Month: March 2021

Mid-life financial crisis!!


Mid-life financial crisis and how to avert it

We all remember how Indian won the World Cup in 2011. Everybody took care of their roles in the matches and finally, India lifted the cup after 28 years. But we hated it when legends like Tendulkar and Sehwag got out early. It seemed India would lose the match if the middle order did not perform and than came Dhoni and he finished it off in style however if Dhoni didn’t perform then the result could have been different.

Just like the failure of middle-order can change the result of the match, a financial crunch in your 40s, i,e. your mid-life, can ruin a lot of things. Despite having a great run your early career, in your 40s, that decide how you will spend the most of your life ahead. Just like the collapse of middle-order exposes the tail-ender to the merciless bowling of the opposition, a wrong financial move can put your entire life in a precarious situation.

To deal with all this, there is something you can do. Long-term income plan from insurers is a product that can help you secure your mid-life and plan for the future.

In a nutshell, this is what it is: You pay a certain amount per annum for 12 years. In the thirteenth year, there is no payment and no payout. From the fourteenth year, you get a certain amount every year for the next 25 years. Setting it straighter, if you pay Rs 2 lakh as a premium per annum for 12 years, then from the 14th year you will get Rs 2.53 lakh as a payout for the next 25 years. Check out the graphic below:



Now, let’s answer all the whats and the whys in your mind.

Guarantee: A guaranteed, fixed payout for 25 years is not something you want to ditch. 25 years is a quarter of a century and a very big span of your life. Rs 2.53 lakh per annum will be a good sum of money to have regardless of the inflation. A guarantee is something we all crave for. No offence intended, but even great cricketers could not provide the guarantee of performance in each match. This plan does that for you.

Lock interest rate: Many of you may have invested in mutual funds. Let’s compare it with mutual funds. Since markets are volatile, you cannot predict your income out of it. What if the stock market is in a bear phase or faces a sudden crash just when you need money? A guaranteed income plan irrespective of how the economy and the stock market behave keeps you stress free.

Leisure: When you already have your 40-50s financially secured, you will have more time with the family. You will not have to bother about retirement, your children’s higher education or marriages all at once. This plan gives you an income that will keep things running and more importantly give you the freedom of really being there for your loved ones.

Taking a risk: There comes a time when people get bored of their work and wish to venture into something else. If you too feel the same at some point in your life, this plan will come to your aid in two ways. You can either infuse the payout amount into your new venture and give it a boost or you can simply use it as guaranteed money to run things the way they were. The money will help you do what you want without losing your night’s sleep over some financial crunch.

Unprecedented times: Life throws up challenges you never see coming. Someone can fall severely ill, your house may need immediate repairing, your kids’ education may require a huge amount of money, a wedding can end up costing way more than what you expect, and so on. This payout will give you the financial cushion to rest on. No matter what life hits you with, this money will absorb the blow.


Retirement: You may have your investments running for your retirement goal. This guaranteed plan will give it a boost. By the time you are done and dusted with your professional life, you will have this payout ready to pay its dividends. When you hit the age when you would want to relax, you will have enough money each year to really feel relaxed.

Vacation: Well, who doesn’t like an exotic vacation? If your key financial goals are already secured, you may want to use this guaranteed income to travel the world and explore different cultures.


Again, in a nutshell, be it education, a risk in career, setback, or retirement, this plan will not fail you, if you don’t fail to take it. We at Caterpillar want you to have a stress-free mid-life and retirement if your plans are that. Financial doubts and hiccups can take down the strongest of us. This plan and our service to you will not let that happen. All you need to do is come to us with an idea of your future.

Is your insurance cover enough ?


Don’t dodge it any further. Take the action now.

Price hike alert: Buy term plan NOW or pay extra from April

If you have plans to buy a term policy, you better do it NOW. A lot of insurers are set to hike the term premium from April. The hike could anywhere be in the range of 10-20 per cent.
Why pay extra? Be a proactive customer and secure your family now. It will help you claim tax deduction too under section 80-C of the Income Tax for the financial year 2020-21.

A few companies had already hiked the prices last year. Many other insurers are set to do it no sooner than April 2021. Why the hike, you wonder? It’s a business call! The way you take insurance from insurance companies, they also secure themselves by taking insurance from reinsurance companies such as GIC. Reinsurers are the ones which have hiked the premium for insurers, which in turn, will be passed on to you.

A term insurance plan is a must for the earning member of the family. It is the cheapest insurance policy that gives a large sum assured to your family if an unfortunate event happens.
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Build your own shield for any emergency !!

Liquid funds: Your financial shield when emergency strikes

There are two kinds of people in the world – one, who have faced an emergency and others who haven’t. If you are among the former, you would have surely built a contingency fund by now. However, the latter may not have seriously thought about it. The COVID-19 pandemic came as a rude shock to those who lost their jobs or faced pay cuts. A contingency fund in such a scenario comes to the rescue. If for some reason you have not yet given a thought to contingency funding, you need to pull up your socks.

The first check post on your way to financial freedom is having enough corpus, to which you can turn to in emergencies. We at Caterpillar suggest setting aside at least six to nine months of your income that you can fall back on, in case of health, loss of income, or other emergencies. The higher your salary and monthly expenses, the more emergency corpus you will need. So, anyone earning more than Rs 25 lakh has to have a nine-month emergency safety net. The people earning below that may set aside up to four-six months of monthly income.

You cannot rely on your equity investment or PPF or EPF money for emergencies. Emergency funds must be liquid enough that you can access them in a couple of hours. Most importantly, it should be parked somewhere safe that you can be assured of its safety. We suggest our clients keep at least two-three months of emergency funding in cash in bank accounts or fixed deposits. Let’s face it, when an emergency strikes, nothing but cash at home or the nearest ATM will be the most accessible. Redeeming other investments will take time. However, it doesn’t mean that all your emergency funds lay idle in your bank account.

As suggested above, keep at least two-three months of your emergency funding in the savings bank account or fixed deposits. The rest can be parked in safer investment avenues, preferably liquid funds. These funds invest in money market instruments of typically less than 90 days of maturity. Unlike other mutual funds, liquid funds do not have an exit load. So, your money keeps earning some return while you have the liberty to exit any time you want without penalty. The money gets credited to your bank account in a couple of days or in a day’s time depending on the asset management firm you have chosen.

Why invest in liquid funds

— To earn slightly higher returns than FDs on a portion of your emergency funds
— To be disciplined about your contingency money — Human psychology is such that you tend to spend extra cash in your bank account for other purposes. The moment you set it aside in a different fund, your mind will have a natural wall against spending it on anything but an emergency.

Tax on capital gains in liquid funds

The returns on FDs are taxed as per your slab rate. However, if you stay invested in liquid funds for more than three years, the capital gains will be taxed at 20 per cent with indexation. So, people in the 30 per cent slab rate can reduce their tax outgo significantly by investing in liquid funds.

If you hold it for less than three years, the taxation is similar to that of FDs, that is, as per your slab rate.

Setting aside substantial corpus sounds daunting to you? Don’t panic. You may build your contingency fund over a period of time. Taking that first step towards financial freedom is all that you need. Call us on 8178271045 to know more about liquid funds. We will help you compute your emergency corpus requirement.