Cheap Broadband with Landline

MTNL is offering one of the Cheapest (Low cost) broadband plans with a landline at Rs.398/- per month in Delhi with 25 Gb Fair Usage Limit at 2Mbps (up to 8Mbps), Unlimited Local calls to any network. This is way better than MTNL's normal lowest 699 plan and Airtel's 899 plan. This offer is available permanently now.

Airtel has a low cost broadband Rs.599/- Retention plan which allows 50 Gb of data at 8Mbps after which speed drops to 1Mbps. This also has unlimited calls to any network like in the 899 plan. Call Airtel Customer care to switch to this plan to save on your monthly bill. It is NOT mentioned on their website nor do they advertise this.


 

If you are young and started earning money then its time to start doing some basic financial planning and start saving money. Here are some tips on basic and simple financial planning in India which will help you build wealth and be financially secure.

Invest in Equity Linked Savings Scheme (ELSS) - Mutual Funds

Find out which ELSS mutual funds are giving good returns and invest money that you have in them. This is a better option that PPF account given below as the returns are much better (at least 10-15%), withdrawal is possible earlier than PPF and they are all tax free. Money is locked in for a minimum of three years. Here are some sample funds and the returns they have been giving over last few years. Check these two articles to get a better perspective: Equity Linked Savings Schemes and Performance Tracker - ELSS

Name of Fund Over 5yr Term
Axis Long Term Equity Fund 22.70%
IDFC Tax Advantage (ELSS) Fund - Direct (G) 22.70%
ABSL Tax Relief 96-Direct 23.00%
ABSL Tax Plan-Direct (G) 22.40%
DSP BR Tax Saver Fund - Direct (G) 20.70%
Principal Tax Savings 20.50%
L&T Tax Advantage -Direct (G) 19.90%
Franklin (I) Tax Shield -Direct (G) 19.50%

The above figures could be varying but will give you a good idea of the kind of returns MFs give.

Open a PPF Account

Whatever be your status or source of income for that matter the first and foremost step you should take to start the saving habit is to open a Public Provident Fund (PPF) account. It is better to keep your money in PPF than in a savings account so if you have surplus money then put it in PPF. Even though the money is locked up for minimum six years, its worth keeping your money in PPF. People who are aged below 60 should seriously look at this as the first option because of the following reasons:

  • You get a high rate of interest, i.e. 8.1% (was 8.7% earlier, keeps changing for each year). Kindly check the current rate from bank or post office.
  • The interest is tax free (which is a rare benefit not to be ignored) as that makes the yield go above 10%.

Mini FAQ

  • Minimum deposit is Rs.500/- per year and maximum Rs.150,000/-.
  • Date on which interest is calculated is 5th of every month so the money in your account on this date is the amount on which interest is payed by the bank.
  • We suggest you deposit your payment on 1st April of each year to earn handsome interest whole year around.

Please do not confuse the PPF account with Provident Fund (PF) account you have as an employee. Both are completely unrelated. Whether you are an employee or self employed you can open a PPF account in most of the public sector banks and many private banks. ICICI bank has an option for Online PPF account. PPF account is one of the best saving option today. They are of 10 year or 15 year duration. You can extend the duration by 5 years when you are reaching a 10/15/20 year limit or withdraw all the money and start another account.

Withdrawal: There is an option to withdraw money after the 6th year which is equal to 50% of the amount you had in your PPF account at the end of 4th year preceding the year of withdrawal.

References:
Public Provident Fund (India)
Public Provident Fund (PPF) – Investment Limit, Income tax benefit

Invest in Mutual Funds

Find out which mutual funds are giving good returns and invest some surplus money that you have in them. If you invest in them on monthly basis (which is called "Systematic Investment Plan" - SIP) that is a very good option. It rationalizes your investment because when the value of fund is down you purchase some funds and even when it is high you purchase, you don't have to worry if you purchased at the right time. Every MF has a Net Asset Value (NAV) declared for each day - this is the value of each of your share for that day. There are multiple factors which contribute to the NAV for each fund each day. These values are valid till trading time, typically 3/3.30pm. If you purchase or sell any MFs before this time then the NAV for that day is used to calculate the value of fund traded else the next day's NAV is used.

You can also participate in New Fund Offers (NFOs) for mutual funds if you do some homework and find how the fund will be invested, who will be the fund manager and is it likely to rise in future. Investing in NFOs can sometimes give you better return but is risky, it could result in loss also. The better option is to check which funds are doing well and giving a good & consistent result and invest some money in them.

Buy a High Value Insurance - Term or Conventional

If you are young you MUST take a high value Term Insurance with return of premium or without it. The earlier in your life you buy Term Insurance, the more it will benefit and lesser will be the premium for all future years. E.g. A term insurance for Rs.1 crore at the age of 25 years is about Rs.8,000/- while if you do it at a age of 40 it will be above Rs.12-15,000/- and above 45 years it gets still higher to a figure like Rs.20-25,000/-. So its a very good idea to purchase a high value insurance as early as possible in your life. The high value will ensure that your family is well taken care of. Buying a conventional or return of premium insurance is beneficial as you will get back your money with some interest. Remember, in Term insurance there is no return of premiums you have deposited and no interest is payable.

Purchase Health Insurance

Health costs are rising in India so its imperative that you take a health insurance for yourself and your family. This will save you in times of trouble. This is worth the investment as cost of critical illnesses is very high and without health insurance it might be impossible for any individual with average income to afford it. We strongly suggest you take health insurance for everybody in family including the elderly. If you work with the central government then subscribe to Central Government Health Scheme (CGHS) scheme to keep yourself covered even after retirement.

Keep your money in Fixed Deposits linked to your Savings / Current Bank Account

Whatever excess money you have lying in your savings bank account must be used to create Fixed Deposits (FDs), even if it is for short duration. If you have money in your Savings or Current account lying idle then create FDs and link them to your savings or current account. Most of the banks provide a facility of linking FDs to your account (also called Sweep-in facility) so that whenever you issue a cheque the money not available in your Savings or Current account is then withdrawn from your latest FD. This helps you earn high interest on your idle money. Many banks like Yes Bank, Kotak Mahindra Bank and IndusInd Bank offer high interest on your Savings account if the amount in your account is above a minimum threshold, like 1 Lac. If that is the case then you already earn high interest even if the money in not placed in FDs. Most banks having internet banking facility allow you to create FDs online and link them to your Savings or Current account. We suggest you link all your FDs to your base account.

Invest in Tax Free Bonds

Keep your long term savings in Tax Free bonds which give anywhere from 7% to 9% interest rates. This is a very good option for long term investment of savings you have. This is a good, risk free and safe option for high earning individuals or people with excess money. Instead of keeping your money in FDs and paying TDS or tax this will help your money grow without any tax incumbrance.

 

Read our follow up article for specific tips to plan your finance: Good Financial Planning Part II

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