How to maintain a good credit history
Credit History
Now that we know how important it is to have a good credit score when you apply for a loan ( read previous post “ Your credit score- meaning and importance), let us see what we can do to maintain a good credit history-
Your credit score- meaning and importance
Back in the 1960s, 1970s and even the 1980s, people lived a credit free life. There were no credit cards, no vehicle loans (not many owned cars anyway!) and no home loans – the business class and the richer sections of the society were the ones who could afford to build their own houses early in life. Many of the middle class and upper middle class people stayed in company provided/rental accommodations during their working years and used the PF/gratuity/terminal benefits to buy a house of their own on retirement.
Estate Planning – Creating a trust
The previous post was about making a will, which is the most basic form of estate planning. But in certain cases, a will has its own limitations and it not sufficient to efficiently distribute one’s estate. This is where a trust comes into the picture.
Estate Planning – Preparing a will
Till a few years back, people used to feel uncomfortable discussing inheritance and estate planning issues and hence tasks like preparing a will etc. were postponed for the future till the time it became inevitable to do so. Not anymore. Clients are now aware of the fact that postponing the inevitable only makes the job difficult; and the difficulties the family would have to face in absence of a will if the breadwinner were to die all of a sudden. As a result, today most of the certified financial planners have included estate planning in their scope of practice.
Planning for Immediate Goals
When we talk of financial planning, it is mainly about goal setting, saving and planning for the future. But, sometimes reaching certain key milestones in our life like marriage may require a complete re-working of our finances- planning for our immediate goals. Let us take Aryan’s case to understand this better.
One can exit an endowment policy mid way too
In continuation with the case in the previous article, Ajit is now 35 years old, married with a small kid. His expenses, responsibilities and insurance and savings needs have all increased. Now, he is stuck with an endowment policy on which he has to pay regularly for the next 10 years, but which neither gives him the required insurance cover nor the required growth on investment. Ajit now knows the benefits of taking a pure term insurance and wants to take one for 25 lakhs for a term of 20 years which would cost him around Rs 10,000/- pa, but he doesn’t want to incur this expense in addition to the endowment policy premium.
Why endowment policies don’t multiply your wealth
Ajit is 35 years old now. When he started working at the age of 25, his father’s insurance agent had suggested that he take a good endowment insurance policy, as it would help him save taxes, provide insurance and also save money for the future. Since it made sense, Ajit did so and subscribed to an endowment policy for a term of 20 years, an insurance cover of Rs. 5 lakhs and an annual premium commitment of Rs. 25,000/-.
Sriraksha Financial Planning Services 