If you have exchanged vows recently, you would need to rejig your expenses and savings structure.

NOW that both of you have decided to take the plunge, among the various angles that you should look at, there is one more that both of you should consider jointly: your finances. As you move from the ‘single stage’ to the ‘double income no kids’ stage, it is important to note that your priorities,

incomes, expenses and savings will all change significantly. (This article addresses the couple where both are working). There are certain strategic and the tactical changes that you should consider and prepare for.

CHANGE IN MILESTONES:

One of the pillars of financial planning is identification of milestones. When you are single, milestones are determined by your whims and desires. Talking to each other about your financial milestones will reveal how significantly different your ideas might be; and this will set the stage for a discussion on what the combined milestones should be.
   To exemplify, typically singles would live in a rented apartment or with their parents. This gives them the flexibility of moving from one job to another, from one place to another. However, as you begin to ‘settle down’, you begin identifying the city, the locality where you would want to stay for an extended period of time. This choice would depend on a host of factors , including where both of you see your medium- to long-term work place, how convenient it is for you to commute to the same. Once the decision is made, invariably, you will start thinking of buying a house, as opposed to renting it.
   Another aspect is when you plan to have a kid – and the final number of kids. This is something that you had either very consciously – or assuming the futility of thinking so – had not decided upon when you were single. Now this becomes an important discussion, as it can have career implications in a double income family.

CHANGE IN EXPENSES:

Next in line is savings that will be needed during the initial years. It becomes painfully obvious that the amount of savings required will be significant over the initial few years of your marriage. Till the last of your kids go to school after which both of you can go back to work uninterrupted, there will be significant cash outflows (like buying a house and/or a car, child-raising expenses). This will necessitate a re-look at your expense profile.
   So whether, it is a new bike that you buy on cue, or that treadmill to burn off your fat that you purchase on impulse, many of these decisions will start getting questioned in light of the bigger milestones that you would have planned. Having led a single life, where expenses almost equalled your incomes (sometime they even exceeded income, thanks to personal loans and credit cards!), you are now faced with a situation where you need to start saving.

CHANGE IN INCOME, INVESTMENTS:

A double income helps in mitigating some of the costs (for example, rents and other living costs are shared). You have now to think not just of saving but also of investing the money, so that these investments can help you later. Hence, the transition from no savings, to savings and then investments is complete.

CHANGE IN LIFE INSURANCE NEEDS:

When you were single, there was a limited need for insurance (unless you had some dependents like your parents or siblings). You could happily go around without a cover, but that would not be the case once you are married. As the milestones start getting firmer, you need to start riskproofing them. Milestones like buying a house, upgrading your car will still be around, even in case of an unfortunate incident. Hence, even in a double income family, there is a case for building insurance.

TACTICAL CHANGES:

Now that you will be investing together, there are some tactical changes that you should think of. One of the most basic is investing in joint names, wherever possible. With the ‘either or survivor’ option, this allows you the flexibility of operating the accounts.
   In case joint holdings are not possible (as in PPF, for example), you should definitely nominate each other (or someone near and dear to both like your children). Typically, the youngest person in the consideration set is made the nominee. In case, after marriage, you decide to change your surname (in some cases, even the name is changed), ensure that all your documentation is up to date.

India caught up in 2007. If one goes by numbers, the first real ‘all-Islamic’ finance deal materialised in October 2006 when Bahrain-based Gulf Finance House and the Maharashtra government joined hands to take up the Energy City India project. Gulf Finance House promised to invest close to $2,000 million for the project. Since then, there has been four major Islamic private equity investments in India — all in 2007.

SHIFTING political sands in America and Europe, especially after the 9/11 terror attack and concerns of a probable slowdown in developed economies are encouraging Islamic investors to turn their focus into growth economies like India and China.

   Although there has always been talk of Islamic investors shifting their investment focus to emerging economies, the real trend of investing in India caught up in 2007. If one goes by numbers, the first real ‘all-Islamic’ finance deal materialised in October 2006 when Bahrain-based Gulf Finance House and the Maharashtra government joined hands to take up the Energy City India project. Gulf Finance House promised to invest close to $2,000 million for the project. Since then, there has been four major Islamic private equity investments in India — all in 2007.

   According to Islamic Finance Information Service (IFIS), National Bank of Dubai along with Velcan Energy Holdings (Dubai) are investing close to $140 million for the Velcan Hydro Power Plant in Arunachal Pradesh. Saudi Economic and Development Company (Sedco) and Bearys Group have come together to invest $20 million for the Bearys Global Research Triangle in Bangalore. HSBC Amanah will invest $50 million in Srei Projects while Gulf Finance House will invest $10,000 million for the Indian Economic Zone in Mumbai.

   “Robust growth, requirement for huge investment in areas like infrastructure and strong legal framework (which protects foreign investors) are some of the reasons why Islamic investors are flocking into India. This number is expected to jump by 100% in 2008. We are expecting investments in the range of 10 to 15% this year,” said Bearys Amanah Investment CEO, Shariq Nisar, who is also an expert in Islamic finance. Arab investors find real estate, infrastructure, engineering and logistics as hot sectors. According to experts, government’s thrust towards infrastructure development via public-private partnerships will bolster investments in private equity space.

   Sighting immense investment potential, there are several private equity funds waiting for the right time to invest in Indian assets. According to Global Investment House data, Abraaj Capital is planning to come out with three separate funds totalling to about $2,700 million. Ithmaar Bank is launching a $500-million balanced fund, with a view to invest in infrastructure. Global Investment House is coming out with $1,000-million pre-IPO fund while Dubai Islamic Bank is floating a global buy-out fund with a pool-size of about $3,000 million. Global Investment House is also launching a $1,500-million buy-out fund with focus on MENA countries.

   “Arab investors like private equity as an investment vehicle as it offers higher returns at higher risk. Risk appetite is high among GCC investors as their need for liquidity is fairly lower that investors of other countries,” said Kuwait Financial Center’s senior vice-president (research) M R Raghu. “Arab investors are also aggressive when it comes to real estate as they are familiar with this asset class,” he added.

His father suggested mortgaging the house where Nishant lived, pointing out that a loan against property would work out to be cheaper than a personal loan. Nishant saw merit in his father’s words and decided to approach the bank for a loan against his property.

   This option is increasingly being exercised primarily by small entrepreneurs who have limited access to other means for credit. Taking the cue, banks have started promoting their loan against property portfolio. Says Vivek Vig, country head, retail bank, Centurion Bank of Punjab: “It was a hidden asset. People are realising that it can be leveraged to boost their business.”

   After valuation of the property, establishing the ownership and assessing the repayment capability, the loan is sanctioned. It is also subject to the minimum market value of the property specified by the bank. Typically, the loan amount could work out to 50-60% of the property’s market value (as determined by the bank). While the loan, usually, can be used for any purpose, some banks encourage the borrowers to disclose the end-use. Speculative businesses are looked down upon. The loans can be repaid in equated monthly instalments (EMIs) and the repayment period could range from two years to 15 years.

   The plus point is the lower rate of interest. “Loans against property are 30-40% cheaper than personal loans,” informs Mr Pandit. Rates on such loans are in the range of 12-15% pa. The banks offer lower rates due to the presence of a security in the form of the borrower’s house, whereas personal loans do not entail any such collateral. Besides, loans against property are offered for a longer tenure, while personal loans are for shorter tenures. Also, banks cannot sanction personal loans beyond a limit. “The bank will not give you a personal loan of Rs 1 crore, but you can get this kind of money if your house is around Rs 1.75-2 crore,” adds Mr Pandit. “A loan against property involves no hassles and the bank’s interference is minimal,” says Mr Vig.

   A borrower needs to check for prepayment penalties. “Most of these loans can be prepaid in part or full without any charges or subject to certain charges. This may vary and the borrowers should check this. Also, before opting for such a loan, it is advisable to check if there are alternative sources of borrowing like loans from family, loans against fixed deposits etc,” advises Mr Pandit.

   So, if you are thinking of borrowing a loan for business purposes, it would be worthwhile to consider encashing the value of your house.

Happily, there was no confirmed case of suicide or shock-induced deaths in the biggest-ever fall for Indian equity markets, but officials were taking no chance because lesser corrections have taken their human toll. “We are expecting patients to come in the next three to four days,” said Dr Brian Pinto, chief cardiologist at the Holy Family Hospital and Heart Institute Bandra, and interventional cardiologist attached to Nanavati Hospital. “We have been messaging our patients to remind them to take their medication,” he said.

   In Ahmedabad, the Gujarati hub of usually savvy investors, gloom prevailed as some brokerages squared off furiously and others shut offices. Policemen roamed the banks of Narmada Canal, Sabarmati river, Vastrapur lake and that happy picnickers’ choice, Kankariya lake, just in case. The fire brigade was standing by.

   Back in Mumbai, one patient suffering from palpitations and high blood pressure checked into Bhatia Hospital, while another was admitted into Jaslok moments after the market opened low. Breach Candy remains on alert for emergencies. “So far, we haven’t admitted any patients, it is too early still,” said chief cardiologist Dr Rahalajani. “But the effect will come later.”

   Doctors worried over their aged patients and worked the phone to advise them to take it easy. “These patients may be prescribed tranquillisers, and if they suffer from diabetes, the dose of their insulin treatment should be increased,” said Dr Hemant P Thacker, consultant physician and cardiologist attached to several top hospitals. Diabetics may especially be at risk. Cardiovascular disease is the most common and serious complication of diabetes and significantly increases the risk of heart attack and stroke. Two in three diabetics die of these conditions.

   Scores of investors in Gujarat have leveraged their investments in the forward market and got stuck with mounting losses. “The situation is grave and there is panic among players. In some cases, losses run into lakhs,” said Apurva Shah, a broker at Ahmedabad Stock Exchange. “At least 90% of us kept our terminals closed and advised investors to keep off the market. Having invested in F&O segment, investors have are stuck.”

LIC’s new HEALTH PLUS (Plan No. 901) comes to town

We just referred to health issues related to the vagaries of the stock market. For all those afflicted by that & even those who aren’t, LIC has brought a new innovative Health plan in the market. Similar to a mediclaim plan one of its USP’s is that unlike normal mediclaim policies, the LIC Health Plus doesn’t need to be renewed every year. It just requires a yearly premium to be paid just like a normal insurance policy. And that’s not all – it’s a Unit Linked Insurance Plan which have shown good returns over the past year.

Have a first hand look at the features of this new plan

Unit linked Health Insurance plan, which provides for insurance cover against following health risks:
1. Hospital Cash Benefit (HCB)
2. Major Surgical Benefit (MSB)
3. Reimbursement of domiciliary treatment expenses
HCB is on per day basis. MSB shall be a percentage of sum assured.
The Principle Insured (PI) can take the policy covering himself / herself. The spouse and/or dependent children can be covered
under the policy. To be covered under the policy at inception of the policy only and if not done, will not be covered under the policy in future.

MATURITY BENEFIT: Net N A V is Payable at end of the term (Maxi. Age at maturity is 65 yrs of PI)
DEATH BENEFIT:
1. If policy is issued on a single life: N.A.V. Payable to nominee.
2. If one or more Insured lives (other than PI) are covered
a. On death of PI < 3 years from doc: N.A.V payable to nominee & policy terminates.
b. On death of PI > 3 years from doc – payment of premiums cease. And cover continue for the surviving
Insured lives till the maximum benefit ceasing age or till the fund is sufficient to recover charges for hospital
cash cover & surgical benefit cover, whichever is earlier

1. Hospital Cash Benefit (HCB)
• HCB is payable on per day basis.
• This Benefit will increase at each policy anniversary by 5% till it reaches a maximum of 1.5 times the Initial Daily Benefit.
• ICU Daily Benefit: Twice Applicable Daily Benefit of that policy year.
• For every hospitalization, no benefit paid for the first 48 hours (two days)
• Maxi. 18 days hospitalization & including not more than 9 days in intensive care unit in the 1st policy year for each insured.
• Maxi. 60 days hosp. and including not more than 30 days in I.C.U. in the 2nd & subsequent policy years for each insured.
• Limited to a maximum of 365 days during entire policy term for each insured.
• Insured Child up to age 5 yrs: Maximum period of 90 (ninety) days.
• Applicable only within India.
• Waiting period: 180 days for new policy & 90 days after revival.
• Termination: After his/her reaching 65 years OR Maximum lifetime claim limit of 365 days.
Feature Principal Insured (PI) Insured Spouse (if any) Insured Dependent Children
Mini. Initial Daily Benefit Rs. 250/- Rs. 250/- Rs. 250/-
Maxi. initial daily amount Rs. 2,500/- Rs. 1,500/- Rs. 1,500/-

2. Major Surgical Benefit (MSB)
• MSB shall be a percentage of sum assured.
• The Corporation will pay the chosen Major Surgical Benefit Amount, as calculated as a % of Sum Assured, regardless of actual
costs incurred.
• The Major Surgical Benefit shall be paid as a lump sum
• Maxi. Benefit payable in any Policy year for an insured person not exceed 100% of the S.A. in respect of each member.
• Maximum limit of three (03) times the Sum Assured.
• A child included will be automatically covered after age 18 years.
• Applicable for surgery conducted only within India.
Waiting period: 180 days for new policy & 90 days after revival.
Termination: After his/her reaching 65 years and/or Maximum lifetime claim limit of three (03) times S.A.
Feature Principal
Insured (PI)
Insured Spouse (if any) Insured Dependent Children
Sum Assured 200 times of Initial Daily benefit
of HCB of PI
200 times of Initial Daily benefit of
HCB of Insured Spouse
200 times of Initial Daily benefit
of HCB of each child
Maxi. annual benefit 100% of Sum Assured 100% of Sum Assured 100% of Sum Assured
Mini. Age for cover 18 years 18 years 18 years

3. Domiciliary treatment exp.
• If at least 3 years’ premiums have been paid, it is payable out of Policy Fund. This is paid over & above those paid through
hospital cash/ surgical benefits.
• The claimed amount should be at least Mini.Rs. 2,500.
• Maximum amount to be paid shall be 50% of the Policy Fund.
• Minimum one annualized premium left in the Policy Fund after the payment.
• During a year, not more than 2 payments shall be allowed.
• Benefit cease for child on the child reaching age 25 years.
Feature:
A. The allocated premiums will be invested in :Health Plus fund
B. Surrender :Allowed any time but payable only after 3 years from d.o.c No S.V. charge.
C. Partial withdrawals & Loan :Not allowed under the policy.
D. Administrative Fees :Rs.75/- pm in 1st year and Rs.25/-pm. through out remaining term
E. Fund Management charges :1.25% p.a. of N.A.V.
F. Health Insurance Charges :There will be two separate monthly charges for the following benefits:
I) Hospital Cash Benefit. (Not on the 5% increase benefit) ii) Major Surgical Benefits
G. Service Tax Charges: Applicable on health insurance chg. Current rate 12.36%.
H. Min. age at entry (for PI) :18 yrs nbd (3 mtn for child)
I. Maxi. age at entry (for PI) :55 yrs nbd ( 17 yrs for child)
J. Maxi. Maturity age :65 lbd for PI
K. Mini. Premium :Rs5000/-Single life & Rs7500/-p.a.(two lives) Rs.10,000 for more than 2 lives.
L. Maximum Premium :No Limit.
M. Increase or decrease in premium :Allowed. (Sub to Condition.)
N. Mode of Payment :Yly, Hly and Monthly (ECS).
O. Non medical :NMG NMS allowed.
P. Allocation Rate :1st year 30% and 6% 2nd & subsequent year of the premiums paid.
Q. EXCLUSIONS for HCB MSB :Refer original Circular.