The Complete Guide to Managing Your Personal Finances

Personal Finance! A topic that almost everybody on the planet has to deal with yet people have a habit of making blunders about it. It mostly is a habit of ignoring the fundamentals.

Personal finance is the management of money for you as a financial entity. It deals with the money you make and the money spent on chasing your liabilities and personal expenditure. There are always ways and tools to save up on your finances through tax savings and other options.

But first, let’s get to the fundamentals:

1. Scrutinize your financial situation

Determining your worth financially is the base of your financial situation. To assess this your news to go through and add up all your assets 

  • Total the money in all your bank accounts
  • Stocks 
  • Bonds
  • Mutual Fund accounts
  • PPF contribution and payout
  •  Pension plans
  • The value of a business and real estate investment
  • Money loaned
  • Expected future income
  • The value of your personal belongings like residence, car, etc.

Petty items such as clothing and food, etc. can’t be calculated in it as they cannot be sold for cash to live on.

You will have to all your financial liabilities separately which include

  •  Personal Loan 
  • Student Loan
  • Car loan
  • Credit cards
  • Mortgage on real estate investments
  • Mortgage on a residence if the home was included in as an asset

Now you can determine your net worth by subtracting your liabilities from your assets. 

2. Determine your financial goals

These goals have many non-financial quotients like emotional, sentimental, career-oriented, wealth oriented, etc. Your financial goals can range from purchasing a house to investing in real estate to investing in stocks and bonds to starting a family to taking a holiday. Some of these are ever persistent goals like planning for your retirement. These have to be allotted even if you are focused on other goals.

A better way is to jot down all your financial goals to set out a clear plan for all your aspirations. This helps your goals be documented and provided for as they do not go amiss in your mind among the cutter.

After writing all your goals you now have to make a decision to number them in the order of priority. This will help you allocate your resources to your goals accordingly.

Tips on making financial goals:

  • Long-term goals are like getting out of debt, buying a house, retiring early, etc.
  • Short-term goals are like sticking to a budget, saving, clamping down your expenditure, etc.
  • Even the long-term and short-term goals need to be numbered according to priority separately to account for their immediateness and value.

Always remember your goals should be realistic and in accordance with your worth and earnings. 

3. Make a plan

Now that you have determined your worth and your financial goals. It would all be left with no strategy if you don’t make a plan of achieving it and sticking to it.

The plan needs to have small steps and achievable short-term goals. A step towards a goal every day will find you achieving your goals sooner than you determine. It is because you will make a habit out of not only reaching your goals but also surpassing them and nearing your other short-term goals.

A vital part of this short-term planning would be

  • Making a budget
  • A spending plan

Things to remember while creating a financial plan

  • Your budget is key to your success
  •  Regularly contribute to your long-term goals
  • Build an emergency fund. The lesser the stress the higher your success.

4. Make a budget

Making a budget is essential to making your personal financial mess and further meeting your financial goals.

It is basically a plan to track your income and your expenditure. It sounds simple but most either fail to make a budget and almost all fail to stick by it. The budget will prove to be a backbone of your finances cautioning you towards expenditure and setting you up for priorities.

5. Pay off your debt

Debt is the biggest hindrance to reaching your financial goals. Debt often comes with interest so it keeps increasing with time so it is of vital importance for you to pay off all your debts as soon as you can. There can be seldom other priorities more important than this.  

Instead of making periodic and minimum payments towards your debts, make large contributions to the biggest debt and pay it off as soon as you can and move on to the next. This will start a debt payment snowball effect. The earlier you are free, the sooner you can move full steam towards your goals.

It is also wise to not incur debt once you get out of it. Small steps towards it can be

  • Leaving your credit card at home to not incur expenses as debt
  • Saving up on an emergency fund

Tips to pay off your debt:

  • Sell unused and unwanted items to pay your debt
  • A side income or an extra job to help you meet your debt payment quicker
  • Areas where you can save money to pay debt quicker

6. Pay Taxes

Paying taxes is a vital part of managing finances. People often overlook this aspect of managing personal finances. It not only determines your financial wellness but also showcases your attitude towards being financially fit.

Paying taxes on time avoids penalties and in India, one gets benefits if it is paid earlier.

7. Invest your money

Part of managing your finances is to invest for long-term profits or generate income and compound it.

Determined by the risk appetite one has a variety of investment products like Deposits, Bonds, Mutual Funds, Stocks, Real Estate, Commodities, and Business ventures.

Risk and return often go hand in hand, but it requires the individual to assess and scrutinize the opportunity. We at SDK Investments do just that for you. 

8. Plan for your retirement 

Planning for retirement is a long term goal requiring constant assessment and allocation.

Managing your finances with the help of a budget and constant meeting your short-term goals might help you to retire early. One has to plan for all the tax benefits and senior citizens’ benefits.


Beginner’s Guide to Mutual Funds Investment

A mutual fund is owned by an Asset Management Company. Mutual Funds pools in money from various investors to form a corpus. This corpus then is managed by experts and invested in various forms of securities. It is invested in stocks, bonds, debts, other money market instruments, etc. Mutual funds are labeled according to their risk, type of investment, and goals. One has to make a decision of choosing a mutual fund that fits their risk appetite and financial objectives. Generally higher the risk higher the reward.

Your Fundamentals

1. Why are you investing in Mutual Funds?

There has to be a clear understanding of why one is investing and why it is being done through mutual funds. Often dissatisfaction arises from a flawed understanding of the financial product and the goals it may achieve in a certain time.

2. Not all mutual funds invest in stocks

Mutual Funds are of various kinds generally defined by the financial products they invest in and the risk they carry because of it. Often the return is better with higher risks and vice versa. It is a misunderstanding that mutual funds are bundled stock investments.

3. How to choose?

You have to have a clear understanding of the financial goals you choose to pursue. Before choosing a scheme based on ratings and past performances, you should make a calculated judgment of your corpus, the goals you want to achieve in what timeframe, and your risk profile. You can always find the right scheme with the right mindset and there is always a mutual fund scheme for every investor.

4. It might not be that simple

Often debt funds are used to park your funds for a few months to a few years and equity funds are used to grow your money. But in the same manner debt funds are less riskier than equity ones. All these complexities could be understood with the help of an advisor and in our case SDK investments are there to do just that. 

Types of Mutual Funds:

1. Large Cap Funds

These schemes offer modest returns but are often consistent and less risky. It is so because these schemes invest no less than 80% of their corpus in the top 100 companies. The to[p 100 are determined by their market capitalization and since they are big enterprises they are unlikely to fail and also unlikely to give growth like smaller companies. They often give consistent growth with moderate risks.

2. Multi-Cap Fund

These schemes invest in all three categories of stocks; large-cap, mid-cap, and small-cap. These invest at least 65% of their corpus in stocks. These generally have better returns than large-cap funds but have moderate risks.

3. Large & Mid Cap Fund

These funds invest 35% each in Large and Mid Cap stocks increasing their risks along with their returns.

4. Mid Cap Fund

With an investment of 65% of their total corpus in mid-cap funds, these schemes turn out to be riskier than others and are suitable for risk-taking high-profit earning investors.

5. Small Cap Fund 

These funds have a higher risk than most with 65% of their corpus in small-cap funds. But as the nature of these funds suggests these have the potential for high returns with such risks as well.

6. Dividend Yield Fund

These funds invest in stocks that give periodic dividends. These funds payout dividends periodically and are oriented towards investors who want constant periodic payouts for their investments.

7. Value Fund

These too invest in stocks with up to 65% of their corpus. In these funds, the fund manager invests in stocks that in his professional judgment are undervalued.

8. Focused Fund

These funds invest in 30 companies’ stocks of a particular segment. The segment would be mentioned (Large-cap, mid-cap, small-cap). These can give high returns but are equally risky as these stocks would be chosen by the fund manager.

9. Sectoral Fund

These funds are sector-oriented, investing at least 80% of their corpus in stocks of companies chosen from that particular segment (e.g. IT, Pharma, Infrastructure, etc.). These can have high returns if the sector does well or vice versa.

10. Equity Linked Saving Scheme

They invest 80% of their total corpus in stocks with a 3-year lock-in period. They are oriented towards tax Saving.  


Ultimate Guide to Choose the Best Health Insurance Policy

All insurances are mitigation of risk. Simply put, you put up a fraction of the sum or sums to buy a product that would financially take care of all the liabilities if you incur the unwanted event happens to occur.

Thinking or speaking about the probability of an unfortunate event is traditionally and culturally shunned in our part of the world. Even if it is so it would be foolish to not think about and especially plan for such events. Any cost that one or one’s family may incur can be taken care of by buying health insurance. 

We here intend to guide you through the process of choosing a health insurance policy

1. Comparison of policies and the coverage they provide

Since health issues arise out of the blue you cannot predict the kind of ailment you should get covered against. It is of primary importance to get a policy with maximum coverage and benefits

You should look for

  • Ambulances Charges
  • Cover for periodic health check-ups
  • ICU rent 
  • No capping on hospital room rent
  • Refill option on insured sum
  • Waiting period for pre-existing room rent
  • Pre and post-hospitalization expenses
  • No claim bonus
  • Cover for critical illnesses
  • Cover for psychiatric illnesses
  • Organ donor expenses
  • Domiciliary care
  • Zone upgrades & maternity cover (these are add-ons)
  • Home hospitalization cover
  • Day care procedures cover
  • Cover for surgeries like Bariatric Surgery

The points may be many but so will the bills you might have to face so it is vital to include these clauses. If you can’t afford a policy that includes all, most of these must be included.

2. Choose an affordable plan

A plan that you can afford has to be chosen. A plan you might not be able to sustain is as good as not having a plan. There will always be a plan with the maximum possible cover in your budget. You have to scrutinize and compare to find yourself a suitable plan with the maximum coverage you can get. All these policies are premium oriented and have to be sustained with periodic payments, those payments should be well within your budget so as not to become a financial burden for you.

3. Choose between individual or family floaters plans

  • Individual health insurance – These insurance plans have a single sum insured for an individual person. In a family, each individual can choose to have individual schemes.
  • Family Floater health insurance – These insurance plans have a single sum insured for all individuals in a family.

4. Cashless Hospital Network

You will have to check and get to know the hospitals that are in a cashless network for your scheme, the more the number of hospitals the more your probability of visiting them in case of encountering a medical problem.

These hospitals would relieve you of your immediate payment and other process-oriented burden and have a more hassle-free service. This benefit ensures your insurance policy covers the expenses incurred due to hospitalization.

5. Easy Claim Process

The claims can be pursued and settled in the following ways

  • Cashless Claims
  • Reimbursement claims
  • Pre Approved claims with Advance Cash

You need to check the process before applying for the policy. The complex claims process often lengthen the claim settlement. You need to have a policy where claim processes are easy and quick.

6. Claim settlement ratio

 Before applying for a policy you should look at the claim settlement ratio of the policy provider. 

The claim settlement ratio is the number of claims that are settled from the number of claims that were made. A high claim settlement ratio is always good for the policy buyer because it denotes that claims are settled unless it isn’t for a valid reason. 

7. Pre-existing illnesses should have a lower waiting period

If you have a pre-existing medical illness policy providers often have their own separate and varied offerings.

Most generally provide an insurance policy for a pre-existing condition as well but often stipulate a time period before claims for that illness can be made. Through this, they guard against policy being bought for the specific purpose of unloading medical expenses for the particular illness that has already come to light and is being hidden from the policy provider.

Since you are the buyer you should look for a policy that has the least denoted time before which you can make a claim for an illness that was disclosed and suffered from when you bought the policy

8. Special benefits for senior citizens

It is obvious that the body tends to fall ill more often with age. On the contrary, the ability to meet such expenses also reduces with age. 

Insurance companies often keep tailor-made schemes for senior citizens. The factors or clauses to look out for in such policies are

  • Coverage for critical illness
  • Coverage for a pre-existing illness
  • Cashless Hospitalization
  • Fast and hassle-free settlement
  • No medical test before availing of the policy
  • No room rent capping
  • Psychiatric illness cover
  • Organ donor expenses
  • Additional sum assured along with refill sum assured option

These factors should also be kept in mind when buying family floaters health insurance. There either must be an aged person or some individuals will be getting into the senior citizen age earlier.

9. Exclusions under Health Insurance Policy

These often overlooked or neglected factors while overlooking an insurance policy lead to the purchase of a policy that lacks comprehensive cover.

Most of the time insurance companies do not cover claims on illnesses like gastric, sinusitis, hernia, etc right after their commencement. While there are also policies that cover expenses incurred in the treatment of diseases like STD, HIV/AIDS, etc. The fewer the exclusion the more comprehensive a policy is supposed to be. That is why it is necessary for you to review your policy for comprehensive coverage. For an expert review of policies and purchases, you have SDK Investments. 

10. Choose a policy that does not mandate co-payment

They are policies that come with a co-payment feature that often mandates the policyholder to pay a part of the claimed amount. These amounts are generally in the range of 10%  to 15% of the claimed amount.

It is recommended to not avail of a policy that asks for co-payment but if entirely necessary to buy such a policy for other reasons. Make sure the co-payment percentage is as minimum as possible.

11. Add-on covers with health insurance

Most health insurance covers come with add-on features on payment of extra premium.

These add-ons are

  • Critical illness cover
  • Daily hospital cash cover
  • Zone upgrade cover
  • Maternity and newborn baby cover
  • Some even provide cover for alternative treatments like Ayurveda, Yoga, etc.

12. Claim tax benefits with insurance cover

Under Section 80D of the Income Tax Act, 1961 individuals and HUF can claim a deduction of up to Rs. 25,000 on the premium paid for their health insurance policies. 

An additional deduction of Rs. 25,000 is available on the premium for the insurance if the policy is for your parents below 60 years of age and Rs. 50,000 if it is for your parents above 60 years of age. 

So make sure your insurance company has the provision to provide you with the tax benefit certificate for your health insurance policy before you avail it.

13. Reviewing your insurance company’s reputation

This is basic, it means one should conduct a background check of your insurance provider. With a growing number of insurance policies with attractive schemes, one should conduct their own homework on how genuine these are.

You should look into their transparency and claims settlement ratio to get an understanding of their genuineness and transparency. In the age of social media platforms, one should read reviews, testimonials, and ratings.


9 Great Benefits of Investing in Mutual Funds

One often finds it difficult to dedicate to investments owing to their busy schedule and expertise-oriented profession. Even if they could, it isn’t certain they would be able to gain knowledge of all types of securities they would want to invest in. It further comes down to analyzing the companies the individual wants to invest in. These are best left to professionals.

Mutual Funds do just that with a fraction of the price of individual investments and analysis.

1. Investment managed by experts

Instead of being a novice or a newbie who finds it difficult to understand the complex world of finances and does not have enough time to allocate to researching stocks and other financial instruments. A mutual fund provides you with an expert who chooses certain financial products to invest in as described in the mutual fund category with an aim of a certain corpus growth with minimum risk.

2. Liquidity

Mutual Funds have the advantage of being liquid in their nature. The units of a mutual fund can be sold or exited at any point in time. However, it does carry a pre-exit penalty or an exit load if redeemed within a short period of time.

3. Diversification

It is what I consider to be the most important aspect of mutual funds. It diversifies the corpus as stipulated by the category of a fund by the expert who is a fund manager. Diversification considerably lowers your risk during volatility since not all stocks start declining in tandem and vice versa.

4. The flexibility of corpus to be invested

Apart from a minimum stipulated amount that ranges from 1000 to 10000 rupees, mutual funds are an accessible financial product in terms of investment. SIP (systematic investment plans) can be started with a meager sum of 500 rupees. 

5. Accessibility

Mutual Fund schemes are founded by an Asset Management Company and offered to investors through

  •  Brokerage Firms
  • Registrar’s like Karvy and CAMS
  • AMC’s themselves
  •  Online Mutual Fund Investment platform
  • Agents and banks

 These channels and intermediaries are accessible to all and make investments in mutual  fund available to anyone who is interested.

6. There are schemes for all aspirations

Mutual Funds are defined by categories or types which have defined investment into certain kinds of securities. These generally vary in terms of risk and return. A conservative investor might choose a lower risk and return investment whereas an aggressive one might choose a higher growth and return investment.

7. Transparency

 SEBI regulates all AMCs thus regulating Mutual Funds. SEBI guidelines specifically ask to color-code each mutual fund scheme. These color codes denote the level of risk of each mutual fund.

  • Blue indicates lower risk
  • Yellow indicates medium risk
  • Brown indicates high risk

Investors can also verify the details of the fund manager and his experience with solvency to Assets Under Management.

8. Tax Saver 

Mutual Funds are taxed on the nature of the investment and the tenure of the investment.

ELSS (Equity Linked Saving Scheme) are mutual funds that have a tax exemption of 1.5 lakhs per year under section 80C. This particular category of mutual fund has a better tax-saving capacity than NPS, PPF, and tax-saving FDs. Else are also known as tax-saving mutual funds.

9. Lowers the cost of investment

There are numerous investors in a mutual fund, this collection of corpus and further investment into securities spreads out the cost of investment among all investors thus lowering the cost of individual investors if they would choose to do it all by themselves.