Health and Financial lessons from COVID (8)
Good morning to everyone. After finishing three important types of investments, we are going to see other two investment options. One investment, even financial experts can't say good or bad is Gold. Another one was darling investment for every one, but now nose Divided , that is real estate.Though there is overall growth in all hemispheres in our country, financial literacy rate in India is only 30%. Many of the common investors know only about two options, Gold and bank fixed deposit and buying a house is a life time achievement for many. Let us see about Gold.
• Dollar appreciates
• Depreciation of Indian rupee.
• Global political turmoil, COVID like situation.
• When share market is down, people start investing in gold as a hedge against inflation.
Returns: It is highly volatile. Most of the time it is in single digit. Many times it's increase is not real , but only due to Rupee depreciation and dollar appreciation.
How much you can invest? : 5% is ideal and at the most not more than 10% of your investment. How to invest?
1. Ornamental Gold : This is only for cosmetic purpose and not as investment. This is the only investment where you lose 25% of your money on day 1 of your investment as wastage & making charge.
2. Gold bar : keep it in mind safety aspect. Here also you have to pay GST of 3%. Not good investment
3. Paper Gold: This is good , and no fear of theft as gold is only in paper. Liquidity is also good. Here there are 3 options.
• Gold ETF: This is exchange traded fund and can be bought through demat account and can be liquidated at any time. Eg. Nippon india Gold BeEs.
• Sovereign Gold bond: This is issued by the government through banks with a lock in period of 8 years. It has got 2 advantage 1. 2.5% interest per year. 2. At the end of the period capital gains is tax free.
• Digital Gold: Gold is bought thru digital platform. We can buy for a amount as little as Rs10. Gold will be in the account for 5 years and after that it will be liquidated. You can get gold or money. Paytm, Phonepe, MobiKwik, Google play offer such digital platform.
Now let us move on to final investment option, Real Estate.
Real Estate: For many years it was most sought out investment option. After Demonetization, GST introduction and stringent income tax rules, it has lost its sheen. Now except in few places like Noida, Chennai, price are standstill or depreciating.
• Commercial space
Plot: if you can choose good upcoming areas in your city and buy at a cheaper rate, then it's good. Flat:
• Buying a flat for self occupation is fine.
• Think twice or thrice before buying the second flat but decide not to buy.
• Your flat value will start coming down after 15 years and drastically after 25 years. As age of flat advances there will be lot of structural problems. Maintenance will be more than the rent.
• Buying a flat with loan, may lead you to loss only. For example one buy a 1300 sq.feet flat for 90 lakhs. at the age of 35 with a loan of 60 lakhs for 20 years loan tenure. Look at the cost of investment.
EMI paid : 1. 5 crores Cost of our fund at 8% compound Interest. : 1.4 crore
Total cost paid in 20 years is 2.9 cr.
Surely we can't get this amount by selling a 20 years old house.
Commercial complex: it is good, but you need a god father to protect your interest.
REIT: Real Estate investment trust is approved by RBI and SEBI. Like paper gold it is paper Real Estate. One unit of investment may be 1 lakh or more. When you buy it, money will be invested in office space, commercial complex, malls . You will get profit when they are sold after capital applications. This is popular all over the world.
After creating adequate wealth for the past 8 days, now we are moving in to a most important but neglected area, that is "Wealth Protection " . See you tomorrow
Health and Financial lessons from COVID (9)
Good morning to all. I am watching a sparrow for over a month now. Post COVID, sitting idle in the home, I have become a Multi faceted person doing bird watching, gardening, cooking and what not. Like COVID this sparrow also taught me few financial lessons.
Sparrow came regularly in to the veranda, sitting here and there. This was going on for 2 days. Like a structural engineer it was surveying the location. After that it started to bring small sticks, straw and started to build a nest , protected from all harms. Building a nest is wealth creation and protecting it from all harmful effects is wealth protection.
• Protection against financial emergencies.
• Life dangers
• Health protection
• Protection against natural calamities.
Protection against financial emergencies: Not able to go to work due to health problems, loosing job ( IT), COVID lockdown are certain things which can happen at any time in life.
Solution: you must keep money equivalent to 6 months expense in Liquid fund ( it is a mutual fund giving 5 to 6% returns and can be liquidated with in 24 hrs). There are Apps like ICICI PRUDENTIAL Liquid fund which can be connected to our S/B account. Surplus money can be transferred to Liquid fund and vice versa with in few minutes.
Diversification: Warren Buffett's famous words " Don't put all your eggs in one basket ". Don't put all your money in one investment, you may lose it. Diversify your investment in all categories. Loss in one category will be nullified by the profit in other category.
Life dangers: There are always uncertainties in life. Life insurance is one area where our knowledge is grossly inadequate and we are totally mislead by the agents. Few things we have to understand about insurance.
• Insurance is not investment, it is social security.
• All policies like Endowment, money back are all not at all good. Even if you mind about the returns, it is only around 5%.
• Term insurance policy is the best one, even if you don't get anything on Maturity. Insured amount should be 10 times of our annual income + our liabilities. For this amount it is not humanly possible to pay premium under Endowment policy. Term policy premium is low.
• If you are having debts or likely to have debts, take policy under Married women property act ( MWPA). This policy cannot be attached for debts of the policy holder.
• Unit linked insurance policy ( ULIP) is not good as the insurance cover is very low. Only advantage is while redemption, we need not pay LTCG.
Health protection : Health insurance is a must for anyone as soon as he started earning. First start as a individual policy and later add your spouse and children and make it as family Floater. Minimum amount should be for 10 lakhs. You can later add on critical care benefits, accident benefits as add on. Senior Citizens can also take health insurance.
Protection against natural calamities: our properties should be protected against theft, natural calamities like Tsunami, floods, fire, structural collapse of the building by suitable insurance. Similarly professional indemnity insurance is also a must to save from professional litigation.
Health and Financial lessons from covid (10)
Reorganizing your loan: Whatever name you can give, Debt is always a debt with a power to destroy a person's life like Liquor.i fear for covid not for its morbidity or mortality but for the financial havoc it is going to cause in many families by way of debts taken for a very high interest rate. Going to bed without any debt is the greatest sleeping pill. EMI and credit cards had introduced a culture where you can't live without any Debt. Before going into reorganizing the loan, first let us see what all the purpose for which we take loans.
• Housing loan
• Car loan
• Consumer goods
• Unpaid credit card loan.
Housing loan: owning a house is prestigious but make sure housing loan EMI doesn't make a house poor. Housing loan EMI is always a Damocles sword hanging over the head. When you take loan ,consider the following things
• Total EMI of all loans should not exceed 50% of carry home pay. Of this housing loan EMI should not exceed 40%.
• Though EMI will be less for long duration loan, choose short duration loan to reduce the interest outgo. For example if you take a loan at 9.75% interest for 1crore, how much you are going to repay.
10 yrs duration: 1.57 crores
25 yrs duration 2.70 crores.
• Never use borrowed money for investment.
• Loan is a liability, it should be covered with insurance.
• Choose a loan provider who offers lower interest rate. Even a 1% difference will have greater impact.
Reorganizing the Loan:
• For a loan of 20 yrs duration, if you increase your EMI by 5% every year, your loan will end in 12 years.
• If you increase your EMI by 10% every year. Loan will end in 9 years.
• If you want to switch over your loan, interest rate difference should atleast by 2%, between two loan providers.
• If you want to foreclose your loan, do it in the early part where your EMI will be more of interest and less of principle. Later part EMI will be more of principle than interest.
• If at any time you feel paying EMI is compromising your life, don't hesitate to sell one house or the only house. After all living happily is more important than living in our dream house.
Car Loan: i have seen many people going for car loan even if they have adequate money in fixed deposit earning 2 to 3% less interest than the loan interest. They put forth an argument that Interest is eligible for tax exemption. Let us see some facts.
• Interest exemption is only when car is used for business purposes and not for salaried people.
• You take a car loan at 10% and you are in 30% income tax slab. Income tax exemption will bring down the cost of loan to 7%. Even then it is more than FD interest.
• Taking a car loan for a car of 10 lakhs and paying 13.5 lakhs in a 5 years loan tenure is not a wise decision. It is a depreciating asset. At the end of 5 years car value will be 5 lakhs.
• If at all you go for car loan, follow 20*8*4 rule. 20% of the car value as down payment, loan interest should not be more than 8% and loan tenure not more than 4 years.
Tomorrow we will mop up the loans and go for creating financially viable clinics. Dr.S.Thirumalai kolundu
Health and Financial lessons from COVID (11)
Good morning to you all. Yesterday many persons have communicated to me that housing loan and car loan details are very useful. "Risk comes from not knowing what you are doing" this is punch dialogue from Warren Buffett.
Credit cards are very notorious, because they will make you to spend with out the feeling of spending. I have seen people spending unnecessarily with credit cards, buying things which are not at all needed. Credit card companies want you to default, then only they can charge you with enormous interest. With credit card payments, there are only 3 options
1. Pay fully by due date.
2. Pay a part, remaining part will be charged with high interest on daily basis. Very bad option.
3. Convert the payment due in to EMI, interest rate will be 12 to 24%.
Loan on consumer goods: we buy consumer goods like smartphones, TV. Laptop, washing machine through EMI. It is very painful to see , money given to self help groups to improve their earning potential, are used to buy consumer goods.
• Buying a smart phone by paying 5000 and remaining amount in 6 installments of EMI is not a good move. Paying 5000 more for a smartphone, in which you are not going to use 80% of its features is not a smart move.
• If you buy things with cash, you can bargain.
• Be careful with interest free EMI, there may be hidden cost.
Let us avoid unnecessary expenses, unnecessary loans and lead a peaceful. Content life.
Early part of life, spend judiciously, avoid luxury which you can indulge when there is surplus money
Young people if you want to buy a car as soon as entering in to a job, buy a small size car. Postpone the purchase of a home until you are financially stable. Until then you can invest in a good mutual fund. Heavy EMI will take away all the pleasures of life.
Young girls also learn to lead a simplistic way of life. Younger part of life is a period when one can be emotionally very happy. Your tender shoulders don't deserve to be burdened with EMi.
How to set up a financially robust clinic of 2020: you may wonder, what is the need to talk about this subject. I have started my practice on the new year day of 1980 at Thanjavur. Started my Paediatric practice at Palayamkottai, Tirunelveli in 1987.
At that time, there were only 15 doctors in my place, now the number has increased to 150. In my entire career of 40 years, I have not bothered about anything but a consultation room and steth. But for covid ,I was over working all through this long span of 40 years. Things have changed now which are having lot of say on our practice. Let us see what are all the things which have changed
• Government hospitals have become well equipped and more modern with more doctors and staff. Most of our vaccine practice has been taken over by the Government Hospitals.
• More & More specialists are coming out every year. Small place of Tirunelveli produces 20 MD Paediatrics every year.
• Lot of rules and regulations by the government for clinics. Now they should be modern and well equipped.
• Minimum wage revision, which increase the expense many fold.
• Patients have become high tech with online appointment booking, card payment, Google coaching, online consultation, extended home service.
• Years back, people use to touch our feet for curing the patient, much to our discomfort as they will be older than us. Today you need minimum two bouncers to practice safely.
In this background, we have reorient and reorganize our clinics to become financially robust at the same time providing quality care.
We will set up such a beautiful clinic tomorrow. Dr.S.Thirumalai kolundu .
Health and Financial lessons from covid (12)
Financially Robust clinic: As I had written yesterday, increasing regulations, changing life style of patients make the functioning of small clinics , small and medium sized hospitals very difficult. I have got an inherent
fear , like US , a time may come where corporates only will dominate. We need to do something urgently to revamp our clinics. After all it is survival of the fittest. Today we are going to see how to make our clinic financially robust.
Out Patients Vs Inpatients: slowly outpatient income is increasing when compared to IP income increase due to following reasons.
• Patient preference.
• Clinical and advanced technology.
• Minimal invasive procedure.
• Advanced Anesthesia techniques.