Declutter What you need to do for everything, including finance.

Leonardo da Vinci once said that “simplicity is the ultimate sophistication.” This quote still stands very true for everyone today and for everything, be it mind or heart, relationships, home, work or money. One of the best ways to achieve simplicity is to declutter. In this article, we will attempt to make a case for decluttering and how to do it.

Why declutter matters?

We live in a world of many. Today getting anything is very easy, just a click away. There are many distractions, updates, communications, events happening at virtually every second. The world today is smaller and we find a lot of things happening around us. Often we find our head spinning with so many choices around us. Here are the obvious benefits we will enjoy once we walk on the path to decluttering.

Saves time
by removing time we spend on unnecessary things
Make better choices
by removing unnecessary things /details
Helps prioritise
from among many things
Bring focus
on things which are really needed
Aids memory
by reducing the things we need to remember
Being consistent
by simplifying things
Get peace
by removing complexities
How to declutter and achieve simplicity?

Simplicity is something that many of us desire but many do not know how to do so. Here are the important steps to do so.

Target
The first step is to decide what to declutter? Since almost everything around us may be decluttered, deciding where to start is an important step. Chose an area or subject which you feel requires urgent attention and has been draining you out mentally or physically. This could be your finances, relationships or even your kitchen or wardrobe.
Learn
The first step is to learn how clutter and lack of simplicity are impacting your time, productivity, money, etc in your chosen area. Have a closer look at everything going in there. In case you are looking at your finances, just observe how many financial transactions, holdings, investments, accounts, advisors and such other complexities are there. Are they too many? Understand what and how you have been at a disadvantage due to this.
Prioritise
The next step is to prioritise. What is the most important? What is the one thing you can and cannot live without? Organising into important and not important is an important step and you really would need to be strict here. Keep doing this till the time you feel you have a shortlist of the most important things that matter.
Reduce
Once you have prioritised, the most critical action now is to remove the things you do not need or do not really carry any real value for you. In finances, one could do this by consolidating your investments, closing unused accounts, closing policies that do not serve the real purpose of protection, moving portfolio with only one advisor, reducing debt, and so on. One has to be very ruthless here to remove things that do not matter.
Add
It would be rare that you would need anything to be added to your chosen target area of decluttering. However, it is possible and perhaps even a good time to add the most important things which you have been missing out since long. In finance, a comprehensive financial plan could be the one thing you are likely to be missing out.
In short,
here is what we have done
subtract the obvious and add the meaningful. That is what declutter and simplicity is really about. Remember that you have succeeded in life when all you really want is only what you really need.
Simplicity in finance
Simplicity in finance
The major reason for mistakes, frequent churning and bad product choices is often exaggerated expectations. We need to have sound, grounded and long-term reasonable expectations and hold on to same at all times.
Most of us would likely have many insurance policies, bank FDs, small saving schemes and even mutual funds and equities. Time to have a strategy and remove the products that do not add real value.
One needs to prioritise one's goals. Often the random, small goals are given priority at the cost and compromise of long term big goals. This has to stop.
Frequent changing of your plans has many costs attached to it. Have a comprehensive financial plan and stick to it. Disciplined savings over the long term is the ideal and easiest way to create wealth. Start a SIP, keep growing your SIP and forget about it.
Financial mistakes in life have the potential to destroy all the good work done over many years. Better to be safe than sorry. Avoid running after hot ideas or stock tips or get rich quick schemes.
Socrates once said,
The secret of happiness, you see, is not found in seeking more, but in developing the capacity to enjoy less.” If we all live to this principle in our lives, I am sure that our lives will be much happier, peaceful, rewarding and healthy. Let us commit ourselves to simplicity in all aspects of our lives and declutter thing which weighs us down, physically, mentally, emotionally and financially.
NJ-EWealth A/c Opening
Excuses to avoid making investments are common
Excuses to avoid making investments are common
“He that is good for making excuses is seldom good for anything else.” - Benjamin Franklin The present crisis has made many realise the importance of savings. However, many of us find ourselves short of adequate emergency savings. Many of us may have gone through pay cuts and even job losses. However, there are also many others who are now spending much less and have in fact more savings on hand. Now is the time to divert all your resources to your financial well-being. Still, there would be those having reasons avoid investing, in spite of having the potential. This article talks about the excuses these individuals put forward to avoid investing. In the past, we have found these excuses to be less convincing and/or something which can be overcome with strong intent.

This is the most common reason quoted by people. Let us dissect the truth behind it.

When we say we don't have enough money do we have an amount in mind? Most people do not think of what amount they can invest and hope that they will start saving once they have enough. However, this is futile exercise and quite often it only delays your savings till you regret it. To be honest, there is no minimum amount for saving and you can even start by saving Rs.500 per month if the intent is really there.

Those who find it difficult to save would be better off having a closer look at where the money is being spent. It can be quite surprising how much you could save if you would only be paying attention. Petty expenses on dining out, movies, ordering food, impulsive shopping online, etc can go a long way when diverted to investments. Only the right intent is needed.
Intent or rather the lack of it as we now see is perhaps the true reason you have the excuse of not having money. Surely, those who despise saving and believe in only living to the fullest in life openly declare their lack of intent. It may suit you if you have enough wealth to retire and take care of your family. But what if not? Surely, there has to be a balance and a good reason and space for the intent to save.
If you have the genuine intent and still do not have adequate money to save, there is a severe problem. You need to consult a financial advisor to really understand your financial situation and guide you further.

This can be a genuine excuse which is not impossible to handle. Let us see what we can do if you find it really hard to save because of huge debt.

The first thing you need is a better understanding of your situation – how much you are earning, how much you own and owe, what is the cost of servicing each loan and so on. Perhaps the plans can unravel ways through which 8you can still manage to save a bit by cutting corners in other areas.

It is also advisable if we can dilute some of our assets and pay off expensive loans and find space to divert the EMIs saved towards real savings and wealth creation.

When you think things have reached a point of no return and it is impossible to manage your affairs, there is still a way out. We would suggest you restructure your loans, leverage your good credit rating to negotiate with the lenders. Perhaps there may be a way out still, if you really wish to pursue it.

Call it procrastination, laziness or just simple lack of interest. Lack of time is a common excuse. Let us unmask the truth behind this. Why this may not be true?

Gone are the days of physical transactions. Now everything is digital and so is the first step is to open an online account. Thankfully, the account opening process is entirely online. You may chose the right financial advisor, distributor, broker and open the account online yourself.

Often we hate to do the paper work for transactions. We also hate depending on our advisor /distributor to bring in the papers and submit them to the operational offices. Good news is that transactions in most financial products, especially mutual funds, can be today done completely online, any time any where.

If you think you need too much time to plan for your finances and these things bore you, well you are mistaken. There are many user friendly tools available today which can help you plan for your financial goals. This can be an option for you if you do not wish to talk to your advisor. Explore these tools which hardly take few minutes and you will know how much SIP or lump sum you need to save to fulfil your financial goals in life.

Some may find the investment topic boring. Finding and approaching a good advisor can make a huge difference in such a situation. However we do not recommend you start online investments all by yourself unless you have a good amount of experience and knowledge to handle things.

These are just three of the most common excuses for not saving. There could be many more and you may even have a hundred excuses, however, there is only one reason to save – financial well-being. If you have the foresight and the common sense but lack bank balance to retire, savings is the way forward, without excuse. You would do well to remember a famous quote from Florence Nightingale - “I attribute my success to this – I never gave or took an excuse.” Happy saving and investing.
How much Life insurance cover do you need?

2020 is the year we have realised the importance of having adequate insurance covers to protect families against any financial shocks. Amidst the fears of coronavirus and living for weeks under closed walls, we have realised how uncertain and vulnerable our lives are. We have realised that our we and our families deserve financial security in life. Most of us are today thinking of having adequate life insurance. Life insurance is nothing but a provision for providing for the financial future of your family in such a way that your absence does little or no financial harm to your family. The very critical element of this provision is the extent /cover of it. It should be adequate enough to provide for your family in your absence.

One cannot pinpoint the exact amount of life insurance one needs. But there are many methods of arriving at a sound estimate for your coverage requirement. In general, you can find the ideal life insurance amount by calculating your long-term financial obligations or goals and then subtracting your existing assets. The gap between the two would be your need. It is however not easy to calculate the same. Here are a few thumb rules and methods which you can explore while calculating the same.

One objective for life insurance is to replace income. Under this very simple method, we would just multiply the income of the person with the number of years of active employment left. For example, for a person aged 40, having a monthly net income Rs.100,000 and a retirement age of 60, there would be 20 years of active service left. One can now simply multiply Rs.12 lakhs yearly x 20 times. This will give you a life insurance need of Rs.2.4 crores, a fair indication of what we should ideally have.

Of course, there are some key parameters ignored here like the yearly growth in the income, inflation, your present expenses and the likely return on the investment of the corpus, etc. We could calculate those things but that would be just a numerical exercise. The understanding of the underlying concept is more important.
Under this method, it is assumed that the policy proceeds will be invested and the income/withdrawals from this investment should be sufficient to finance your expenses over the foreseeable future. Note that in the previous method we will be considering the entire net income and here we are only considering a part of it which goes towards financing household expenses.

Let us see this with an example. Your monthly expenses are said Rs.50,000 amounting to Rs.6,00,000 yearly. With a withdrawal rate of say 4%, the corpus needed would be Rs.1.50 crore (Rs.6,00,000 divided by 4% or 0.04). The 4% is a very popular rule, based on some studies indicating a long-term sustainable withdrawal rate to calculate retirement kitty need. We borrow the idea here. To be on a safer side, a lower withdrawal rate of 3% would give us a higher amount of Rs.2 crore (6 lakh / 0.03).

The assumption is that the investment corpus would continue to grow to match growing expenses with inflation. Theoretically, in the absence of any huge expenses, this amount should be sufficient to finance your expenses. Again there are limitations in this method and one may fine-tune this further and use the results with care.
This is a more detailed method of calculating the life insurance need. Here we consider all important elements like the earning years remaining, the present net income, the estimated income rise, the present liabilities, the household expenses and the major financial goals the person is expected to achieve during this lifetime. We present the method here in a simple way for awareness purpose only.

Step 1: Calculate the present value of net income: In this step, the present value of all future net cash flows is arrived at.

Step 2: Add present values of all future life goals: In this step, the present value of all future goals like child education, purchase of a home, marriage for child, retirement for spouse, etc., is considered.

Step 3:Add all the existing loans /liabilities (less) assets: Next, we add all existing outstanding loans and liabilities. This would include all home /car loans, credit card bills, personal loans, etc.

Step 4:Finally, the figure above will be reduced to the extent of any existing 'disposable or liquid' assets that you have.

The above steps should give you a fairly accurate amount of life insurance needed.

There is no perfect way to calculate the value of a person. We do not wish to do that as a human being can never be replaced. The absence of a person, however, does not take away the fact that life has to go on; the survival and fulfilment of the dreams of those left behind are what matters now. The aim of any method is simply to gauge the figure which can make sure that the lives of our loved ones are not compromised due to paucity of finances.

As already discussed, there are many ways and variations in methods of calculating the life insurance need. No one can claim that one method is perfect. The decision rests on us to chose and modify any particular method to suit our needs and requirements. We would strongly suggest that one approaches a qualified insurance advisor or a financial planner to help you make the calculations and arrive at the right figure. We also hope that you assess your present life insurance cover in the context of this article, take adequate life cover as soon as possible and enjoy peace of mind.

FUND MANAGER INTERVIEWS
Partner Image
Mr. Vinit Sambre Head – Equities DSP Mutual Fund
Vinit Sambre has been managing the DSP Small Cap Fund since June 2010. He is also the Fund Manager for the DSP Mid Cap Fund. Vinit specializes in the small and mid cap space and has over 16 years of relevant work experience.
Vinit joined DSPIM in July 2007, as Portfolio Analyst for the firm's Portfolio Management Services (PMS) division, which manages discretionary accounts and provides advisory services to institutional clients. As a research analyst, his focus was on sectors like Pharmaceuticals, Power Utilities, Chemicals, Fertilizers and Textiles.

Previously, he was with DSP Merrill Lynch as a part of its Global Private Client business. He spent 20 months at DSP Merrill Lynch as Equity Strategist. Prior to DSP Merrill Lynch, he was employed with IL&FS Investsmart Limited as an Equity Analyst in their PMS division. He has also worked with UTI Investment Advisory Services as Equity Analyst for the offshore fund – India Growth Fund. Vinit is a Chartered Accountant from Institute of Chartered Accountant of India.
Answer :The fund management team is fully functional and all members are operating from home. Our research function is connecting very efficiently with the company management, industry experts, economists, bureaucracy other channel partners through video or audio calls and the team is up-to-date on recent happenings. We have been following an “internal day” concept since last 10 years every week on Wednesdays, where the whole team sits together to discuss and debate new ideas, strategy, portfolios etc. I must say that we have continued with that process even during the lock-down and are having these sessions online. So it has been quite seamless transition for the team and we are not facing any big challenge per se.
Answer : We believe Banking is currently on a weaker footing due to rising risk of defaults and liquidity challenge faced by NBFCs. Some worthy financial institution would clearly emerge stronger over long term but we see most of them going through bit of a challenging phase in the near term. Beyond banking, we believe consumer oriented segments like hospitality, travel, multiplexes, retail etc. are likely to see pain for some time due to social distancing requirement. High ticket consumer discretionary spends related sectors like realty etc are also likely to see delayed recovery. On the positive side, we believe the sectors which are in the nature of essential category like pharmaceuticals, FMCG (health & hygiene and other essential products), Insurance, etc are relatively well placed in the current environment. As economy starts opening up we see quicker recovery in automobile as demand for personal mobility would go up and cement as need to spend on infrastructure rises to reinvigorate the economic cycle.
Answer : There is worry and concern most customers are demonstrating. This is expected behavior in such times. Partners and clients are getting used to the new norm of functioning. Some disturbances due to these changes is to be expected. Also wherever there is loss of income or salary cuts etc likely to see readjustment in monthly saving pattern. This may impact the SIP numbers. It is too early to take a guess on the actual impact right now.
Answer :Frankly the correction was too swift to carry out big changes in the portfolios. However, over last few days, in many schemes we have raised cash levels with a view to deploy through market weakness. We have also used this downfall to switch out or reduce exposure from weaker businesses and consolidated position in stronger ones. As a fund house we had decent positioning in Pharmaceutical sector which has held us well in this fall.
Answer : Yes, we would agree that it is indeed a golden opportunity to attract foreign capital in a meaningful way and attempt to become global manufacturer. However, if we are able to address some issues around ease of doing business, simplify labour laws, address red-tapism, provide long term regulatory pathway and reduce government intervention, our ability could increase multi-fold to attract foreign capital.
Answer : We expect the current year to remain subdued due to various iterations we will be required to do before we fully normalise as an economy. The risk of virus spreading will mean suboptimal level of economic activity for most part of the year. Besides the job losses and wage cuts would take longer for demand momentum to come back. Much of the economic pain would reflect in stock prices leading to heightened volatility during the year. Investors who wants to enter the market now need to set their expectations right. Investment made in tough phases rewards well over long term hence investor will need to have 3-5 yrs time horizon before entering the market.

Disclaimer : “Mutual Fund investments are subject to market risks, read all scheme related documents carefully.”

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"We have taken due care and caution in compilation of this E Newsletter. The information has been obtained from various reliable sources. However it does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions of the results obtained from the use of such information. Investors should seek proper financial advise regarding the appropriateness of investing in any of the schemes stated, discussed or recommended in this newsletter and should realise that the statements regarding future prospects may or may not realise. Mutual fund investments are subject to market risks. Please read the offer document carefully before investing. Past performance is for indicative purpose only and is not necessarily a guide to the future performance."

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