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When you graduate into adulthood and begin trying to manage your finances, the first step you’ll often be encouraged to take is to create a budget.

While that’s important, there’s something else even more basic and more important you should explore. Here’s the secret: the budget isn’t any good unless you track your spending.

If numbers and spreadsheets make your head spin, you’re probably cringing at the thought of tracking your spending. Yes, there are certainly hundreds of ways to do this and yes, you’ll need to do a little math.

But instead of focusing on the how, let’s talk about the why. If you’re willing to recognize the benefits of tracking your spending, you’re more likely to do it (math and all). Here are seven benefits of tracking your spending to get you motivated to start.

1. Creating A Meaningful Budget
To create a meaningful budget, you need to understand a little bit about where your money goes. You probably know how much your rent or mortgage is. It’s a budget category that shouldn’t fluctuate too much. But how about your grocery bill? Many areas of your budget will fluctuate weekly, monthly, or seasonally. It’s important to track your spending for a longer term to build a better budget. And when you build a better budget, you’re more likely to stick to it. Tracking your spending for a while before creating your budget means you’ll have an excellent starting point for your spending plan. You already know where your money is going – you’re just documenting it in the budget. From there, you can decide what changes you need to make.

2. It Combats Mindless Spending
Speaking of changes you need to make, you’ve probably heard one of those sob stories – the kind where someone making six figures a year is broke. How does that even happen? It’s because they spent, spent, spent, and never had a plan for where the money was really needed. That’s why having a budget is so important, but it’s not enough. If you’re spending way off plan, you’ll find yourself in the hole every month. On the other hand, if you track your spending – even without a budget – you might uncover a few shocking numbers. Tracking your spending puts your expenses in black and white. There’s no denying your problem areas anymore. Knowing is half the battle.

3. Motivated to Cut Back
Similarly, you might have known good and well that you spend around Rs.10,000 (approx.) per month on groceries, but as you compare your spending to your budget, you might realize some areas need to be trimmed. You might also decide the excess money you’re spending is better off going toward debt or savings. Likewise, seeing a large electric bill will make you more likely to shut off lights when you leave the room (just like your mom always said to do). A large water bill might make you question your 30 minutes showers. You’ll likely continue along with your daily routine until you see the impact it has on your wallet.

4. Getting Your Partner on Board
Finances are one of the biggest causes of stress and tension in long-term relationships. That’s more likely to be the case when neither party has any idea what the other party is doing with their money. The very act of tracking spending together as a couple makes it more likely that you’ll coordinate with your partner ahead of purchases. However, it also closes the loop after purchases have been made. You can check to make sure all your expenditures align with the priorities you have as a team.

5. You Catch Expenses You Forgot About
When you’re tracking your spending, don’t just add up all the receipts you have. Go back through your bank accounts and make sure you capture everything. Many people will find there are a few charges they forgot about. These charges are often subscriptions you signed up for a long time ago, and you might not have used the service in years. People are especially prone to signing up for a “free” service that’s only free for a few months. Then it begins to charge you. You probably told yourself you would cancel the subscription before the charges kicked in, but then forgot.

6. Confirms If Your Spending Aligns with Your Values
Are you in debt payoff mode? Are you saving for a house down payment or retirement? No matter who you are or how old you are, you likely have some long-term financial goals. The goal of your budget is to make those long-term goals happen. However, your spending puts the pedal to the metal. You budget means nothing unless you abide by it. However, each month you find you’re short of making that happen because you spent too much money on entertainment or eating out. Tracking your spending allows you to start questioning yourself. Are these expenses really in line with your priorities? One special note here: you can change your priorities. Debt payoff might be your priority today, but tomorrow it could be different. Make sure you know what your top priorities are by reviewing them monthly. Don’t allow your spending to control them.

7. Simplifying
As you move forward, you might find you want to simply your life, so you cause yourself less pain when reviewing your finances. You might force yourself to plan better for grocery store shopping expeditions, so you don’t have to run back to the store. A natural outcome of simplification is experiencing a small amount of savings. Fewer trips to the grocery store each week means less opportunity for impulse buying. The first few weeks of tracking your spending will be the hardest but have no fear! It will get easier, and the benefits of tracking your spending will outweigh any negatives. The sooner you get started, the sooner you’ll experience these benefits.

Source:everythingfinanceblog.com

Besides, the loan processing cost, interest rates on loan, documentation for loan against life insurance are quite less and hassle-free compared to taking a personal loan.

During a short-term financial crisis, one looks for personal loans to meet the contingency. However, most often high interest on personal loans and the repayment period being too short deters us. In search for other opportunities to meet this crisis, one such alternative is to take a loan against a life insurance policy you have taken to secure yourself and your family.

This seems to be an easy option as you get a loan against an insurance policy on which you have been paying the premium regularly. Besides, the loan processing cost, interest rates on loan, documentation for loan against life insurance are quite less and hassle-free compared to taking a personal loan. However, you should not opt for a loan against a life insurance policy without any reasoning or checking the pros and cons of such a measure.

Here are a few things you must keep in mind before you opt for a loan against a life insurance policy:

1. Surrender Value
If you have a life insurance where the sum assured is Rs.10 lakh at the end of the tenure, you won’t be eligible for a loan of Rs.10 lakh. In fact, the loan amount depends on the surrender value of the policy. Surrender value is the present value of the policy when you terminate the plan voluntarily. In most cases you will be eligible for a loan amount of 80 to 90 percent of the surrender value. For example, you have a life insurance policy with a sum assured of Rs.10 lakh, and you want to take a loan against the plan. If the surrender value comes to Rs.5 Lakh at that time, then you will get a loan amount of Rs.4 to 4.5 lakh only.

2. Not All Policies Are Eligible for Loan
All life insurance policies are not eligible for the loan. Unit linked insurance plans and term insurance policies are not eligible for loans, according to IRDA guidelines. But loans can be taken on traditional insurance policies such as endowment and money-back plans. Hence, it is important to check the type of your life insurance policy you have and whether it is eligible for loan against it.

3. Waiting Period of Three Years
Just buying a life insurance policy does not make you eligible for a loan against it. There is a waiting period of three years before you are eligible to take a loan against your life insurance policy. You must not default on premium during the three-year waiting period. Besides, you need to continue paying the premium during the tenure of the loan.

4. How Repayment Works
The benefit of taking a loan against life insurance policy is that you have the full tenure to pay back the loan. How you wish to repay the loan can vary. You can either keep paying the interest regularly or pay back the principal amount. When the tenure of the policy ends, the remaining balance of the loan amount will be adjusted with the total claim settlement. Hence, it’s a win-win situation for both the insurer and the policy holder.

5. What If You Default on Premium and Repayment
In such a situation, your policy will lapse, and the insurer has the right to recover the dues from the surrender value of the policy. If such a thing happens, the very purpose of taking a life insurance policy to secure yourself and your family falls flat although you may achieve your short-term financial requirement. Hence, it is important to weigh your options before you opt for a loan against life insurance policy.

Source:financialexpress.com

Here is a list of people who might need life insurance at different life stages, and why you would want to buy life insurance at these stages. This list will help you consider various reasons to purchase life insurance and help you figure out if it is time for you to investigate buying life insurance or not. A financial advisor or life insurance representative can also help you explore different life insurance options and should always be consulted for their professional opinions to help you make a choice.

1. Beginning Families
Life insurance should be purchased if you are considering starting a family. Your rates will be cheaper now than when you get older and your future children will be depending on your income.

2. Established Families
If you have a family that depends on you, you need life insurance. This does not include only the spouse or partner working outside the home. Life insurance also needs to be considered for the person working in the home. The costs of replacing someone to do domestic chores, home budgeting, and childcare can cause significant financial problems for the surviving family.

3. Young Single Adults
The reason a single adult would typically need life insurance would be to pay for their own funeral costs or if they help support an elderly parent or another person they may care for financially. You may also consider purchasing life insurance while you are young so that by the time you need it, you do not have to pay more due to your age. The older you get, the more expensive life insurance becomes and you risk being refused if there are problems with the life insurance medical exam.

4. Homeowners and People with Mortgages or Other Debts
If you plan on buying a home with a mortgage, you will be asked if you want to purchase mortgage insurance. Buying a life insurance policy that would cover your mortgage debt would protect the interest and avoid you having to buy extra mortgage insurance when you buy your first home.   Life insurance can be a way of securing that your debts are paid off if you die. If you die with debts and no way for your estate to pay them, your assets and everything you worked for may be lost and will not get passed on to someone you care about. Instead, your estate may be left with debt, which could be passed to your heirs.

5. Non-Child Working Couples
Both persons in this situation would need to decide if they would want life insurance. Maybe in some instances one working spouse contributes more to the income or would want to leave their significant other in a better financial position, then as long as purchasing a life insurance policy could be an option.

6. People Who Have Life Insurance Through Their Work
If you have life insurance through your work, you should still buy your own life insurance policy. The reason you should never only rely on life insurance at work is that you could lose your job or decide to change jobs and once you do that, you lose that life insurance policy. It is not strategically sound to leave your life insurance at the hands of an employer. The older you get the more expensive your life insurance becomes. You are better off buying a small backup policy to make sure that you always have some life insurance, even if you lose your job.

7. Business Partners and Business Owners
If you have a business partner or own a business and there are people relying on you, you can consider purchasing a separate life insurance policy for your business obligations. 

8. Buying Life Insurance on Your Parents 
Most people don't think of this as a strategy, buy it has been used and can be a smart thing to do. Life insurance on your parents secures a death benefit to you if you put yourself as the beneficiary of the policy you take out on them. If you are paying their premiums you will want to make sure you make yourself an irrevocable beneficiary to secure your investment. This way when your parents die, you secure the amount of the life insurance policy. If you do this while your parents are young enough, it may be a financially sound investment. You may also want to protect your own financial stability by looking at buying long-term care for them as well or suggesting they look into it. Often when parents fall ill as they get older the financial burden on their children is enormous. These two options may provide financial protection that you might not have otherwise thought of.

9. Life Insurance for Children
>> If you worry about your children eventually getting an illness. Some families have concerns about their children's long-term health due to hereditary risks. If parents fear that eventually, this may make them uninsurable later in life, then they could consider buying their children life insurance so they don't worry about failing medical exams later when they need life insurance for their own families.

>> Some people purchase life insurance for children as they reach early adulthood to help them get a head start on life. A permanent life insurance policy may be a way to build savings for them and give them an opportunity to have a life insurance policy that pays for itself by the time they have a family of their own, or if they want to use the cash portion to borrow against for a major purchase. Life insurance for children may be purchased as a gift to them

10. Elderly
One useful thing about life insurance if you are older, is the tax savings elements if you want to preserve the value of your estate. You should speak with an estate attorney or financial planner to understand if buying life insurance in your later years may provide tax benefits.

Source: livemint.com
As life Insurance serves as a safety net to mitigate future unfavorable circumstances, it is imperative to know the intricate details of what the plan entails.

As life Insurance serves as a safety net to mitigate future unfavorable circumstances, it is imperative to know the intricate details of what the plan entails. One of the main reasons for individuals to be disappointed with their life insurance plans is when they do not fully understand the details of their coverage, thereby derailing the claims process, be in at the time of maturity or untimely death. Here are six simple ways to avoid this pitfall at the policy buying stage itself.

Have clarity on buying the policy
Before even starting the buying journey, have clarity on the life goal you plan to secure through the life insurance policy. While money is fungible, it is always good to buy a life insurance plan for a specific need. This not only gives the reason to buy, it also helps you continue with the policy for the full policy tenure. You can also assess how each of the product features is linked to the need for which you are buying, thus reducing the risk of buying something that you later regret. Though once-in-a-lifetime offers are enticing, it’s a trap you should avoid at all costs. Always ask for the company authorized ‘benefit illustration’ customized for you and don’t blindly fall for high returns simply because stock markets might have performed rather well in the last two years.

Do your own research
You must do your homework carefully and go through the product brochure and the other available information on the company’s website to understand various aspects of the policy you plan to buy. While sellers are a good source of knowledge, your own research goes a long way in making an informed decision. If required, talk directly to the company representatives. Even better, ask your agent if you can speak to other customers who have purchased the same/ similar product five years ago. You do this for your property purchase, don’t you?

Don’t take a decision in haste
Any decision taken in haste related to financial investments is likely to be regretted later. You will always find customized products that cater to your specific need. A little financial prudence coupled with patience will help you make an intelligent and informed decision.

Fill in the details correctly
When you get a job offer or buy property, do you sign the papers without reading? Of course not. So why would you sign your insurance papers without reading it? Also, closely look at the medical details asked in the form. Concealing information related to your health can lead to claim rejection later, defeating the very purpose for which you bought the policy.

Check the product name, type
There are multiple policies sold by life insurance companies—term plans, ULIPs, and traditional plans. There are minor product variations under each category. For example, when you procure a home loan, a traditional endowment policy may not serve your purpose. Instead, you may need a policy customized for loans available with your mortgage loan provider. Therefore, always check the name and type of the product while filling out the form.

Wait for a direct call from the insurer
Most life insurance companies call you to verify your understanding of the key terms and conditions of the policy. This is done to ensure that you have understood the policy, its benefits and various terms and conditions. If you feel that the policy sold was different from what the seller explained, you can cancel it. In any case, there is a ‘freelook period’ after you receive the policy document, during which you can chose to return it within 15 days if it does not meet your expectation.

Source: financialexpress.com
Please do not reply back to this mail. This is sent from an unattended mail box. Please mark all your queries / responses to webmaster@rsfinanceservices.com.
Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. rsfinanceservices.com and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. rsfinanceservices.com, its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.