Creating an emergency fund is hard but it is just the beginning. It is as, if not more, important to protect and maintain this fund so that it is there when you need it

Creating an emergency fund has been accepted as one of the primary goal to save for, irrespective of your age and stage in life. Such a fund provides the cushion a household needs to protect itself from loss or reduction in income or an unplanned large expense that can derail its financial security. But building the emergency fund is not an end. The fund must be continuously maintained and managed. There are three aspects to managing an emergency fund: determine the conditions under which the fund will be used, hold the fund in a way that it is accessible when these situations arise, and restock the fund every time you have had to draw on it.



Ring fence the emergency fund
Imagine that your emergency fund is sitting with your other savings when you need money for daily expenses, that vacation you so wanted, or the investment opportunity that you don’t want to miss. In such situations, your discipline and will power may not be enough to keep your emergency fund safe. A more workable plan would be to cocoon this money from your other needs and desires. If you hold your emergency fund in the same bank account or investments where you hold your money for other expenses, you may start seeing it as available money. Instead, hold this fund in a separate bank account and investments.

When to use emergency fund
Ideally, a situation should tick three boxes for you to justify dipping into this fund: 
—it should be unexpected, 
—it should be a need and not a want or desire,
—it should be unplanned, urgent and something that cannot be postponed.
These would be situations like losing your job, a medical emergency, travel to take care of urgent family matters.
Have a framework that helps you determine which expenses warrant the use of your emergency fund. This will keep the fund safe for situations that have the potential to upset your financial life.

Use and replenish
Use the emergency fund only when the situation merits drawing from it. You can use the free credit period on credit cards to tide over the delay in redeeming your emergency investments, which may take a bit more time to realize. Make sure you pay off the credit card debt as soon as the investment funds come through, so that there is no interest cost. Once used, you must replenish it so that you are ready to meet the next emergency. The steps are like creating a fund for the first time.

Save on an emergency footing
Reassess the fund requirement before you set your saving targets. A change in your situation may increase, or even decrease, how much you need to keep in an emergency fund. For example, if your household has gone from a double income to single income, then you may have to consider increasing your emergency fund, and vice versa. Or, when your income and savings ratio have stabilized and show a rising trend, then you may be justified in reducing the amount held for emergencies. Set a time frame within which you must build it back and do it on an emergency footing.

You may need a special budget to find the savings to restock your emergency fund. Call this the temporary emergency budget because it is going to be a tight one, which must allow you to replenish the fund as quickly as possible. Trim expenses to essentials for this period. Challenge all the fixed expenses and see where you can find savings. The allocation you may have made for recreational and personal needs, may have to be sacrificed to find the savings. Apart from curtailing expenses, you should also look for ways to expand the income to increase savings. A second job or income in the household will go a long way to quickly rebuild the fund. Once your task of replenishing is over, you can slowly reintroduce the spending that you had cut out and eliminate the second income if earning it is burdensome.

Any bonus, refunds, or other money received should be used to top-up the emergency reserve. Funds received on redemption or maturity of investments may also be used, though diverting these funds may mean that the goal for which that investment was originally earmarked will be delayed or under-funded unless you catch up on the savings goal.

Refilling the emergency fund takes precedence over most of the other goals that you may be saving for, except perhaps the retirement goal. The periodic savings that are being made should be first assigned to the emergency fund till it is stocked-up. If you have money saved for goals that can be postponed, say a holiday or the down payment of a second home, the funds for it could be diverted to the emergency fund.

Anticipate and overfill
One way to replenishing the emergency fund faster would be to assume that the money will be used up and overfill it with your savings. Given that liquidity, and not return, is the priority for investment avenues in which emergency funds are held, holding more than required in such investments will be under-utilizing your money. One way to pad your emergency fund without compromising on returns is to hold the extra savings in investments with a medium-term horizon, which earn better returns. These investments should not be considered part of the emergency fund and should not be assigned to any other goals either. They should be held to replenish the emergency fund when required. It may take some time to redeem these investments, but you know that they are there, and you can adjust your emergency saving targets accordingly.

To begin with, the financial steps you must take to rebuild the fund may seem hard. But they would give you the comfort of having a cushion in an emergency; and this will be the motivation to stay the tough course to create the buffer again.

Source:livemint.com

The only way to go about insuring oneself is to calculate how much cover you need and then find a good policy that covers you for that amount

When faced with the prospect of figuring out how much insurance to buy, most people pluck a figure out of the air--something that just seems adequate. The only reasonable way of making this decision is to unemotionally create a financial plan that your family should follow if you die suddenly. Families also must consider the impact of both parents passing away in an accident. The impact of such a tragedy could be greater than just the sum of two deaths occurring separately.

Here are some heads to consider:

Time left to retirement: Before buying any insurance plan, an individual must assess time left to retire and a sufficient sum assured. Time remaining to retire here does not necessarily mean retirement from your job, it means the period till your family members will depend on you for their financial needs. Once you know the number of years for which you must stand as the financial support, look out for policies that offer the matching policy term and maturity age. For instance, if you are supposed to retire after 20 years, make sure that you take a minimum policy term of 20 years. It is fundamentally important to be insured at least till you pass on the baton to another family member.

Loans and debts: As far as possible, take debtors' insurance so that your debts can be paid off straightaway. If you have a housing loan, the lender has probably made sure that you already have such insurance for that loan. Other loans need to be considered. While you can add these to your insurance, taking a policy where the insurance company will directly pay off lenders has the advantage that your survivors will not be tempted to carry the loans. Do not waste money in insuring unsecured personal debt like that for credit card. The card issuer cannot make your family pay so there's no need to cover that, unlike say, vehicle loans where you wouldn't want the family car to be possessed by the lender.

Future Expenses: The hardest part of providing for future expenses is estimating and allowing for inflation. Take a reasonable, at least 7 per cent, inflation rate into account.

Education: Insurance companies are designing policies that will ensure that your children's education is paid for.

Living Expenses: Estimate what living expenses are going to be and estimate the investment needed to yield that much return. Make a realistic financial plan and not an idealized one. Perhaps your spouse will need to start working if she doesn't do so now. Consider the investment needed if she would start a small business. When it comes to 'how much sum assured' it is better to avoid thumb rules, as the amount to be called an adequate sum would differ for everyone. The best person to decide on the amount will be the one to be insured. Sum assured should be purely based on current lifestyle, annual family income, annual expenses, current investments (if any) and liabilities like home loan or education loan overhead. The final value after considering these figures will be the Life value of prospective insured. Most insurance companies provide a 'Human Life Value' calculator on their website to ease the task of calculations. Do not forget to consider inflation as the purchasing worth of Rs 100 today, will erode with time. It is very important to find out an apt cover because, as buying a lower sum assured may not be able to take care of financial needs of your family in adverse situation. Most insurance products come with a minimum and/ or maximum sum assured under their products. It is important to check if sum assured on offer matches your requirement.

Source:valueresearchonline.com

A notice from the Income Tax department brings about lots of stress. But it does not always have to mean bad tidings. Sometimes, it could be informing you about some tax refunds too! 

The important thing to remember is to understand the reason for receiving the notice and replying to it timely and correctly!  Also, the IT department is currently busy tightening its noose around the black money hoarders. Therefore, a lot of taxpayers are going to be receiving these notices soon. 

How will you Receive the Notice from the Income Tax Department?

  • The intimation from the I-T department would be sent on the email id provided during the e-filing of Income Tax Returns. 
  • If CPC is processing the returns, the sender’s email id would be: intimations@cpc.gov[dot]in. 
  • The Notice would arrive by Post to the address as per PAN details. 
Verify the address associated with the PAN number by:
  • Visiting the e-filing ITR site
  • Logging in with your PAN number as the User ID and a secure password
  • Filling in your date of birth details and verifying the captcha
  • Under ‘Profile Settings’ you can then opt for the ‘PAN details’ from the dropdown menu and confirm


Income Tax Notices are Sent Under which sections
Five different types of Notices are send under different sections of the I-T Act of 1961. 



What Response should you Give When You Receive an Intimation from the I-T Department

Let us present your reply to the Notices from the Income Tax department in a tabular form: 



Source: policybazaar.com
In a life insurance policy with maturity benefits, the insured will be entitled to claim maturity benefits if he or she outlives the term of the policy. The insured is entitled to claim the maturity benefits only when the policy is in force and all premiums have been paid duly. A maturity claim is one of the simplest claim procedures with minimal paperwork involved.

Policy discharge form
Typically, the insurance company sends a Policy Discharge Form about one month before the maturity date of the insurance policy. The letter also provides instructions regarding the documents that need to accompany the form. 

Details and documents
The policy discharge form must be duly filled by the policyholder. The form needs to be signed by the policyholder as well as two witnesses. Along with the form, the following documents need to be enclosed with the application:

* Original policy document
* Copy of identity proof
* Copy of address proof
* Bank mandate form with bank details
* A cancelled cheque leaf

The duly completed form with required documents must reach the insurance company at least 5-7 working days before the maturity date of the policy for a seamless maturity claim settlement. 

Process
Once the documents are sent to the insurance company, upon verification, the insurance company will process the maturity claim and make the payment to the policyholder. The maturity proceeds will be credited directly to the bank account of the policyholder after the policy maturity date.

Points to note
* This procedure is applicable only to those policies that have maturity benefits such as survival benefit, bonus etc.

* In case the policyholder dies after the maturity date of the policy but before policy discharge procedures are completed, the claim is considered as maturity claim and the amount is paid out to the legal heirs of the deceased policyholder. 

Source: economictimes.indiatimes.com
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