Savings Advice

[theKnown]

Hi,

I am planing to start investing and saving monthly/quaterly/yearly.

i fall under the 20% bracket of Income tax, and am thinking of bifurcating my investment plan in the below mentioned order:
-60/70k for traditional life insurance- from long term savings point of view
need suggestions on policies, money back retirement and brand.
-5-10K for health insurance
-50/60K for high risk investments- short term savings

** all the figures mentioned are yearly.

please suggest what sort of plans i can look into, the categories can be changed if needed be.

inclusion of SIP or PPF or mutual funds can be done too.

thanks in advance

[disneysteve]

I am planing to start investing and saving monthly/quaterly/yearly.


-60/70k for traditional life insurance- from long term savings point of view
need suggestions on policies, money back retirement and brand.
-5-10K for health insurance
-50/60K for high risk investments- short term savings

I'm a little confused what it is you are asking about. You say you want to start investing but then go on to talk about life insurance and health insurance, neither of which has anything at all to do with saving or investing. And what do you mean by "high risk investments - short term savings".

Regarding life insurance, the first question is do you need it? Is anyone financially dependent on you? If so, you want to get the cheapest term policy you can through a source like accuquote.

What about health insurance? Is it offered through your employer?

Tell us more about your income, family situation, current savings, debts, etc. and we can give more advice about what to do with savings going forward.

[theKnown]

I'm a little confused what it is you are asking about. You say you want to start investing but then go on to talk about life insurance and health insurance, neither of which has anything at all to do with saving or investing. And what do you mean by "high risk investments - short term savings".

Regarding life insurance, the first question is do you need it? Is anyone financially dependent on you? If so, you want to get the cheapest term policy you can through a source like accuquote.

What about health insurance? Is it offered through your employer?

Tell us more about your income, family situation, current savings, debts, etc. and we can give more advice about what to do with savings going forward.

Hi Steve,

this is also from tax savings perspective, hence the life insurance. and yes my mother is a dependent.
I'll also be getting the sum insured post the insurance maturity.

Regarding health insurance i do have one with my employer, however its not much and would like to increase it.

The short term savings i meant investing in ULIPs, mutual funds, SIP etc. Apologies i am naive when it comes to these term.

[disneysteve]

this is also from tax savings perspective, hence the life insurance. and yes my mother is a dependent.

Ignore any propaganda about using whole life insurance for tax savings or investing purposes. I'm guessing you've already had some type of encounter with an insurance salesperson who put these insane thoughts into your head. Just forget everything they told you. It isn't true.

You have someone who is dependent on you. Fine. Go to accuquote.com, punch in your info, and get yourself the cheapest term plan that comes up for the amount you feel you need. A general rule of thumb is 8-10 times your income but you need to tweak that based on your situation and what you need the insurance proceeds to pay for after you die.

I'll also be getting the sum insured post the insurance maturity.

I have no idea what this statement means.

Regarding health insurance i do have one with my employer, however its not much and would like to increase it.

You could look into buying your own insurance but it will most likely be prohibitively expensive. Does you employer only offer one option or is there a plan with better coverage available?

The short term savings i meant investing in ULIPs, mutual funds, SIP etc. Apologies i am naive when it comes to these term.

Forget absolutely anything that involves insurance products as investments. INSURANCE IS NOT AN INVESTMENT! If you need insurance, buy insurance. If you need investments, get investments. Never, under any circumstances, try to combine the two. You will lose money 100% of the time.

[snafu]

Known, welcome to SA. I hope you'll take Dr. Steve's advice and drop whoever is trying to sell you insurance for a commission for their personal benefit. If your mother depends on your income, you need the cheapest term insurance you can find.
1st, does your employer offer any type of retirement program; is there any employer contribution? That is free money that is important to your long term plan. It also helps reduce your income tax.

2nd, it is imperative to start any saving/investing with an Emergency Fund. This sum is not for fun, entertainment or vacation. It is a sum that will pay for basic expenses if things go off the rails. Start with saving $ 1,000. in a savings account that links with your regular account and easily accessed. Over time add bit by bit each and every pay until it can pay your most basic costs for 3 months if you lost employment or became ill for example.

3rd. If you are just starting out, I suggest creating a simple budget for yourself. The economists say... Pay Yourself First. Take 20% off the top of take-home to savings to build up a sum needed to make investments and grow your money. Keep it simple, add up your basic monthly expenses like rent, utilities [heat/electric/internet], transportation, food, term life, vehicle, & medical insurance etc and hold it to no more than 50% of net pay. That leave 30% for discretionary spending for clothes, entertainment, electronics...whatever you like to spend. When sums are gone, spending halts until replenished by next pay.

Meanwhile, you might want to read one of the easy read books that will help you with an investment plan like The Millionaire Next Door [Danko] or Wealthy Barber which are available free from your library. Just now we're finding banks are adding fees for services which had been part of their service plan. How much are you paying in bank fees each month? Multiplied by 12 can be substantial.

[feh]

Ignore any propaganda about using whole life insurance for tax savings or investing purposes. I'm guessing you've already had some type of encounter with an insurance salesperson who put these insane thoughts into your head. Just forget everything they told you. It isn't true.

+1

OP - first, make sure your personal finances are in order. Click on the link in my signature for help in that area.

Second, educate yourself about investing. This is a great place to start: http://www.bogleheads.org/wiki/Bogle...g_start-up_kit

[indianguy80]

hi Known,
This may be a bit generic, and I am not very experienced, but one thing I have noticed is that it is never a good idea to combine two things into one when it comes to money. E.g. insurance + investment or banking + investing etc etc. The issue I found is, when you add more things into one, everyone takes a cut and your money suffers.

It is always a good idea to pick an investment vehicle for investment, insurance vehicle for insurance, a bank for your regular daily banking stuff.

I am very happy to see that you are thinking about this and not playing by ear when the time comes.

Thanks,

Krishna.

[ACarboni]

Forget absolutely anything that involves insurance products as investments. INSURANCE IS NOT AN INVESTMENT! If you need insurance, buy insurance. If you need investments, get investments. Never, under any circumstances, try to combine the two. You will lose money 100% of the time.

I totally agree with this point that insurance and investments are two different things. If you actually want to invest on something then stock market can be a option but they are less attractive and can't match the high rates of ROI acheived by the owner of granny flats built on their property.