that they could help me become wealthier.
+What I got instead was clever circumlocution. A financially sophisticated version of what you'd expect from your teenage son if you pestered him about why he didn't come home until four in the morning.
+Those discussions convinced me that these guys could not manage my money better than I had been managing it.
+To be fair, they certainly knew more about investment products than I did. But they didn't know more about how to become wealthy.
+These guys were smart. They had graduate degrees from great schools. They spoke eloquently. They seemed so...so...inside the game. I wanted them to be better than me. I really did.
+But they really didn't seem to care whether their services would make me richer or poorer. The contracts they wanted me to sign were going to put money in their pockets regardless. That didn't feel right. In the end, I told both of my elite financial planners to take a hike. And I went back to managing my money.
+Seeing Only 20% of the Big Picture
+The investment advisory industry is a huge multibillion-dollar business based on hard work, clever thinking, and sophisticated algorithms. But also on one teensy-weensy lie.
+The lie is that you can grow wealthy investing in stocks and bonds.
+It's not a big black lie. But the unfortunate truth is the financial establishment rarely looks beyond stocks and bonds. And if you think about it, why would it want to? It makes its money by ushering you from one 'hot' stock or 'amazing' fund to the next.
+Stock Markets around the world want you to think the stock (and sometimes the bond) markets are the only places you can make money. And because they know that you have heard that 'diversification of assets' is good, they give you the illusion of diversification by having your stock portfolio invested in businesses that are 'diversified' into manufacturing, retail, global trade, natural resources, etc.
+This is, as I said, an illusion. At the end of the day, it's all invested in stocks or stock derivatives. The result? More risk and less potential wealth gain for you myself.
+So start by deconstructing the little lie.
+Building wealth involves much more than just investing in stocks and bonds. Most rich people get that way by consistently doing the following nine things:
+Giving top priority to increasing their net investable wealth with more income, not maximizing returns
+Spending less as a percentage of net income as it grows so they can save more
+Understanding debt and using it occasionally and strategically to build wealth
+Investing in stocks and bonds with discipline - i.e., without expecting to get returns that are much higher than market averages
+Insuring themselves against 'black swan' events but not investing with the hope of profiting from them
+Owning tangible, portable, and non-reportable assets as a reserve that can be tapped into at opportune moments
+Investing in safe real estate - i.e., income-producing properties
+Investing directly in private enterprises and other 'outside-stock market' opportunities
+Keeping a substantial store of cash to be used when 'cash becomes king.'
+As you can see, investing in stocks and bonds is only 1 of 9 strategies you must follow to become rich, but that was the only one the two money-management firms I tried cared about.
+How to Ensure Financial Growth and Security on Your Own
+So if you can't reasonably expect to get rich with just stocks and bonds, what can you do?
+You can model your investing behavior on the behaviors that have been proven, time and time again, to actually work.
+I'm talking about asset allocation.
+Asset allocation is the process by which you spread your wealth across different sorts of investments.
+You might think that something so dull as asset allocation could not possibly be that important in acquiring wealth, but numerous studies have shown that it may be the most important factor. Because of an early financial disaster, I became an emotionally compulsive diversifier of practically every dollar I could save, putting some of it in bonds, some in stocks, some in cash, some in real estate, and so on.
+Over the years, I have made hundreds of individual financial decisions - buy this, sell that. Some of them were quite good, a few of them were quite bad, and most of them were in between. And yet, overall, my net worth had increased considerably and consistently, without any down years, for more than 30 years.
+I could see very clearly that this was not due to the particular buy/sell decisions that accounted for this good fortune. It was the general decisions about asset allocation that paid off.
+Since I discovered this, I have been telling my readers about my own asset-allocation decisions every year. Not because I think my portfolio is the best possible exemplum of diversification but just to illustrate my belief that one needs to go well beyond some combination of stocks, bonds, and cash to win at the wealth-building game.
+The following will give you a bird's-eye view of what I do:
+Stocks - I have several stock portfolios: one that you might call 'legacy' stocks, one that I call 'performance' stocks, and a third group that includes what would conventionally be called 'growth' and 'speculative' stocks. The lion's share (maybe 80% to 90%) of my stock money is in the legacy stocks, a handful of big, dividend-giving companies that I'm happy to keep on a 'forever' basis. A smaller percentage is in dividend-giving companies with growth potential. And a tiny percentage are speculations - stocks I'm quite sure I'll lose all my money on, but I want to own them just for fun.
+Fixed Income - Historically, bonds make up this asset class. At one time, bonds (govt bonds) represented as much as 40% of my net worth. My strategy was always to hold until maturity and buy them in 'ladders,' replacing them when they matured. But I haven't bought them since the rates dropped below 4.5% and I have sold some I didn't like much. Today they represent about 5% of my net investable wealth. I also own an annuity and a life insurance product. These are not the typical insurance products. Most annuities and life insurance products are very expensive and very complicated. You have to be very careful with those.
+Rental Real Estate - Next to business ventures, income-producing property investments have been the largest contributor to my wealth-building success. I invest for the income and see appreciation as a bonus. As with insurance products, real estate investing can be tricky for the inexperienced investor. Most mainstream real estate advice is bad. But if you do it properly - focusing on income - this asset class will do huge work for your portfolio.
+Direct Investments in Entrepreneurial Businesses - This is, by far, the investment class that has given me the best results. If you do this right, you can expect terrific, steady income and the potential for enormous growth. The trick here is to invest only in companies you understand and have some control over.
+Chaos Hedges - This asset class is not - for me - an investment. It is, as the name implies, protection from times of turbulence - a market crash, bankruptcy, lawsuits, etc. In this class, I include gold, silver, and platinum coins (bullion and one or two 'rare' types). Gold has gone up and down since then, but at today's prices, it looks good again.
+Collectibles - This is a category of investing that you will probably not be interested in, unless you want to enrich not just your net worth but also your experience of living each and every day for the rest of your life. My preferred collectible is fine art and first-edition books, but you can invest in anything from baseball cards to vintage cars to surfboards.
+Options - Although my cardinal rule is not to invest in something I don't understand, I found a way to trade options that I understand and also believe in. Like real estate and insurance products, most options strategies are speculations. I'd advise against them. But the way I do it, selling puts on 'legacy'-type stocks, or blue chip stocks, has worked very well for me.
+Cash - I call this a 'Cash Opportunity Fund.' You keep a store of money you add to every year. That way, when the crash comes, you can use this fund to swoop in and buy a bunch of great assets at bargain prices.
+====== Estate Planning #6: Trusts  ======
+A trust is an agreement between the settlor and the trustee to transfer legal ownership of assets to the trustee who then holds it for the benefit of the beneficiaries as specified in the trust deed. A trust has has four components:
+Settlor: The author of the trust
+Trustee: Individual or entity appointed by the settlor to administer the trust
+Beneficiary: The person(s) for whose benefit the trust is created
+Trust property: Movable and immovable property, e.g. cash, jewellery, land, investment instruments, etc.
+To create a legal trust, it is necessary for the settlor to comply with four conditions:
+Make a binding and unequivocal declaration
+Outline the purpose of the trust
+Clearly specify the beneficiaries
+Transfer the identifiable property under an irrevocable arrangement to the beneficiaries
+Indian law classifies various types of trusts depending on their purpose. The two most popular are...
+Public Trust: A public trust is constituted wholly or mainly for the benefit of the public at large. These are usually religious or charitable in nature.
+Private Trust: A private trust is constituted for the benefit of one or more individuals who are, or within a given time, identified. It's governed by the Indian Trust Act, 1882, but if such a trust is created by will, it shall be subject to the provisions of the Indian Succession Act, 1925.
+Why consider a private trust? You want to...
+Ring-fence assets from any litigation and avoid the rigmarole later
+Ensure assets are used for specific purposes
+Distribute assets based on a contingent event (e.g. the beneficiaries reach a certain age)
+Ensure your children are well looked after
+Ensure prudent tax planning
+A private trust can help with effective estate planning, but the terms must be well documented so that the beneficiaries indeed benefit from what's bequeathed to them. Remember, a trust can be created during the settlor's lifetime (for the benefit of loved ones, who may or may not be dependents, and for the settlor himself as he ages), or after the settlor's death (to bequeath assets to loved ones).
+Wills vs Trusts
+With a trust, the author can avoid issues that sometimes arise with a will, such as determining the authenticity of the will, the mental soundness of the author, etc. Wills can be challenged on numerous grounds, and it can take years to get probate on a contested will and can be expensive.
+On the other hand, a trust deed is Creating a private trust resolves most of the problems and can be highly efficient never disclosed to anyone and is highly confidential and there is no need to obtain probate in the management and distribution of assets.
+Although a private trust is the best way to bequeath assets, it is ideal to have a combination of both will and trust. But it will all boil down to the individual, the extent of assets, the objectives, and the constitution of the family.
+A private trust does have limitations though...
+Cost: Stamp duties on the transfer of immovable property differ from one state to the other and can be high.
+Trustee: The success of a trust depends upon the selection of the trustees. An incompetent trustee can defeat the entire purpose of setting up the trust in the first place.
+Trust Deed: Drafting a trust deed is more difficult than writing a will. If not drafted clearly, a trust deed is difficult to execute. Also there's less flexibility to a trust.
+====== Estate Planning #7: Why a Mere Nomination Is Not Enough?  ======
+Now that we have understood the benefits of writing a Will and holding a private trust, let's address a common misconception in estate planning - nomination.
+'I have nominees on all my investments? Do I still need a Will?'
+Most individuals assume nominees to be a legal heir. Counterintuitively, that's not true. A nominee is the trustee of your assets, to whom the mutual fund company, insurance company, and so on will transfer your funds. But this does not mean that the nominee will always be the owner of your assets. The owner of your assets will be your legal heir as per your Will. Or if you have died intestate (i.e. in the absence of a Will), the transmission would be as per the country's succession laws.
+Let us understand who will be the beneficiary of the following assets:
+Financial assets
+For most financial assets (such as mutual fund investments, bank accounts, and so on), a nominee is not compulsorily or necessarily the beneficiary, but only a trustee responsible for distributing the assets to your legal heirs as per the Will or succession laws.
+However, for some financial assets such shares and debentures, the nominee can be the owner of the assets after your death and not the legal heirs. The Honourable Bombay High Court in its judgement in the 2010 Harsha Nitin Kokate case ruled that the nominee and not the legal heirs would inherit the shares.
+Later in 2015, in the Salgaonkar-Ghatalia case, judgement the aforementioned was overruled by Justice Gautam Patel of the Bombay High Court and upheld the view that rights of the heirs override those of the nominee.
+One way to address this ambiguity and avoid a messy court battle is to appoint the intended beneficiaries as nominees. It is also advisable to pen down a clear and unambiguous Will, which shall automatically supersede everything else as per the honourable court's latest judgement.
+Insurance
+Earlier, the nominee was not necessarily the beneficiary of the policy and had to distribute the insurance claims of life insurance policies to the legal heirs. However, the new Insurance Laws (Amendment) Act, 2015, has addressed this efficaciously. There is a separate category now called 'beneficial nominee'. If you nominate someone as your beneficial nominee, that person does not have to share insurance money with other legal heir. A policyholder can appoint multiple 'beneficial nominee' mentioning their share.
+It is also possible to appoint a 'collector nominee' who will simply receive money from the insurance company and facilitate the transmission to the legal heir based on succession laws.
+New rules have also made it clear that a nominee has a right to claim money even at maturity in case the insured person survived the term of insurance but died before claiming the maturity benefits. What's more, earlier, original nomination used to stand cancel on assignment of policy as collateral to a loan. However, new rules say that insurer will pay-off the creditor first, but will have to directly transfer the rest of the amount to the nominee appointed by the policyholder. The new rules have not only made nomination more effective but also made the process of nomination more meaningful.
+Property
+With property, the nominee may not be the ultimate beneficiary of the assets but may be required to pass assets to the legal heirs. Nominees who are unwilling to pass the asset(s) to the legal heirs in good faith can be taken to court. The legal heirs would then need to substantiate their claims by producing a succession certificate or a probated/registered Will.
+Hence, to transmit your assets to your loved ones smoothly, you may nominate your intended beneficiaries as nominees to avoid confusion. You can also make a Will and clearly state the name of the beneficiaries of every asset in your Will. In the absence of this, someone else might claim your assets and your family might have to go through lengthy and complex legal procedures to obtain what's rightfully theirs.
+Simply nominating a person while creating an asset does not necessarily make them the beneficiary of the asset after you are gone. Every asset is governed by different laws that could change over time. Estate planning is necessary to ensure the easy transmission of your wealth.
+Nomination versus Assignment
+With a life insurance policy, the new Insurance Laws (Amendment) Act, 2015, makes nominees - restricted to immediate family members such as spouse, parents, and children - the beneficiary so that the insurance money can go to the intended recipient. Nomination is a right given to the policyholder to appoint person(s) to receive the money after the death of the holder. One can appoint multiple individuals as nominees and specify their shares of the policy proceeds in percentage terms.
+However, for the assignment of a life insurance policy, the nomination automatically stands cancelled.
+An assignment of the policy automatically transfers the right of the policyholder (assignor) and their nominee to receive the sum assured on death of the policyholder or on maturity of the policy to the assignee. Assignment must be in writing and a notice to that effect must be given to the insurer. But the catch is that once the assignment has been done, it cannot be revoked. After assignment, the assignee will be eligible to receive the proceeds from the policy, and not the assignor, even if you survive the tenure (unlike nomination).
+The assignment of life insurance policies can also be used as collateral while taking a loan. If an insurance policy is assigned to the lending bank and the policy holder expires during the tenure, the insurance company shall pay the outstanding loan amount to the bank and the remainder (if any) will be paid to the legal heirs of the policy holder. In this case, if the holder survives the tenure, the bank will reassign the policy back to that person.
+====== Estate Planning #8: Estate Planning for HUF (Hindu Undivided Family)  ======
+When everything goes to hell, the people who stand by you without flinching - they are your family. - Jim Butcher
+India is blessed with rich tradition and a somewhat rare joint family system. We understand the importance of the joint family. It helps pass on values and culture from one generation to another. A family that lives together - grandparents, parents, uncles, aunts, and their children - share the merits of patience, discipline, and respect for elders.
+The Hindu Undivided Family (HUF) is a kind of 'joint Hindu family' that enjoys a separate tax status under the provisions of Section 2(31) of the Income-tax Act, 1961.
+The HUF is automatically constituted under the Hindu law by a Hindu male living together with his wife and children and is even extended to their wives and their children. It can be created by members of a family, wherein the members are lineal ascendants or descendants. The concept of HUF is not only applicable to Hindus, but even those professing Sikhism, Jainism, or Buddhism.
+The affairs of the HUF are managed by the senior-most member of the family, who is known as the Karta (manager) of the HUF. A typical HUF consists of a Karta, wife, his sons, grandsons, great grandsons, and daughters. The daughter(s) on marriage continue to be the coparceners in her father's HUF, but are considered to be members in the husband's HUF post-marriage. The male members are by and large called the coparceners of the HUF. A HUF can consist of just two members, one of whom is a coparcener. It may also have several branches or sub-branches. The married male members (i.e. the coparcener or the son) of the HUF having their own families will form a branch of the HUF. Likewise, when the grandsons have families, they too will be sub-branches of the HUF.
+To enjoy a proper status and rights of a HUF, one should manifest it in a particular name and get a permanent account number (PAN) and open a bank account. If you have an income-generating asset such as an ancestral property or a business that yields income for their entire family, you can easily get it recorded under the tax laws and even claim tax benefits under various sections of the Incometax Act, 1961. It is noteworthy that a HUF can also pay salaries to its members in case they are jointly managing a business, and can even provide loans to its coparceners and members for various purposes.
+Now, before we go ahead with estate planning for HUF, let's understand the rights of coparceners and members of HUF...
+Once a property is assigned to a HUF, all coparceners have an equal right to it. Even the Karta cannot transfer the property unless he gets consent from all coparceners.
+All coparceners can at any time, demand partition of an ancestral property assigned to a HUF by way of distribution of HUF property among the coparceners.
+While each coparcener would be entitled to a share of the property, the members would be entitled to receive maintenance from the HUF.
+If a coparcener decides to separate himself from the HUF, the others being his father or brothers may continue to be coparceners to the extent of their share. In case he has a family, then he will become the head of a new joint family. If he obtains any property on partition with his father and brothers, that property will become the ancestral property of his branch.
+The interest of coparcener in property on death shall transfer by testamentary or intestate succession and not by survivorship.
+The discrimination between son and daughter has been removed vide amendment to Section 6 of Hindu Succession Act 1956 w.e.f. September 9, 2005, which provides that all daughters of a coparcener who were unmarried as on the date of the amendment would be by birth regarded as coparceners in the same manner as the sons in the family. Consequently, she would have the same rights and be subject to same liabilities as the son. Hence, unmarried daughters as well as daughters married after the date of the amendment are regarded as coparceners and thus eligible to demand partition of an HUF, and receive equal share in the HUF property. It is noteworthy that this right is not extended further to next generations of such daughter. Further a woman can even claim to be the Karta of the HUF (vide a recent judgement of the Delhi High Court) if she is the eldest coparcener in the HUF.
+Properties or Assets that can be classified as the assets of a HUF are:
+Ancestral property or assets inherited from father, grandfather or great grandfather
+Any property or assets received on partition of a larger HUF of which the coparcener was a member in the past
+Property or assets acquired with the aid of joint family property
+Separate property or assets of a coparcener, blended with the family property
+Any assets or property received as a gift by the HUF from close relatives or friends
+Assets bequeathed by a Will that specifically favours the HUF
+It is noteworthy that the term 'Coparcenary Property or Joint Family Property' is wider in connotation than the term 'ancestral property'. While an 'ancestral property' is the one inherited from father, grandfather, or great grandfather, in which the share is allotted on partition; 'coparcenary property or joint family property' is acquired by the coparceners with joint efforts - so for example, father and sons would be joint family and hold coparcenary property.
+There may be an instance where a single male member in the family having no ancestral or coparcenary property, receives a gift from relatives or friends of members of family. If the single male member of such family decides to add this gifted property into joint family property, then such property would neither be ancestral nor coparcenary property but a HUF property.
+While there can be a gift or a Will for the benefit of a HUF, it is immaterial whether the giver is male or female or a member of the family or an outsider. What matters is the gifted property is for the benefit of the whole family. The Karta of the HUF can make a gift of an ancestral immoveable property within a reasonable limit keeping in view the total extant of the property. The Karta can even gift his self-acquired property to the branch HUF of his son, through a Will, which will then become the ancestral property of the son's HUF.
+What happens in case of death of the Karta?
+The Karta manages the family property, which is regarded as the joint property of all the coparceners. On the death of the Karta, his HUF can continue and the next senior-most coparcener of the family shall be the Karta. If under given circumstances, the senior-most coparcener is not in a position to discharge his obligation, then the next senior coparcener can be the Karta of HUF with the mutual consent. Hence with mutual consent, the HUF can also appoint any coparcener as the manager. The assessing income tax officer should also be intimated about the death of the Karta and the appointment of the new Karta.
+In case of death of a coparcener, his interest in the property of a Joint Hindu family shall devolve by testamentary or intestate succession, as the case may be, and not by survivorship.
+Section 6 of the Hindu Succession Act, 1956, as amended by the Hindu Succession (Amendment) Act, 2005, states that a coparcener is entitled to bequeath his share in a joint Hindu family property to any person of his choice, in any ratio, by executing a Will or intestate succession. A coparcener can bequeath only his share in the HUF property and not the entire property of the HUF.
+The share in property can be bequeathed to his son and/or to his grandsons and/or to his great grandsons or any person of his choice. In case the coparcener does not execute any Will, the property will devolve as per the rules of intestate succession applicable to Hindus under the Hindu Succession Act, 1956, as stated below:
+The daughter is allotted the same share as is allotted to a son;
+The share of the pre-deceased son or a pre-deceased daughter, as they would have got had they been alive at the time of partition, shall be allotted to the surviving child of such pre-deceased son or of such pre-deceased daughter
+The share of the pre-deceased child of a pre-deceased son or of a pre-deceased daughter, as such child would have got had he or she been alive at the time of the partition, shall be allotted to the child of such pre-deceased child of the pre-deceased son or a pre-deceased daughter, as the case may be.
+These guidelines will help you to take right decisions while transferring assets and properties of a HUF. Don't forget that the Will must be in writing, signed by the testator in the presence of two or more witnesses, who should also sign as witnesses on the Will. It is noteworthy that any part of the property can't be bequeathed to the signing witness.
+====== Estate Planning #9: Forced Heirship ======
+Let's understand the concept of forced heirship with the help of some simple snippets:
+Mr Vivek Shah (65), a Hindu, residing in Maharashtra, has decided to pen down his Will. He plans to distribute his assets between his wife, children, and 'YouWeCan' - a cancer charity in India. His children decided to challenge the Will, as they believed it's illegal for their father to bequeath his assets outside the family.
+Mr Shabbir Ahmed (60), a Muslim, residing in Hyderabad, has decided to donate 100% of his estate to 'HelpAge India' - a leading non-profit organisation caring for disadvantaged elderly senior citizens. His spouse and children were shocked and they don't believe he can do that.
+Mr Jack Pinto (75), a Christian, residing in Goa, has decided to break away from family customs and traditions and bestow his estate to his close friend Mr Jason Pinto.
+Is it mandatory for Vivek, Shabbir, and Jack to bequeath their estate to family members? Or can they give it to a charity, trust, social cause, or anyone else? Does the law allow it?
+The Indian succession system is complex, confusing, and often cumbersome. There isn't a uniform civil code applicable to the whole of India. And religion plays an important role in inheritance rights.
+Before we address the dilemmas of the Shah, Ahmed, and Pinto families, let us first understand the concept of 'forced heirship'.
+Forced heirship is a rule of law wherein an individual is not free to dictate their estate heirs. The law automatically bequeaths certain individuals a certain portion of the estate.
+These individuals are known as 'protected heirs' and typically include the surviving spouse, children, and other relatives.
+The rationale behind forced heirship is family protection. If the deceased was a primary bread-winner with dependants, the forced heirship rule does not permit an individual to Will away his estate without providing for his dependants.
+These restrictions apply irrespective of the terms of the deceased's Will, and there may be a situation where the stated wishes of the deceased may not be carried out by dissatisfied protected heirs.
+However, the forced heirship provisions typically apply only to a portion of the deceased's estate and the balance may be distributed at the discretion of the testator.
+So, how is forced heirship applied in India?
+Hindus follow the Hindu Succession Act, 1956. Muslims follow Islamic Law on Succession - Sharia Law. There is a Parsi Law, a Christian Law, and a Special Marriage Act for spouses following different religions. Regardless, all Wills, except Wills written by Muslims are governed under the Indian Succession Act, 1925, for the purpose of execution, probate, etc of Wills.
+The exception to the above rule is the state of Goa, where the Portuguese Uniform Civil Code applies, making it mandatory for all religions to follow a common law regarding marriages, divorces, and adoptions.
+So, if you are Hindu, Parsi, or Christian, and don't live in Goa, you have the freedom to Will away your estate as per your wish, even against family wishes and social customs and traditions. So the rules of forced heirship don't apply to these individuals.
+However, if you are a Muslim, the Islamic Law on Succession - Sharia Law, permits you to Will away only one-third of your property while two-thirds goes to the family, irrespective of a Will to the contrary. This restriction can be waived by all members of the family, in favour of the testator, permitting him to Will away his property as per his desire.
+So, coming back to our snippets, the Hindu Succession Act permits Mr Vivek Shah to Will away his property to anyone or any charity that he pleases. It is the executor's job to obtain the probate to avoid any complications. (A probate is obtained from a court with the necessary jurisdiction proving that it is the last and final Will of the deceased written on a particular date.)
+On the other hand, Mr Shabbir Ahmed and Mr Jack Pinto cannot give away their entire estate to charity or to a friend as the rules of forced heirship are applicable.
+How to distribute assets is a question every head of household has to answer. Succession planning is never easy. And in a country like India, where social customs and traditions prevail, discussing succession planning is even more complicated. But it is essential if you want to ensure a peaceful handover the estate.
+====== Lessons for India from Wells Fargo  ======
+Lose money for the firm and I will be understanding; lose a shred of reputation for the firm and I will be ruthless. - Warren Buffet
+Berkshire Hathaway owns almost 10% of Wells Fargo. The prominent US bank recently admitted to a massive scandal. The bank's management has made a mockery of Buffet's philosophy of corporate culture. Surprisingly, Mr Buffett has been tightlipped so far. Speaking to Fox Business a few days ago, he said, 'If I start commenting on that or anything else, it will lead down too many paths, so I will wait until November to speak about it, the election or any other subject.'
+So until then, let's try to understand the severity of the fraud, the complexity of the problem, and its consequences for American society. One of the biggest scams in the American banking system offers lessons not only for the US but by every major economy. India must refer to it as a case study.
+This Is What Happened at Wells Fargo
+Over the last six years, employees of Wells Fargo opened twenty lakh bogus accounts for their existing customers. Wells Fargo serves nearly four crore retail customers. So 5% of the bank's customers were victims of the fraud. The employees who opened sham accounts, allegedly, transferred funds from the customers' original accounts to these fake accounts without the account holders' consent. The fraudulent transaction made in the name of the customers earned real fee income for Wells Fargo. This fee income supercharged Wells Fargo's earnings and employees who committed the fraud got raises.
+As this massive scandal has come to light, the bank is facing serious charges and various authorities have already imposed a collective fine of US$185. The bank fired nearly 5,300 employees. Furthermore, approximately US$2.6 million will be paid as compensation to customers who were overcharged.
+Firing thousands of employees who had no say in the corporate decision-making process is a wishy-washy step and a rather poor response to save the image of the Bank that's already shattered into pieces.
+But The Real Story Is This...
+Unlike many other top American investment banks, Wells Fargo is still a mainly conventional bank involved in the business of lending and borrowing. Naturally, net interest income (NII) forms a large chunk of its revenue, whereas investment banks earn primarily through trading activities.
+In the aftermath of the financial crisis of 2008, the Federal Reserve slashed rates aggressively. Wells Fargo, being a major player in the mortgage market, was hit hard. It not only lost interest income, but the value of collateral came under severe pressure with the declining property prices. To compensate, Wells Fargo adopted a strategy of cross-selling products to existing customers to earn more income from fees.
+The cross-selling targets were so steep that bank employees working for US$12-15 per hour found it impossible to withstand the pressure. Many of them felt their incomes were inadequate to support their families. And as we all know, the job market was fragile and switching jobs wasn't easy at all, especially in banking.
+Wells Fargo made its employees cross-sell as many as eight products, meaning a customer who bought one product from the bank was expected to buy eight more products from the community banking division of Wells.
+The logic for setting such high sales target was rather bizarre. While addressing the shareholders of Wells Fargo & Company in the Annual Report 2010, John G Stumpf Chairman, President and Chief Executive Officer wrote: 'I'm often asked why we set a cross-sell goal of eight. The answer is, it rhymed with "great". Perhaps our new cheer should be: "Let's go again, for ten!"'
+Whether customers needed as many as ten products, Wells set the targets. Then the management pushed employees so much that they crossed every line to produce the expected results. This happened right under Mr Buffet's nose, and surprisingly he never thought to question this madness. In fact, he hiked his stake.
+The hidden motive behind promoting cross-selling was to attract the attention of the investor community. The success of the cross-selling efforts was seen as a positive development for shareholders. The stock price climbed relentlessly even when interest rates were near zero and the mortgage market was completely out of whack. John G Stumpf continued to boast. And he pretended that ethics meant everything to his bank.
+If you open the Wells Fargo vision and value statement, you will find a quote from Mr Stumpf: 'Integrity is not a commodity. It's the most rare and precious of personal attributes. It is the core of a person's - and a company's - reputation.'
+The value statement continues: 'We have to earn that trust every day by behaving ethically; rewarding open, honest, two-way communication; and holding ourselves accountable for the decisions we make and the actions we take.'
+Mr Stumpf laid the foundation to make Wells Fargo a multi-billion-dollar company. From about US$100 billion in 2009, the market cap of Wells jumped to US$300 billion in 2015, making it the most valuable bank in the world.
+Dishonesty went up along with the stock price
+Soldier
+(Source: Yahoo Finance)
+As per his own admission before the Senate, Mr Stumpf owns 65 lakh shares in Wells Fargo. In other words, when the scam was building, the Chairman and CEO of the bank was making a fortune on Wall Street. As the stock price appreciated more than US$30 between September 2011 and May 2015, his wealth grew a mammoth US$200 million. As the Chairman of the Board and CEO of the company, he was answerable only to himself. No one questioned him about his love for the 'figure 8'.
+The investment rationale John Stumpf presented to Wall Street on numerous occasions was so strong that Wells Fargo became an investor darling. And over the last six to eight years, Berkshire Hathaway consistently raised its stake.
+On the other hand, the battle to survive among employees drove many of them to addiction. But as Mr Stumpf publicly admitted, he hasn't fired anyone in the senior management. The board has so far fired only front office staff. Compliance officers, business heads, board members, and other high-level staff all have their jobs, pay packages, and incentives. They haven't returned even a penny of the personal wealth they earned while the scam brewed.
+It's striking that the authorities couldn't detect the fraud all these years. And the timing of the scandal, only a few months from the presidential elections, is also suspicious. The fine imposed on Wells Fargo may appear massive, but the fact is it's not even a percent of its market cap. Only a percent of staff lost their jobs and what's the gain?
+The stock more than doubled on the 'cross-selling story' over the last five to six years. Investors have been expecting that, as and when interest rates move up, conventional banks such as Wells Fargo that have solid customer relationships would do a lot better. It seems, in the 2010 annual address, Mr Stumpf was even hinting at making the stock ten-bagger when he said, 'Let's go again, for ten!'
+Wall Street is addicted to growth stories. And conveniently shuts its eyes to reality.
+The Wells Fargo expose has given rise to many questions that are yet to be answered. Meanwhile, Mr Buffet's million-dollar silence is palpable. How could Mr Stumpf manage to mislead the Oracle of Omaha. The story will unfold only after presidential elections.
+What Are the Lessons for India?
+Cross-selling and misselling are used interchangeably in the context of Indian banks. But either way, it isn't new to Indians. However, the regulators have started taking strong actions lately against banks violating rules. Nonetheless, there is still enormous scope for improvements in the corporate governance of Indian banks.
+The state-controlled public sector banks are on the brink of losing thousands of crores of rupees in bad assets due to mismanagement and shady loan approval processes. Many private sector banks have mastered the 'art of cross-selling' third party products.
+Compare the pay packages of relationship managers of private sector banks with the pay packages of a person with the same post in a public sector banks. One could argue the difference might be an indication of the efficiency of the private sector banks. That might be true to an extent, but do you think private sector banks can afford to pay fat salaries and incentives to their front office staff in wealth management divisions just to maintain relationships, improve customer satisfaction, and do sales practices passively? Please recall how many times your relationship manager followed up with you to invest in an 'attractive insurance-cum-investment plan'.
+On the other hand, political interference in public sector banks and the nexus of corrupt officials and corporates has been costing Indian taxpayers a great deal.
+Bulls on Dalal Street, like their 'Big Bros' on the Wall Street, always chase growth. So, amidst flat credit growth, any bank that announces superior revenue growth receives a thumbs up. Many Indian banks have openly talked about their ambition of raising 'fee' income. But banking services in India, being nascent, have not driven any bank to the extent of Wells Fargo.
+There is plenty of easy prey though. Many people in India still don't have adequate life insurance coverage, and banks make it a point to sell them any policy that earns them good commissions, whether it is suitable for the customer or not. Unfortunately, more than awareness, commission-driven misselling has been driving the growth in the insurance sector. Insurance companies controlled by banks or otherwise are now creating enormous wealth for their shareholders.
+Although insurance is the most grossly mis-sold financial product, it's not the only financial instrument out there. Mutual funds, credit cards, and other liability products too are missold. Banks aspire to report higher growth in earnings per share (EPS) year-on-year. That boosts the stock price. In the name of nurturing relationships, many banks are misusing relationships to sell more financial products and improve the balance sheet.
+It's high time for Indian banks to realise that value created for shareholders on Dalal Street would be ephemeral unless it is built on a strong foundation of customer satisfaction.
+If you invest in banking stocks, you should go beyond what the management of a bank says and try to understand how satisfied the customers are.
+To safeguard your interest as an investor and a customer of a bank, keep the following in mind:
+Unless you understand the nitty-gritty of the financial products, you shouldn't buy them.
+Ask your relationship managers relevant questions and try to read his sales pitch. You may do some product research on your own or may take expert help.
+You should take pains to check your monthly account statements. The devil always lies in the details. Your account statement reflects all charges banks collect from you by directly debiting your account.
+Monitor the performance of products you buy and also assess how the similar products available in the market are doing.
+Request all communications in writing and know your rights as a consumer of banking and financial services.
+====== Estate Planning #10: Choosing the Right Estate Planner and Passing Digital Assets Online  ======
+One of the things we often miss in succession planning is that it should be gradual and thoughtful, with lots of sharing of information and knowledge and perspective, so that it's almost a non-event when it happens. - Anne M Mulcahy
+An estate planner plays a very important role in estate planning.
+The qualities of an estate planner should not be judged in a single meeting, but spread over several initial meetings. During these meetings, you, the testator, ought to deeply engage with the estate planner, asking pertinent questions covering topics such as:
+Their area of practice
+Their experience
+Their services (e.g. Can they institute a trust?)
+Their fees (fixed or on time basis)
+The services included in the fees (e.g. Do they provide a review and maintenance service to account for any changes in law or your personal circumstances?)
+...and many more!
+You should also study any testimonials and get a sense of the service. Do research and reference checks; talk to people who've hired their services, but beware of a one size fits all approach.
+It's equally your responsibility as the testator to disclose material information to the estate attorney. If you keep secrets, your family may face problems later. You also must assess if the estate planner is keen to have you as a client. It's important that you are comfortable with your estate planner; after all, it is a long-term relationship.
+It's probably obvious by now that an estate planner carries substantial responsibilities. Here are the qualities to look for in a good estate planner...
+Righteous: An estate planner should have absolute integrity and ethics. They ought to be morally upright and never compromise safeguarding and serving the interests of their clients.
+Highly proficient: Advanced degrees in estate planning laws and practice are a must. Make sure there isn't the slightest ambiguity to the documentation.
+Personality: You will be discussing personal issues, so a pleasant personality can bring the necessary comfort factor and help you to ask sensitive questions and share details without hesitation.
+Compassionate, communicative, comprehending: A good estate planner will always give you a patient hearing. They will display sensitivity and the ability to comprehend wisely and render prudent advice. Collaboration and communication are key.
+As a testator, do not consider making a Will or instituting a Trust as an end. It is just the beginning of your long-term relationship with the estate planner. Changes to your Will or Trust will likely come up from time to time, and you may need to incorporate them. So connect with your planner from time to time and keep them abreast of developments; this will help you take timely actions.
+Passing Digital and Online Assets to Loved Ones
+The entire world has gone online.
+Today, we can bank, invest, and trade...online from anywhere in the world. We can interact with and send data to anyone anywhere. We can communicate freely through email, messengers, and internet voice calls. Blogs and videos keep us informed and entertained. Social networks provide a platform to connect and share our lives with others.
+And through it all, a lot of important private data - vital files, passwords, etc - are stored as 'online property'. Have you ever thought about what will happen to your online property after your passing?
+You've probably considered the transfer of your physical assets - your land, jewellery, home, stocks, etc. But not many think about making provisions for the transfer of online assets and accounts - your email data, photos, videos, documents, passwords, and other digital property.
+Providing for the transfer of online assets is serious. If you do not account for vital online information in your estate plan, it can be a herculean task for your loved ones to get hold of your digital property later.
+For example, you could have important files saved on a cloud server or in your email account, but it may not be accessible to your loved ones. Many online account service providers won't be able to provide access to your loved ones unless they can produce adequate evidence to prove their relation with you.
+So for a smooth transfer of online assets, follow these steps...
+Just as you nominate a beneficiary in your Will to claim funds in your bank account, nominate someone to claim your digital assets.
+If you want someone to have access to you email and other online accounts, explicitly mention that in your Will.
+Store usernames and passwords in an encoded format online. You may also write them down and store them safely in a trusted bank locker. Just beware that both storage methods are subject to theft.
+Email account providers, social networking sites, and online banking and trading services may most likely have different provisions. Contact these companies to find out how to provide access for your loved ones.
+Hire a trusted lawyer who has expertise in planning the transfer of online assets.
+====== Estate Planning #11: Conclusion - Plan Your Estate, Bring Peace to Your Loved Ones  ======
+Estate planning is an important and everlasting gift you can give your family. And setting up a smooth inheritance isn't as hard as you might think. - Anne M Mulcahy
+Indeed, irrespective of your level of wealth, effective estate planning can be an everlasting gift to your family. Today, in this last part of our series on estate planning, let's review some of the key benefits we've seen over these past weeks. Effective estate planning...
+Prevents financial and legal grief to your loved ones
+Financial and legal grief is the last thing you want to add to your family's emotional grief. With prudent estate planning, you can ensure the long-term financial interests of your loved ones while minimising the legal rigmarole.
+Avoids family conflicts
+The lack of an estate plan can lead to squabbling and bickering within the family. Furthermore, if you have young children or other heirs whom you'd rather wait for their inheritance, you may leave your assets to them under a Trust.
+Ensures assets go where and to whom you want
+Estate planning ensures that your assets - physical, financial, and online - will be transferred to the people of your choosing. However, if you die intestate, the law is not likely to take into account your personal relationships and preferences as they distribute your assets.
+Provide for a loved one with special needs
+Besides leaving behind a corpus for an individual with special needs, you can also designate their guardian.
+Pass items of sentimental value to a specific individual
+Say you are defence personnel and wish to give your war medal to your daughter who has interest in war history; this is possible through prudent estate planning. Otherwise, such items of sentimental value aren't likely to be granted to the person you'd prefer.
+Prepares for contingencies
+With systematic estate planning, you can determine who will handle all your financial affairs in case you were to become incapacitated tomorrow. Similarly, you can nominate a person to make your medical and health-related decisions. You can specify person(s) to take care of your estate and manage your finances after your death.
+Reduce inheritance tax
+Yes, this is possible...with prudent planning. For instance, instead of bequeathing assets after your death, it may be better to gift them to your loved ones while you are alive. That's because, if left to the prevailing intestacy rules, higher tax will likely be applicable to your property and other assets. You can also make separate arrangements for tax payments. For example, you can provide for tax liabilities separately from your residuary estate if you don't want to reduce the inheritance value of assets by way of taxes.
+For these reasons (and many more), you should start planning your estate now. It is never too early. Estate planning is an on-going, dynamic process. Once an estate plan is in play, you can review it from time to time to account for any changes to your finances or family. We recommend you work with a trusted lawyer to ensure a legitimate and prudent estate plan.
+====== Fixed Deposits Are Not Safe ======
+Let us share with you a startling misconception...
+Many investors 'perceive' investing in a bank fixed deposit as 100% safe!
+But in the pursuit of high returns, they depict a penchant to deploy hard earned money in a bank, whose fundamentals may be on a shaky ground.
+While some are aware that their deposits are secured under the Deposit Insurance and Credit Guarantee Corporation (DICGC), a holistic understanding of how the said scheme functions is missing...and often, investors undermine the instances of bank defaults and liquidation of banks as well.
+The intent of sharing this story, is to make you aware of the potential risks you might be exposed to.
+First, here's a backdrop...
+Over the last year and a half, banks in India have been lowering the interest rates on deposits. Lower demand from corporates for new credit has guided banks to go slow on deposit growth. Nationalised banks and large private banks, including foreign banks, have been the frontrunners in cutting deposit rates. This has led many investors, who have a dominant portion of their portfolio in fixed deposits, worried about its performance...and as result, induced them to look at other alternatives such as fixed deposits of co-operative banks who offer a higher rate of interest - which in some cases compared to a fixed deposit with a basis point depending on the term
+But unfortunately, what comes along is often ignored or undermined.
+Perhaps investors are compromising on the aspect of creditworthiness of banks...
+Have you heard of Baranagar Co-operative Bank Ltd and Shri Shivaji Sahakari Bank Ltd? RBI cancelled licenses of both these banks after repeated attempts to revive them failed. In other words, these banks hit the dead end as far as the business was concerned. While the former was a West Bengal-based bank, the latter was founded in Maharashtra. DICGC settled claims worth Rs 14.99 crore and Rs 7.27 crore respectively in case of Baranagar Co-operative Bank and Shri Shivaji Sahakari Bank in the last eight months.
+Now if you're thinking these were just one-off instances due to the poor credit situation across the economy, here's the bigger picture.
+As per the data disclosed by DICGC, it has settled claims worth Rs 2,473.55 crores over the last 10 financial years in 178 cases. This is not to say that all depositors recovered all their hard earned money. A report from The Hindu Business Line in February this year revealed even more startling facts - 69% of the total value of deposits held by investors was not covered by the insurance scheme.
+More about the deposit insurance...
+It is vital to note that DICGC protects you against any default only upto Rs 1 lakh of your deposits held across branches of a bank and in various accounts.
+In simple words, your deposits under a savings bank account, FDs, current account, etc would be pooled for the calculation of determining your exposure. The threshold of Rs 1 lakh also includes accrued interest as well.
+The process of claim settlement is complicated, but DICGC is required to settle claims within two months of the date of receipt of the application. For any discrepancy in data or deficiency in compliance, DICGC may stall processing the disputed payment until it receives clarification from the bank. For example, if the list of payers and payees contains twenty common names and bank records fail to prove their identities and residential addresses (due to discrepancies), DICGC may adjust their liabilities against claims and pay the balance unless bank shows they are different individuals providing documentary evidence.
+How can you avoid landing in trouble?
+Be very careful while trusting a cooperative bank or any bank with your money. Don't forget, banks that have undergone liquidation were mostly co-operative banks. Always open a fixed deposit with financially sound banks. Do check the health of the bank before investing your hard-earned money.
+Keep away from banks that have a clear political dominance, although they might appear sound on paper.
+If at all you find interest rates offered by co-operative banks extremely attractive and wish to take advantage of the higher rate, invest intelligently. A deposit insurance scheme recognises the different ownership patterns involving the same people. For example, you can be a first applicant and your spouse can be a second applicant for one FD receipt. You can just reverse the ownership pattern for opening another FD with the same bank. By doing this, you can get an insurance cover for upto Rs 2 lakh. More than two owners will put you in an even better position. You need to satisfy one of the two conditions mentioned in the deposit insurance scheme - in the joint accounts, the names should appear in different order or names should be different.
+PersonalFN counsels investors to be prudent and not take undue risk while parking hard-earned money in bank fixed deposits that offer a few percentage points higher than the rate of interest. This could save you some pain...and ensure your long-term financial wellbeing. Treat the compromise on the returns as the premium you pay to buy insurance for peace of mind.
+====== Debt after Death  ======
+Live within your means, never be in debt, and by husbanding your money you can always lay it out well. - Andrew Jackson.
+Have you ever wondered what will happen to your debt when you die?
+The fact is your debts do not die with you. And dealing with debt-overhang along with grief can be harrowing for your loved ones. Because, when you die, your debt becomes the responsibility of your estate.
+This means your liabilities need to be defrayed from your assets. The executor of the Will is responsible to use the assets to defray the liabilities.
+Here's how your family must deal with your various debts...
+Credit card dues - The recovery agents of credit card companies will be at your doorstep, prodding your family members to clear the dues. But note that, unlike mortgage and auto loans, credit card dues are unsecured. So the onus may not fall on your loved ones. But if it's a joint card, the other cardholder would have to pay up.
+Auto loans - Auto loans are secured, so the lender has the right to repossess the vehicle. But the lender will first assess if a family member can inherit the vehicle and repay.
+Home loans - Home loans are also secured. But before repossession, lenders may seek recourse from the joint holder and/or guarantor. But sometimes, even guarantors turn down, and so the lender has no option but to auction the property. The proceeds, to the extent of the outstanding loan, go to the lender and the gains (if any) go to your legal heir. In the case of a loss, the heir must pay the lender the shortfall, which could be very difficult for your family. That's why lenders insist home loan borrowers opt for a home loan insurance plan, which covers the outstanding liability (besides the other benefits offered).
+Education loans - If you have an outstanding education loan when you die, the co-applicant - perhaps your spouse - or the guarantor would have to shoulder the responsibility.
+Personal Loans - Like credit card dues, personal loans are unsecured. If you've taken a personal loan jointly, the lender will recover the dues from the joint holder. The high interest rates (12-24%) of personal loans can be a millstone. But if gold and/or investments and/or an insurance policy are pledged, a cheaper rate can be entreated. Personal loans are insured, as lenders insist and the premium thereto is added to the Equated Monthly Instalment (EMI). This serves as an indemnification to the lender in case of default.
+Income tax dues - The liability is abdicated...not that you shouldn't pay your taxes!
+In estate planning, it is vital to account for debt and endeavour to defray. You don't want financial and legal grief to add on to the emotional grief of your family. So here is a five-point approach to ensure that you don't leave a posthumous burden of debt...
+Live within your means - Draw a budget. Analysing your cash inflows and outflows. And ensure that you follow it diligently. Abstain from frivolous spending. Before using your credit card(s), find out how repayments are done to avoid fees. When you're borrowing, determine if it is for a larger financial goal in life - a house to live in, your children's education. But here too, stay within your limits so that EMIs don't become a burden later. A thumb rule is to ensure that the total monthly debt commitments (mortgage, credit card, car, etc) do not exceed 25% of your gross income.
+Renegotiate terms - If you're having trouble repaying your debt, renegotiate the terms of your loan or mortgages with your creditors. They may be willing to lower the rate or extend the loan repayment tenure. But you must ask them to find out. If the lender is extremely rigid and are unwilling to renegotiate, consider transferring/shifting the loan.
+Utilities windfall - If you receive a windfall income, first use it pay down debt.
+Insure optimally - A life insurance policy with an optimal cover could help your loved ones. The proceeds can be used to defray the debts. Among a host of insurance products, a pure-term insurance plan offers the best cost-to-benefit advantage. Nevertheless, select an insurance policy carefully before signing on the dotted line. And keep investment and insurance needs separate. Likewise, for medical and healthcare needs - have a health insurance policy with a sufficient coverage in place.
+Invest wisely - If you die with debt, your investments and assets can come to the rescue of your family and help defray the liabilities. So that's just one more reason to deploy your hard-earned money wisely and let it work for you and your family. It must beat inflation and generate an appealing 'real rate of return'. Don't invest randomly. Ascertain your risk profile, investment objectives, financial goals, and time horizon, and then allocate the investible surplus in different asset classes such as equity, debt, gold, real estate, etc, which add the benefits of diversification, reduce risk to the investment portfolio, and generate wealth. Moreover, adopt a research-oriented, unbiased approach.
+Remember, emotions are at bay when it comes to lending. If your financial condition is giving you sleepless nights, be courageous and put in place certain defence measures. Engage in prudent investment planning and estate planning as you pursue financial freedom for your family and loved ones.
+====== How to Deal with Windfall Income  ======
+Flipping through the documents, estimating the approximate value of his newfound wealth, Mr Fernandes, age 51, told our investment consultant, 'I have immense emotions about this windfall.' Then he asked an important question: 'How can you help me to put this wealth to productive use?'
+(Windfall income is an abundant income from unexpected events like winning a lottery, inheriting an unforeseen fortune, etc.)
+Mr Fernandes, or Willy as his beloved late auntie called him, is a humble man, emotionally and spiritually well-evolved. Prone to charity. Financially as well, God has been gracious to him.
+Many of us, if we're fortunate enough to receive a windfall income, will binge on all the goodies of life - a car, travel abroad, a dream home, and so on. But Mr Fernandes preferred to get his finances in order put this wealth to productive use. His key financial goals were to get his daughter, Chrysel, married and later live a blissful retired life with his wife, Maria.
+So here was our approach...
+Set a cool-down period
+If someone challenges the inheritance, the cool-down period would help. Fortunately for Mr Fernandes, there were no such worries. But tax needed to be looked into. Further, the cool down period allowed him to revisit goals and reconsider his estate plan.
+Boost emergency funds
+Nothing in life is permanent or guaranteed. So although Mr Fernandes was making a good income, we advised him to deploy money into liquid funds to boost his contingency reserve to at least 6-12 months of his regular monthly expenses.
+Insure
+A review of Mr Fernandes' insurance portfolio revealed that he had a sub-optimal life insurance coverage. So before addressing any of his goals, we counselled him to indemnify risk to life with due respect to 'Human Life Value'.
+Pay down debt
+Mr Fernandes had taken a home loan for a villa in Goa. The outstanding amount was substantial, a few million. Our advice was simple: Repay a portion of that debt.
+Address life goals
+Mr Fernandes had two key financial goals - his daughter's wedding and his retirement. Most of his existing investments, however, were in fixed deposits, corporate deposits, bonds, etc. These are debt instruments that do not always yield an appealing real rate of return. And they don't always beat inflation, which can erode the purchasing power of hard-earned money. To beat inflation, you must invest in wealth-creation avenues such as mutual funds and stocks. So we skewed Mr Fernandes' portfolio toward equity. That way, he could compound his wealth in time for his daughter's wedding twelve years from now and his retirement at 65.
+Avoid exuberance
+Some individuals, after a windfall, take extraordinary risk and invest all the money in risky assets. Fortunately, Mr Fernandes was wise and invested mostly in traditional products. He was conservative, but perhaps he was overlooking the fact that equity as an asset class, over the long term, can compound wealth more quickly. Taking a more risk does hold merit. Nevertheless, having recognised the advantages of investing in mutual funds, he made a structural shift to his portfolio, and today his investments are well on track to achieve his key financial goals.
+Estate planning
+Estate planning refers to passing down of assets from one generation to the next. It can prevent adding financial and legal grief to the emotional grief of your loved ones after your death. And without proper estate planning, it is possible that the law will be in charge of your estate and will distribute assets to relatives who might not be your first choice. So we counselled Mr Fernandes to write a legal Will with the help of a lawyer with expertise in estate planning.
+Spend!
+Everyone has some personal wishes. Mr Fernandes was inclined to travel to London and give to charity. So we advised 2% of his inheritance to be reserved for the vacation and left the amount for charity undefined.
+How one handles windfall income can go a long way toward a meaningful and fulfilling life. Don't allow the rush of a windfall income to triumph over the prudent approach. Be sensible, invest wisely, and ensure long-term financial wellbeing before you placate your short-term gratifications.
+====== How to Protect Yourself From the Next Worldwide Economic Collapse  ======
+Making good investment decisions is both a science and an art.
+You can, for example, track investment sectors, fund managers, and even investment advisers with precision. You can see their successes and failures. But past performance, as we all know, is no indication of what will take place in the future.
+You can calculate with reasonable precision global money flow, government and personal debt, unemployment, the gross domestic product, and so on.
+But these data won't tell you with any certainty what and when some macroeconomic event might happen.
+The problem is twofold. For one, the global economy is so damn big and complicated. Secondly, humanity's response to economic shifts is equally complex. And this is to say nothing of "black swans" - unpredictable events that cause major turmoil.
+Which is to say that, for practical purposes, seeing the future is impossible.
+Still, as lowly investors, we must try. We must make regular buy, sell, and hold decisions. And we must make general judgments about the market to assess our holdings.
+As you know, I've been in the financial publishing business for more than 35 years. In that time, I've worked with many of the best investment writers and followed their advice. I've even been able to see unpublished analytics that track their performance.
+I've concluded that most haven't a clue about the future. But there are some who are actually very good at making specific investment recommendations - for a time.
+There are also some who are good at big-picture economic analysis. By good, I mean they are able to write arguments that convince me, a skeptic.
+Of those few who are good, about half are perennial optimists. The other half, of course, are perennial pessimists.
+What I do is this...
+I read the best big-picture writers I know - not to "know" what the future holds, but to get a sense of what might happen. Then, I look to specialists for specific advice that would apply.
+Around 2004, my favorite pessimists were predicting a collapse of the real estate market, the dollar, and the stock market. They predicted a serious economic recession as a result of the insanely overvalued real estate market and the government's love affair with paper money.
+The optimists were saying not to worry.
+I found the pessimists - especially my colleague and business partner Bill Bonner - more convincing.
+So what did I do?
+I did not sell all my stocks. But I did sell off any stocks I felt might not recover from a major economic collapse.
+I did not sell all my real estate. But I sold most of the real estate that wasn't generating a rental income that would give me more than 5% returns even if rental prices dropped 25% or 30%.
+And, for the first time, I started buying gold.
+To keep things simple, I bought gold bullion coins. Over the course of two or three years, I bought gold every month until I had a tidy sum stashed away.
+By tidy sum, I mean it was enough to support my family in the event of a sustained depression. But I did not bet the farm on gold prices rising because I had no certain knowledge of whether gold prices would go up or down.
+My guess is that gold coins at that time came to represent about 5% of my wealth.
+As it turned out, the pessimists were right. The economy went south, the stock market followed it, and the price of gold soared.
+My stock portfolio went down but not terribly because I had nothing but what I call 'legacy' stocks. I owned companies, like Coca-Cola and Nestle, that I was pretty sure would do well even during a serious recession.
+I didn't sell those stocks, because I had a long-term view. Now, of course, I'm glad I didn't sell. They are all not only above their lows, but also at near-record highs.
+And although the value of my real estate holdings went down, I kept making good income from the properties I kept.
+Making these adjustments - reducing my exposure to risky assets, focusing on income, and buying gold as insurance against disaster - was about hoping for the best but preparing for the worst.
+The collapse of the real estate bubble made millions of middle-class Americans poorer and thousands of bankers, brokers, and other members of the financial-industrial complex richer.
+It amounted to a multitrillion-dollar transfer of wealth from Main Street to Wall Street.
+In a truly free market, a financial recession has a positive effect. Like a forest fire, it kills off unhealthy businesses and financial practices and replaces them with better ones.
+But most economies, including the US and Indian ones, are not a genuinely free market. They are highly manipulated by large industries and businesses that persuade local, regional, and national government officials to pass laws beneficial to them.
+On top of that, you have a political environment that compels politicians to spend money we don't have, jacking up the national debt.
+All of which is to say that, despite what you sometimes hear from the financial media and bullish investors, the economy is still very much in danger of another major financial collapse, possibly one much larger than the 'Great Recession' we've been living through since 2008.
+Shields Against Financial Disaster
+So what shall we do about it?
+Here's what I recommend:
+First...
+Make sure you have what I call a 'start over again' (SOA) fund - a store of liquid wealth that can cover the costs of starting your financial life over again if all your intangible assets (stocks, bonds, and cash held in banks) disappear.
+The amount of money you should have in an SOA fund depends on your situation. If you are an employee, make sure you have at least one year's income. If you own a business, make sure you have enough to restart it or a similar business.
+Your fund should consist of gold coins and cash stored in easy-to-access places.
+If things really do implode, you don't want to be calling a broker or banker asking them to cash in your accounts only to hear that the government has frozen such transactions.
+Second...
+If you can afford to buy real estate, do so. I've said this many times. Rental real estate is a great source of part-time income. It's easy to understand. And as long as the price is right, it can be very lucrative.
+If you can find a single-family house in the right neighbourhood at the right price, buy it. Buy as much property as you can in the same neighborhood to make management easy.
+If you can't afford the down payment, you can find partners to work with you. This is something any smart person can do. You don't need to have a lot of cash.
+Third...
+Review your stock portfolio to make sure that it is safely invested. This is not the time to be overly speculative. Try to buy only big, cash-flowing businesses sure to weather any 'black swan' event in the markets. I suggest you stick to the sorts of stocks I invest in.
+Investing this way will ensure that your equity holdings survive a large-scale financial collapse. And if there is a collapse, the decreased stock price of these companies will present a great opportunity to pick up more shares on the cheap.
+Finally...
+Consider becoming an 'international' person. By that I mean having an offshore residence, business, bank account, and passport or residency permit.
+This may seem like a very exotic option, but it's easier and cheaper than you might think. You could, for example, have all three of these things in Nicaragua or Panama for less than $150,000.
+Looking offshore gives you several benefits: a safe haven to retreat to if living in your own country becomes dangerous, ways to earn extra income with big tax advantages, and a lower cost of living.
+====== Dividends: Not Life's Greatest Joy but Great for a Worry-Free Retirement  ======
+John D. Rockefeller once said that what gave him the "greatest joy" was seeing dividends flowing into his bank accounts.
+Dividends are income - i.e., cash flow you've earned from investments.
+Rockefeller was probably the richest man that ever lived. His dividend income was enormous. Yet I hope he was exaggerating to make a point. How depressing to be filthy rich and value money as your greatest pleasure. That's a grey, lifeless limbo of existence.
+Still, I can imagine situations where income matters a lot.
+Let's say you are retired. Between your pension and your and your spouse's, you have Rs 50,000 a month. Your monthly nut is 45,000, leaving you a measly just 5,000 for emergencies or even other stuff. What if you could bring in another Rs 20 to 30,000 a month? Would that help?
+Most financial brokers and advisors focus on "rate of return" when they talk to their clients about investments. Not because they care about their clients but because they know that's what their clients want.
+They know that their best clients (usually retirees with significant stock and bond accounts) want high returns because, for them, a return of 12% rather than 4% means the difference between eating at home and dining out.
+They also know that the easiest way to sell their clients on big returns is with growth stocks (like small cap stocks), junk bonds, short selling, stock options, and other forms of speculation (yes, including bitcoins).
+They know the financial media will devote 90% of its coverage to those investments so they don't have to push too hard to get you into them. They merely have to provide you with the opportunity to chase returns and make you sign waivers (that you don't bother to read and don't take seriously) when you are investing in a way that is clearly idiotic.
+What the financial community should be doing is telling you some basic truths.
+You need to know that every asset class has its natural, historic rate of return. Trying to get much more than that is a sure way to get poorer.
+Growth stocks should have a place in your investment portfolio, as should speculative investments. But growth stocks should have a small place. And speculative investments should have a tiny place or no place at all!
+The smart move is to invest in big, proven companies that have nearly zero chance of going out of business and a long history of providing dividend income to their shareholders.
+I set up such a portfolio about five years ago. It was meant to be the sort of portfolio Warren Buffett might have established if he had been starting out (rather than as head of the huge and hugely successful Berkshire Hathaway).
+My portfolio has done pretty well, if I do say so myself. Of dozens of portfolios tracked by a service I trust, it ranks number two in that time period with an overall return of something like 58%.
+More about that another time. The main point I want to make here is that I recognize how important income is to retirees. And that's one of the reasons I believe that when you invest in anything you should invest for the income.
+Forget about huge promises for the future. Forget about the amazing contract a company just signed. Forget about how it's going to change the world. Ask to see the dividends the company's stock has produced since its inception. That is what matters most. That is what will most likely give you an income when you need it.
+====== Are You Too Old To Benefit From Compounding?  ======
+My mother-in-law - whom I officially adore - has no interest in finance. She retired about 20 years ago at age 60. When she did, she had a nest egg of about $750,000. It sat - I don't know where - for 10 years until her hairdresser gave her a suggestion.
+What was it? To put that money in the care of the hairdresser's son, "a nice young man" who had just become a broker.
+Despite my gentle warnings, she was reluctant to move it to a broker that I recommended because - I'm not making this up - she didn't want to hurt her hairdresser's feelings.
+The market went up and the market went down. After 10 years, I figured this broker must have grown my mother-in-law's account by $50,000 or so. Instead, her account had shrunk to $700,000, a loss of $50,000.
+When the broker recently moved on to another company, it gave me the opportunity I needed. I persuaded her to move her account to another broker: one I could monitor. We moved it to my own broker, who gave me a breakdown of what had been going on.
+I will spare you the details. But, as I'm sure you can guess, her portfolio was anything but good. Among other things, she was in bond funds and international stocks. She had also been sold an annuity - at nearly 80 years of age.
+If you know anything about risk, you can understand how happy I was to be able to reposition her assets.
+I had a very good idea about what I thought she should do, but I asked my broker for his thoughts. (It's always good to ask your broker questions from time to time to see where their ethical tendencies reside.)
+He, rightly, asked me first about what her needs were. I told him: "She doesn't need the income. She simply wants to be sure that her account doesn't go down in value." So he recommended putting half of her money ($350,000) in high-quality municipal bonds and the rest in high-quality stocks (like those I use in my Personal Portfolio).
+I was once again reassured of the solidity of my broker's thinking.
+The short answer for why I was happy with the municipal bonds is that they were good, safe, quality bonds paying 2-2.5% at the time.
+What I want to do now is tell you why I was happy with my broker's suggestion that we put the other half of my mother-in-law's nest egg (the other $350,000) into the stocks that will compound over time.
+YOU'RE GOING TO LIVE LONGER THAN YOU THINK
+If you are a 60-year-old female in good health, according to the American Academy of Actuaries, your life expectancy is 27 years. In other words, statistically speaking, you will live to the age of 87.
+If you are 70, your life expectancy is 20 years.
+And even if you are 80, as my mother-in-law soon will be, your life expectancy is still 13 years.
+If my mother-in-law earns 8.5% annually on her Safe stocks (which is what we're projecting), she'll turn $350,000 into $1,010,775 in the 13 years she has left.
+Now, as I said, my mother-in-law retired 20 years ago when she was 60. Consider this: What if she hadn't invested her $750,000 nest egg with her hairdresser's son? What if, instead, she had invested just $350,000 of that money in the Buffett-style stocks?
+At age 60, she'd have 27 years left to live. Her $350,000 would be worth $3,167,167 when she turned 87.
+The numbers speak for themselves. But there is another, more important reason I urged my mother-in-law to allocate part of her nest egg to what I have in my Personal Portfolio: increasing retirement income.
+Right now, she is fine with the income she gets from her pension. She's not even using the income from her nest egg. But if she wanted to, she could.
+As I write this, my stocks are yielding an average of 2.8%. So, if she were to put her entire $750,000 nest egg into these stocks, it would give her an extra $21,000 in income per year.
+All of the stocks in my Personal Portfolio increase their dividends... between 6% and 15% each year. And they've done so for decades. Assuming that, as a group, they continue to raise dividends by 8.5% annually, her annual income will grow by the same rate.
+She'd earn $22,875 in her second year, and $24,722 in her third year. In 10 years, she'd have grown the annual income from her Legacy stocks to $43,761.
+Here's one last statistic to blow your mind.
+If she didn't want the extra income, she could reinvest it to buy more shares. The stocks would continue raising dividends at an average of 8.5% per year. And their share prices would more or less follow along, increasing by an average of 8.5% each year.
+So 13 years from now (when the actuarial tables expect her to pass away), she would have grown her $750,000 into $3,791,304!
+And she could pass the stocks on to her grandchildren to continue the compounding process.
+If you think you're too old to benefit from compounding your money, think again.
+The stocks I recommend - like those in my Personal Portfolio - should be the first thing you consider as the backbone of your asset allocation plan.
+====== Foundations of Wealth #1: Net Investable Wealth ======
+Making money is not the most important thing in life. And getting rich shouldn't be your no. 1 goal.
+But whether you're a young person embarking on a career or just past middle-age and feeling unprepared for retirement, wealth building should be on your agenda. Because - like it or not - your financial situation will affect your ability to enjoy every other aspect of your life.
+The present program is based on wealth-building principles I developed and have written about for many years. But I've tailored the ideas presented here specifically to you.
+As someone just starting out on the path to becoming wealthy, you have a powerful advantage that makes it easy to get rich - even easier, the more decades you have left. And the purpose of the essays in this series is to give you a blueprint for doing it.
+If you start practicing the wealth-building skills that you will learn in this series (I'll show you how), you'll be on your way to financial independence before you know it.
+'Wealth': What Does That Mean?
+When I've asked readers to define wealth in the past, here are a few of the hundreds of answers I've received:
+Having everything you want
+Having more than you need
+A million rupees in the bank
+A million in savings
+Making several millions per year
+Living the life of a rock star.
+Even experts disagree on what it takes to be wealthy. Here are just two examples:
+To Blanche Lark Christerson, director of the Wealth Planning Group at Deutsche Bank, wealthy is a net worth of $15 million. Christerson figures that for married couples with two young kids, today's 'pricey lifestyle' costs about $375,000 a year. If you are single with no dependents, Christerson says $10 million will do. (She's assuming that you'd have 45 years ahead of you and that you'd want to preserve capital and leave it to your heirs or charities. She's calculating a conservative 3.5% return on investments.)
+To certified financial planner Jon Duncan, it's a net worth of $7.5 million. Duncan is making the same assumptions as Christerson in terms of kids and life span, but he thinks it only takes about $200,000 a year to live rich. And because the stock market has historically yielded about 10%, he's figuring on you getting a much better return on your savings.
+So, yes, wealth is a relative concept. But in order to talk about it productively, we must agree on a definition. For the purposes of this essay, then, I'm going to ask you to accept this one:
+Wealth is a store of something valuable, something you can use or enjoy later. Financial wealth, therefore, is the money you have put aside for spending in the future. I call this your 'net investable wealth.'
+Your net investable wealth (N.I.W.) is the money you have saved that doesn't need to be used for any current needs or any current debts. That is to say, your N.I.W. is the amount of money you have put aside that is free and clear for future use. (I'm going to recommend you invest a good portion of it in ways I'll explain in upcoming lessons.) If I had to put a formula to it, it would look like this:
+N.I.W. = Your Income Minus Your Expenses/Debts
+Minus the Value of Assets You Want to Hold
+Some financial experts (such as Christerson and Duncan) classify wealth as your net worth. Net worth is the total of all your financial assets (e.g., cash, house, car, jewelry, etc.) minus all your debts (e.g., mortgage, credit card debt, etc.).
+My definition - using your net investable wealth - is a little more stringent. I'm not letting you count the financial value of your house, your car, or any other key possessions that you wouldn't be willing to get rid of someday.
+The reason for this stricter definition is simple: You are always going to need a house and a car, so you can't really count them as part of your wealth. (This is an oversimplification. If you figure your wealth this way, you will be erring on the side of conservativeness. That's a good thing. It means you will always be richer than your numbers say you are.)
+The truth is: When I decided to retire for the first time at 39, I was confronted with this distinction. As I stopped bringing in active income and began spending down my wealth, I quickly realized there were many assets I would be unwilling to give up in retirement: my valuable art collection, my cars, my house, my wife's jewelry...
+Therefore, I determined to keep some assets outside of my overall financial picture.
+If you accept this definition - or even if you would rather count your wealth using the standard net worth formula - you must still recognize one important fact: You need more than a high income to be wealthy. It's amazing how many people, young and old, don't understand this. Too many folks equate making 'mucho dinero' with being rich.
+A good example: the popular HBO television show Entourage. In Entourage, the main character is a fictionalized version of Mark Wahlberg after he became famous as a Hollywood actor. Mark's character and his friends spend all their time and money buying toys and chasing girls, while their accountant sits in his office and screams at them.
+The entourage is hell-bent on spending every cent of the multimillion-dollar income their buddy is earning. And that makes them feel rich. The truth is, however, that they are just as broke as they were when they were living in Brooklyn. The only difference is that they are spending more.
+To be truly rich, you need lots of money in the bank. A big income can give you a great lifestyle. But if you're spending it as fast as you're making it, when you stop working, or when a financial emergency arises, you'll very quickly find out how un-rich you really are.
+The Sad Story of Mike Tyson: A Spending Fool
+During the 20-year span of his career, Mike Tyson's net worth exceeded $400 million. Yet in 2004, before his 39th birthday, this amazing moneymaker was $38 million in debt. He had some assets - equity in some mansions, some cars, and some jewelry - but insiders speculate that their total value was less than $3 million. For the sake of wishing him well, let's assume it was twice that much. That would put his personal net worth at minus $32 million.
+Think about that. Minus $32 million!
+With a negative net worth that large, Mike Tyson was 160,000 times poorer than the average wage earner from Sierra Leone, the poorest country in the world, with an average annual income of $200 per person.
+By every recognized standard of accounting, he was poor. Extremely poor.
+But he didn't think so. And that's part of the reason he got so poor in the first place. The faster money came in, the faster it went out. Stories about his profligacy are legendary. Tyson employed as many as 200 people, including bodyguards, chauffeurs, chefs, gardeners...
+He spent:
+Nearly $4.5 million on cars and motorcycles
+$3.4 million on clothes and jewelry
+$7.8 million on 'personal expenses'
+$140,000 on two white Bengal tigers and $125,000 per year for their trainer
+$2 million on a bathtub for his first wife, actress Robin Givens
+$410,000 on a birthday party
+$230,000 on cell phones and pagers during a three-year period from 1995-1997.
+The purpose of this is not to shake a finger at Mike Tyson, but to alert you to the dangerous temptation to spend more when you make more. As someone who grew up drinking powdered milk and wearing hand-me-downs, I understand the strength of that temptation.
+But I should also point out that, nowadays, 'Iron' Mike has come around. He's working hard, acting, making appearances, and doing what he can to salvage his life.
+I admire the new Mike Tyson - he shows you that you can recover from a terrible financial loss, even one that came from your own bad habits, simply by adopting a positive mindset and getting to work...
+If you want to become wealthy - in terms of having lots of money put away for a rainy day or money to spend after you stop working for it - you are going to have to learn how to save and invest a significant portion of your income.
+But here's the good news. This is a really good time for you to start saving money. No matter where you are in your life, it's not too late to break bad spending habits and start good saving habits. If you start now, you'll be rich before you know it.
+But let's get back to this idea of stored value, which - in financial terms - translates into savings.
+The purpose of saving money is so that if and when you stop working, you can draw on your savings to pay for your living expenses.
+But that would require you to have to 'guesstimate' how much time you have left after you retire (and before you pass). You would have to apportion it such that you spend your final pennies on your final day on this Earth... unless you wanted to leave some behind.
+Perfectly calculating how much time you have left and budgeting accordingly is absurd. That's why, for many people, the ideal situation is to have enough money saved that they can live off the interest they are making on that savings.
+Let's say, for example, your lifestyle (including paying your debts) costs you Rs 400,000 per year. You have Rs 5 million in savings generating 8% interest (or Rs 400,000 in income). In this scenario, you are financially independent.
+Another, rather crude, way of saying this is that you have 'Get Lost' money.
+Get Lost Money. Isn't that a good objective? Wouldn't you like to have the ability to not work, tell your boss off, and yet continue to pay for all your living expenses? Wouldn't it be great to spend your time focusing on the activities that give you the greatest satisfaction in life, without worrying about money?
+That's exactly what I'm going to show you how to do: Create a plan to get you from where you are today to a state of financial independence - which requires having a comfortable level of Get Lost money. (I'm assuming you are broke and saddled with debt now. If you are better off than that, my plan will work much faster for you.)
+Okay. So how do we figure out how much in savings is enough?
+The first step is to figure out how much income you think you will need to live the life you want to live...
+I'll show you how to do that in the next installment.
+====== Foundations of Wealth #2: The Important Relationship Between Income and Quality of Life ======
+Editor's Note: Welcome back to Foundations of Wealth. In the last installment, we left the discussion at the concept of 'net investable wealth.' Mark stressed that the purpose of saving money is so that if and when you stop working, you can draw on your savings to pay for your living expenses.
+Today, he goes deeper into what financial freedom means, what good saving and spending habits are, and what your goal should be to achieve your desired quality of life.
+As a young man, I never had any ambitions about making money. I knew nothing about business and didn't care to learn. My goal in life was to write a great novel, marry a beautiful woman (who liked my novel), and travel.
+Apart from finishing that novel, I got what I wanted. And along the way, I also got rich...
+It was 1983. I had just been hired as editorial director for a fledgling newsletter-publishing company in South Florida. And after turning myself into a financially invaluable employee, my yearly income grew to $100,000 per year. (That's about $250,000 in today's dollars. I explain how I did this in another Wealth Builders Club program, Intrapreneurship 101.)
+This was more money than I had ever imagined I'd make. So I wasn't quite sure how to feel about it.
+'You should feel very good,' Ron (my accountant at the time) told me. He found my innocent excitement amusing. Ron was used to working with high-income earners-most in the $1 million-plus category.
+'Welcome to the world of the rich,' he said.
+'Come on,' I said. 'A hundred grand is nothing compared to what most of your clients make.'
+'It's time you learned something about money,' he replied.
+I perked up and listened. To this day, I've never forgotten what he said: 'First of all, you have to recognize that as far as earning income is concerned, you are already in the top 5%. Second, you need to know that $100,000 is enough to live like a billionaire.'
+'How can you say that?' I asked.
+'Think of it this way,' he said. 'When you have a family income of less than $50,000, it's a struggle.'
+'Tell me about it,' I replied. 'I have been struggling ever since I graduated from college.'
+'Then, when you boost your income to between $50,000 and $100,000, you have everything you need... but you have only some of what you want.'
+Since my transition to $100,000 had been so quick, I had never had the time to experience living at the level of income 'in between.' So I asked him what he meant.
+'I mean this. You can afford a nice, modern, modest home. And you can pay your bills. You can even go out to dinner at a good restaurant once a week and spend a few weeks a year vacationing. But you can't do any of those things too elaborately, and you can't afford to buy yourself toys.'
+'Toys? Such as?'
+'Such as sports cars, boats, expensive watches, and so on.'
+'My $35 Casio watch is fine for me,' I said. 'And I get seasick. But I wouldn't mind a little red sports car.'
+'Well, guess what?' he said. 'Now you can afford that, too.'
+'Do you really think so?'
+'Sure. Buy yourself a little 5-year-old convertible for $3,500.' (Remember, this was 1983.) 'Keep it in your garage. Take it out on weekends.'
+'I'd love that.'
+'Now that you are in the $100,000 club, you can have everything you need and everything you want. You just have to be sure that you don't overspend on what you want.'
+'Like limiting the money I spend on my sports car to $3,500.'
+'Exactly. The only difference between your lifestyle and the way my wealthiest clients live - and I'm talking about guys who rake in eight-figure incomes every year - is the price of your toys. Other than that, you are living the same.'
+'That's a great thought,' I told Ron. 'Very comforting.'
+'And here's something else you need to know,' he said, as he packed up his papers and started to walk out of the room. 'You'll get just as much fun out of your $3,500 sports car as any of my other clients get from their Lamborghinis.'
+That conversation with Ron left a deep impression on me.
+It was definitely a turning point in my financial life. Were it not for the advice he gave me, I might well have gone on to do what most high-income earners do: spend my money as fast as (or even faster than) I made it.
+Overspending is a major problem for high-income earners for several reasons:
+They want to show off their income by purchasing status symbols.
+They want to reward themselves by buying expensive toys.
+They feel that as long as they can pay for what they buy, there isn't any problem. If they spend every dollar of what they make this year, there'll be plenty more dollars next year.
+The trouble with this sort of thinking is obvious: It makes it very difficult to save. And if you don't save money, you can't get richer.
+Wealth is not about how much you make. It's about how much you have to spend in the future.
+Put in financial terms: Wealth is not your income...or many of your 'things'...but your net investable wealth.
+Ron's conversation was immensely helpful to me, because he made me understand, at the beginning of my high-income-earning years, that spending extra money on ever-more-expensive toys wasn't going to gratify me. All it was going to do was put me on the same treadmill with everyone else in my category, most of whom would never end up wealthy.
+Of course, the most valuable lessons are often hard won. I wasn't always loyal to Ron's advice...
+When it reached the $250,000-350,000 range, for example, my family and I moved to a big, custom-built home in a fancy gated community, put our kids in private schools, bought ourselves luxury cars, and went to Europe or Hawaii once each year.
+I liked living that way. I was proud of what I had achieved and eager to show off my material wealth to friends and family. It was also fun to splurge on stupidly expensive things (like booking a suite in the Hotel George V in Paris, easily over $1,000 per room per night).
+But was the quality of my life better? Did the actual pleasure I got out of life increase when I was making double... quadruple... and then 60 times $100,000 per year?
+It did not.
+In fact, I liked that middle-class neighborhood much better than I liked the gated community. Our neighbors were not only more accessible but also more considerate and more authentic. (I'm still friends with many of them.)
+And what about booking that suite in Paris?
+I'm glad I did it once. But when we go to Paris now, we stay in smaller boutique hotels. They aren't cheap, but they're usually less than half the price of the George V.
+So there you have it: When my income passed $100,000, then $200,000, and then $500,000 and beyond, I was able to spend even more extravagantly. That felt good for a while. But it was mostly the ego high of finally 'arriving' - the feeling of 'Holy crap! Aren't I great?'
+But ego highs don't last. Like drugs, you need more and more to give you a lift. And ultimately, they leave you feeling empty.
+You remind yourself that the best things in life are free, but you're addicted to the high you get from spending.
+So you keep working and you keep spending.
+You're also addicted to increasing your income because you have equated income with success. You have to make more money to prove to yourself that you're better than your friends and colleagues. It's all about keeping score.
+So you keep working and you keep spending.
+Am I going to tell you to stop trying to make more money? Of course not.
+But I want to make sure you never fall into the income addiction trap.
+That's why I'm stressing this important lesson now. As you follow the steps laid out in this program and begin to earn a higher and higher income (whether by becoming an 'intrapreneur' or developing multiple income streams on the side), don't fritter it all away by being lured into buying more expensive toys.
+Master wealth builders understand this secret, which took me many years to internalize. You would do well to memorize it now:
+You have to keep your spending down while your income increases.
+Let's take another look at the levels of income that Ron identified. I've amended them and translated them into today's dollars. You will pass through them all, so you must be aware of how they can affect your lifestyle and be prepared for what's coming.
+Why Strive for Financial Freedom Anyway?
+The main purpose of this series is to help set the stage for you to achieve financial independence.
+Think about the term financial independence. What does that mean? And why should you want it? Here are some possibilities:
+You may want more freedom in your life - more choice about where you live, how you live, how much you work, and so on.
+You may want more leisure in your life. You don't want to feel compelled to work 8-12 hours every day, or five and six days every week.
+You may want more tranquility in your life - an end to the stress that lack of money sometimes causes. You want to be able to sleep easily at night and enjoy your days without worry.
+Those goals are all reasonable, laudable, and possible. And they are all attainable if you'll follow the advice in the program I'm laying out for you here.
+The Relationship Between Income and Quality of Life: How Much Money Must You Make to Enjoy a Really Good Life?
+Here are six income-levels based on a family of four. For single people, couples, and one-child families, it could be lower. And it would vary somewhat depending your location. For example, it costs a great deal more to live in Mumbai than it does in any other Indian city.
+Income Level 1: You're making less than Rs 500,000.
+For a family of four with a household income of less than Rs 5o0,000, life is tough. You are renting an average apartment or dilapidated house, driving a car that breaks down regularly, clipping grocery coupons (if not food stamps), and accumulating debt. Debt is always a huge, omnipresent problem because - for some incomprehensible reason - credit has been extended to you.
+Income Level 2: You're making Rs 500,000 - 800,000.
+You are living in a small but decent place and driving an okay car. But you are struggling to pay your bills on time. You are trying to save money, but 'emergencies' keep eating it up.
+Income Level 3: You're making Rs 800,000 - 1,200,000.
+You are living in a nice house, driving a nice car, and paying your bills on time. You want to save a decent percentage of your income, but to do that you have to forgo regular dining out and nice vacations.
+Income Level 4: You're making Rs 1,200,000 - 2,000,000.
+Things are good. Your house is not showy, but you have everything you need...and a lot of what you want. You can drive a luxury car, but you may prefer to drive something more sensible. As you move up in this income range, you can go out to dinner whenever you like and take a nice vacation every year. Debt is manageable, even minimal. You're putting money away for the kids' college education and for retirement. You expect to be able to retire at 65.
+Income Level 5: You're making Rs 2,500,000 or more.
+You've got it all: a nice house, luxury cars, dinners out, very nice vacations, and a growing savings account. In other words, a financially worry-free life. If you are smart with your spending, you can retire early.
+Income Level 6: You're making crores!
+You can pretty much buy whatever you want without worrying about the cost. You're happy and comfortable - but no happier or more comfortable than when you were making Rs 2,500,000.
+Look at the levels above - it will be apparent where you are on the totem pole.
+So how much wealth do you really need?
+Having a 'net investable wealth' about 10 times the amount you need to live on is, in my opinion, an adequate amount of wealth.
+What it means is that if you earn an average of 10% interest on your savings, you'll be able to spend what you need for your lifestyle (barring financial emergencies) and never have to dip into your financial nest egg (your savings).
+That's a good goal: to squirrel away an amount of money big enough to let you live off the interest.
+But how much do you need to save to get there?
+If you complete the steps in the next lesson, you'll have a good idea.
+====== In Conversation with Mark #1: Is It Possible to Find Your Passion and Turn It into A Business?  ======
+Dear Reader,
+In this new series called 'In Conversation With Mark', we bring to you excerpts from the James Altucher show where Mark Ford gets candid about his journey and throws light on the incidents and decisions that shaped his path to wealth.
+Since you are following Mark's life and business decisions closely, we believe you would like this series that unveils the many untold facts from the man himself.
+---------------------------------------------------------------------------------------------------------------------------------------
+James Altucher:
+So, Mark. Mark Ford, thanks so much for joining me on The James Altucher Show.
+Mark Ford:
+Thank you for inviting me, I gotta tell you, like I told you before, as far as I'm concerned, you're a celebrity, I'm a big fan of yours, and I'm thrilled to be here in Delray Beach.
+James Altucher:
+No, I think people have to know what you've done. How many businesses have you either started or been involved in?
+Mark Ford:
+I don't know, but certainly, it's in the hundreds.
+James Altucher:
+In the hundreds, okay. Okay, so the average, let's say investor, expects an 85% failure rate. What do you think your failure rate is in all these businesses?
+Mark Ford:
+You know what, it's hard to tell.
+James Altucher:
+I know that you were an investor, because you started tons of these businesses.
+Mark Ford:
+Right. There are two prongs in answering your question. One is that I'm 64 years old, so it'll all be in retrospect. And you know in retrospect the vision gets cleaned up as you go. The other's that I'm Irish. So, my feeling is that 85% of them are correct, but the truth is I have no idea. I'll say this, I'm definitely not one of these people that have failed, and failed, and failed, and then finally made it. I never wanted to be that way. I've always been extremely cautious as an investor of my time, and my resources, and my money. So, my failures -
+James Altucher:
+I like how you put that, by the way - time, resources, money - money last. Time is the most valuable.
+Mark Ford:
+Absolutely, absolutely. Though, because of that - and of course, it took long time to learn - I would say that it doesn't feel like I've had a lot of failures. But where my failures have been are generally in areas that I knew practically nothing about. For example, investing - when my career was basically the career of starting as employee and turning into an intrapreneur, and then turning into an entrepreneur. And along the way, as I was making money - I was accumulating money - I didn't know what to do with it, so I would invest it according to whatever half-baked notion passed my way. And I did a pretty good job of losing a lot of that money. And I do talk about that.
+James Altucher:
+Welcome to the club.
+Mark Ford:
+Right. But I would say that generally, I think the general idea that to make more money you have to take risk is wrong. I feel the opposite. I feel that the way to make money, to give yourself the highest percentage of chance of making money, is to avoid risky things and to do things that are more like sure bets. I guess I'm the career equivalent of the parent that says, 'Forget about being an NBA player, forget about being a rock star. You can be a doctor or a lawyer, or maybe a plumber, and just stick with that.'
+James Altucher:
+But you haven't stuck with one thing. I mean yes, you started businesses, but they've been businesses in every category. And you say, for instance, you're not good at investing, and yet you've even started businesses obviously in the publishing industry about investing.
+Mark Ford:
+Right.
+James Altucher:
+So you've been able to take this skillset of starting businesses and apply it to any area, which is opposite you know, many people are told, 'Find your passion first, and then start a business.' What do you think of that concept?
+Mark Ford:
+Well, you know, I thought both ways about it. I think it's possible to find your passion, turn it into a business, and have a happy life. But generally, I think if you turn your passion into a business, you're going to lose your passion. And so I think that there were things that we call 'vocations' and 'avocations'.
+And to me, the avocation is the thing that you love and you're going to preserve, your pristine - because the truth is, whatever we're in love with in terms of a career, we're in love with it because we know practically nothing about it. Being an astronaut, or being a doctor, or being a missionary - and when you actually end up being a missionary and you're riddled with mosquito bites and you're trying to help people, and they're ignoring you and they're just asking for more money, and you say to yourself, 'Geez I wish I'd known about this when I thought it was so wonderful.'
+So, I think that for me, there are parts of my life that I've kept as avocations - I've never wanted to make a business out of. And you know what I really did is, I accidentally got into the business I got into. I wanted to be a writer; I started off as a writer, I was working for a small newsletter publishing company in Washington, D.C. writing about Africa. Well I wanted to write about African culture, but the job turned out to be a job writing about African commerce. And I knew so little about commerce. I mean, I had a master's degree at this time. It was called African Business and Trade, and I remember thinking, 'What is the difference between business and trade? In fact, what is trade?'
+James Altucher:
+What's business?
+Mark Ford:
+I kind of knew the concept of business but, I literally didn't know what 'trade' meant. And forget about countertrade, barter, and all the other things I had to deal with. So I ended up being in that business and in three years I figured out how to become the publisher of that you know - the top guy in a very small business.
+James Altucher:
+Is that what you mean by “intrapreneur”? You used that word earlier.
+Mark Ford:
+Yes, I would say you become either the most valuable - or one of the most valuable - and you get a compensation deal where it's tied to the sales or profits that you create. But rather than being the sole boss and owning the business entirely - having that satisfaction - you attach yourself to a larger group that maybe has a lot more potential than you. And that's the way I always felt, 'cause there were so many things I didn't know how to do, like make money. And I'd rather have 10% of a big piece than 100% of a very little piece.
+James Altucher:
+I think that's an important concept that a lot of people forget. They think they're either going to be in a cubicle, or they're going to be an entrepreneur. And somehow some consider being an entrepreneur some magical thing, and being in a cubicle some hateful thing. But there's this middle place where - as you call 'intrapreneur' - where you can figure out how your success within an organization can tie itself to your success.
+Mark Ford:
+Right. And I had noticed as devout reader of your stuff that one of your most popular essays is Quit Your Job or How To Quit Your Job and Do What You Love/ But I have noticed lately that you've been mentioning that it's possible within some kind of business environment where you're not the owner to become wealthy and have a good life.
+And I think that that's true for me. If you go work for IBM or Merrill Lynch it's probably not going to happen because those companies are so big and so structured, that the way to become successful there is to just do what you're told and move through the ranks. But if you work for a smaller company like Agora - after Washington, D.C. I went down to Florida and decided whether to be a journalist.
+So I decided to take a journalist - I was looking for jobs as a journalist. I decided to take three interviews in Florida, 'cause I thought I would get a tax deduction. I was trying to be clever. And I took the three interviews assuming I'd be getting none of them, 'cause in D.C. there were no jobs at the time. And I got all three.
+I took a Dale Carnegie course and I realized that my big problem in life was that I had too many goals, you know? One, common problem is people don't have goals, and then they say, 'You don't write them down, you don't do this, you don't do that,' which I think is true for many people. But I had a lot of goals. And I was trying to follow them all at the same time.
+And I remember we came to that chapter and it said, 'If you have this problem, you're going to have trouble with this exercise.' The exercise was to eliminate the - write down your top ten, narrow it to three, and then go in. The Dale Carnegie program that I took was 14 weeks and every week you'd read a chapter and then you'd go and you'd stand in front of this audience, and you would tell them what you're gonna do - you make a little speech and if they liked you, you got a pencil. I don't know if you've ever experienced this.
+It sounds pretty corny, but this really changed my life. I got down to three - teacher, writer, and millionaire, you know, rich guy. And I could not decide. I was frantic. I was sweating driving there, my heart was pounding - because I felt that if I chose one, somehow, subconsciously I knew that it would change me, and I felt like I was giving up the others. And so as I was walking up to the podium, I had this thought, 'I need to just make the money, because if it turns out not to be what you think it is, then you just give it away.'
+I said I was gonna do that. And that changed me. I mean, overnight, it changed me. Everything got clear.
+James Altucher:
+Did you have to pick one?
+Mark Ford:
+I had to pick one.
+James Altucher:
+Okay. So you had to write down ten, you had to narrow it down to three, and then that night you had to pick one.
+Mark Ford:
+And for the rest of the course, which was another 12 weeks or so - 11 weeks - you had to focus on nothing but that in terms of your goals. Both when you went in and talked about things, and when you were in your daily work.
+James Altucher:
+So you had to kind of for the next 12 weeks or whatever, you had to kind of come up with ideas that would move you forward to being a millionaire?
+Mark Ford:
+Exactly.
+(Mark continues talking about 'intrapreneurship' in the next parts of the series, and reveals how to choose two things that you could do simultaneously. Stay tuned!)
+====== In Conversation With Mark #2: How To Get Out Of Your Cubicle ======
+Dear Reader,
+In the previous article of this series, Mark Ford explained the meaning of 'intrapreneurship' and why one should not merge your passion with business. In this part, Mark explains how you can become an 'intrapreneur', move up smartly in the organization, and grow as an individual.
+----------------------------------------------------------------------------------------------------------------------------------------
+James Altucher:
+You talk about this a lot in your books, particularly Ready, Fire, Aim, 'How can I (a) come up with the idea that will get me out of my cubicle and (b) how do I start marketing this?'
+I forget if you said it or someone else said it, but school kind of teaches you to get a job, when no one teaches you to get several multiple sources of income. And so, how can I start from step one? I'm in the cubicle, and I'm scared. I think I don't like my boss, and he's gonna fire me. I have kids to raise, and I have the alimony to pay. My mind is telling me I'm stuck. What's the first step?
+Mark Ford:
+Okay. There are two things you could do simultaneously that don't compete with each other.
+One is you have to figure out how to become the most valuable employee you possibly can be, and really the most valuable employee in your environment of your business, whatever that is - your department, your division, however far you feel you can contribute.
+The other thing is you have to decide whether your business is the business where an entrepreneur can thrive - many businesses are not. I have to say that becoming an entrepreneur will not work - as I said - if you work in a very corporate environment.
+If your business is political, it won't work. A political business is one where position and power are more important than creativity, and productivity, and profit. Profit is the purifying element of business.
+When everybody's thinking about making profit first, then politics - what you're allowed to do, what you're not allowed to do - takes second seat to coming up with good ideas. So you have to be in that environment. And if you're not in that environment, I think you have to move. You do have to quit your job.
+I always say - go work for a small business, that's growing.
+'A rising tide lifts all boats,' and we all have different capacities and our own internal boat, where boats of our brains or emotional intelligence have different sizes...but if you're in a company that itself is growing quickly, your chances of moving up the ladder are much, much greater. And your chances of getting a cross-departmental experience are much, much greater.
+I think it's very important to figure out whether your business is a business that would accept you if you were an entrepreneur that welcomes and lets people move up as fast.
+For example - if you are working for Procter & Gamble however, they're not going to change, so you have to change. You have to move, and go into a small, fast-growing business.
+But in the meantime, while you're waiting to get that better job, you should try to become the best employee you can.
+Every business has a base of three pieces. They have the sales and marketing side, they have the product production side, and then they have the management staff.
+What you need to do is understand - how does this or that work in your business? How does your business make money?
+How do products get produced, and reinvented, and reproduced? And find out where you are - you in that mechanism - are you part of that, and if you're not, can you shift over? Can you start volunteering to at least learn about those things?
+You know, it is a pretty strategic. You do have to promote yourself within a business, because if your business is at all big, there are plenty of people who want to take what you're doing, take credit for it, and put you in the closet. So, you have to know how to do that.
+James Altucher:
+That's interesting. My only real experience with big corporate America is that I worked for HBO - and you're right.
+There was a production side, they made TV shows. There was a sales and marketing side, how do we get more cus- tomers for HBO? And then there was the whole kind of accounting/IT side, it was for the management side. And I was on the management/IT side, so we were in another building, no one to talk to. And the way I would try to succeed in HBO was moving myself into the production side where I was obsessed.
+Mark Ford:
+The person that's really making the ultimate decisions about who makes money in business looks at their employees in terms of the ledger. On one side of the ledger are the expenses, and on one side are the production people who help make money.
+When you're an engineer, an IT guy, an accounting guy, even the legal guys - especially at Agora - you're on the expense side.
+Yeah. I may need them, but you're a cost. And I want to reduce that cost, and I want to increase who help make money.
+James Altucher:
+Okay so we're in the cubicle, this is a good example of him being an intrapreneur... But now, what if I also want to make that transition to entrepreneurship? Again, I'm in the cubicle and I'm scared because I've never done that before.
+Mark Ford:
+I wrote a whole book for that person called Reluctant Entrepreneur. I myself was never an entrepreneur, per se. I was an intrapreneur. I created businesses within businesses, and then while I had businesses, I was making more money than I needed, then I would invest in other businesses, and start other businesses, with my partner or other partners.
+My thing is, never leave your day job until the income from your side job is equal to your day job. Of the decisions I made after I decided to get wealthy was, I had this thought one day. I said, 'Wouldn't it be cool if every day I got just a little bit richer?'
+And that was one of the first things I said, 'I will do whatever it takes, even if it's just a nickel richer. I will get richer every day. I never want to get poorer.'
+And so I developed all these strategies, one of them was multiple incomes. You have to have multiple incomes. Another is, I kept a very minimum amount of money in volatile investments like stocks.
+My recommendation for people who want to get outside of that to their own is - to keep your day job, start by working extra hours. You do have those extra hours, and you can be better than 80% of the other employees working 25 hours smartly a week.
+====== The Time Management Bible ======
+Let's take a look back at the year so far.
+And make a promise for the future.
+Dear Reader,
+I received a heartfelt letter from one of my favourite Wealth Builders Club members, RKG. He had not written to me for some time so I was very happy to see his mail. However, I could see from his letter that he was struggling. This is what he asked of me...
+"Thanks for your relentless efforts and unperturbed way in which you carry out the task of sending us the mails twice a week. Whenever time permits I also read the Common Sense Living newsletters in addition to WBC mailers.
+Honestly, with office work and also at times personal work I am not able to find too much time for going through all the mails. I wonder what would happen to my dreams of doing something on my own. With an intent to not letting this (enrolling into WBC) become a failed attempt I had paid the annual membership renewal amount too. I hope I would be able to do better in terms of acting on the nice advices that WBC provides in the coming year.
+Anisa, I have a unique problem and I would like to ask you about it. I felt it better to ask a person who can look at it from a distance without any bias or prejudice and give me an independent view/response. So here is my problem...
+I have slowly become a slave of my bad habits especially when it comes to time management. To explain it better, let me quote a few examples. My work in IT services doesn't allow me to go home early in the evening, which eventually leads to late night dinner and late to bed. All this results in getting up late and this has become a vicious cycle.
+Throughout the day I keep thinking that I need to change my timings, go to bed early, get up early etc. but it doesn't happen. Day after day, month after month, this has been the case. However, please note that I am taking 3 meals a day with proper gaps, doing a bit of physical exercise late in the morning and getting adequate sleep. The only problem being the biological clock has shifted by nearly 2 hours when compared to others. My wife keeps asking me to join her for a morning walk and although I yearn a lot but unable to go with her.”
+- Wealth Builders Club member RKG
+RKG is asking for advice on how to manage time. He, like many of us, is struggling to live life to the fullest, to make the most of his time, to balance work, relationships, and health. To follow his dreams and follow-up on the life-changing ideas that Wealth Builders Club brings to each one of us.
+Many Wealth Builders Club members write to me about the success they are having, the new endeavours they have started, the way their financial situation and personal confidence is developing. But some of us are still struggling...
+You see, having access to a hoard of life-changing ideas makes us incredibly fortunate. But if ideas were rupees, we would all be millionaires. If ideas made us healthy, none of us would have bad backs and failing eyes. If ideas could bring success, who amongst us would be lacking?
+I'm asking you today to reflect on what you have done so far with your ideas. With all the ideas we have shared with you. Have you done all you can with your access to this amazing club of riches?
+Or have you not had the time?
+Today, I'm going to give RKG and all of you the most important thing that Mark Ford has ever shared with me. For me, it is a bible, one I refer to constantly, one that reminds me how precious my time is and what I am capable of achieving if I use it right.
+As Mark Ford puts it...
+If you can use your time more effectively than others use theirs, you will move ahead of them. It's all a matter of focusing your extra time and energy. This is a big secret, one that most people don't understand.
+Let's face it, life isn't fair. When it comes to money, beauty, intelligence, and talent, the distribution is uneven and arbitrary. But one thing we all have an equal amount of is time. We each have 24 hours a day. Even the length of life you get is not fair. But the 24 hours you have each day is the same for everyone. And what you do with those hours will determine your success and happiness.
+And to help you with your time management, with pursuing your goals, and with creating that wealth we are working to help you create everyday... I'm sending you Mark's time management guide.[report available in WBC Reports]
+Whatever stage of your wealth building journey you are in, I hope you take this chance to go back to the pledge you made when you joined us, reaffirm your pledge, and reassess your journey.

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