FINANCIAL PLANNING FOR TEACHERS

FINANCIAL PLANNING FOR TEACHERS

TEACHERS TOO NEED TO PUT IN PLACE A FINANCIAL PLAN AFTER ASSESSING THEIR CASH FLOW SITUATIONS AND THEIR RISK TAKING ABILITY WHICH WILL HELP THEM MEET THEIR LIFE'S FINANCIAL GOALS

In India, traditionally teaching as a profession was never a well-paid one.

However, things have changed & some of the teachers earn handsomely through a combination of a permanent job and private tuitions. 

There are also some who earn a monthly salary, which is a stable source of income and is low-risk, while there are some whose sole source of earning is private tuitions. 

The latter group belongs to the slightly higher risk category of people because their source of income may not be categorised as stable since their incomes are likely to vary from year to year, if not on a monthly basis.

Financial planners and advisors say that like most people, all the three sub-groups of teachers should put in place a financial plan to meet their life's financial goals after assessing their cash flow situations, their level of debt, their risk taking ability etc.

Mutual funds umbrella..

Like people from every stream in the society, teachers also at times face new financial challenges to meet their professional needs. 

For example if a successful teacher in a school or a college wants to set up a coaching centre, he will need to commit some extra money to have a room or / two, buy or rent furniture, take care of rents, electricity, one or two helping hands, etc. 

Of these, some are fixed costs which are one-time payments while some are recurring, which may be daily, monthly, quarterly or / yearly.

Financial planners and advisors say if one thinks intelligently about meeting these costs without stretching one's finances much, there are products within the mutual funds (MFs) umbrella that could be of help. 

Systematic investment plan..

For example if the needs are short term like the teacher has to take care of payments on a monthly or / quarterly basis, he could opt for keeping part of his monthly income in liquid funds and meet his monthly & quarterly financial obligations.

This way he could earn a little more than what he could if he keeps his money in savings bank.Likewise for meeting his annual payment obligations he could create a systematic investment plan (SIP) in a debt fund and contribute monthly. 

Recurring deposits

At the end of the year, he could withdraw from the corpus to meet his yearly payment obligations. This way he could earn a little more than what he could get in bank recurring deposits (RDs) and meet his annual payments.

Similarly teachers can use mutual fund products to pay up their loans in an easier manner which may not hurt their pockets much.

Also there are solutions through mutual funds which could be of help to meet his other financial goals, financial planners & advisors said. 

For example, if he/she wants to buy a room or / two to set up his/her own coaching class sometime in the future, say after 5 to 7 years, he/she could settle for an SIP in a good equity fund & contribute on a monthly basis. 

As the goal date nears, he/she could start shifting the corpus to a debt fund. This is to ensure that there are no unusual equity market-related shocks just when he/she needs the funds for which it was being invested.

Retirement corpus

Financial planners & advisors also say that like all people, teachers also need to be mindful about building a retirement corpus to take care of their financial needs when they retire. 

For this too one could set up an equity fund SIP & contribute monthly. Usually the long term average annual return from the stock market is nearly 12% to 13 per cent. And this is tax free because of long -term capital gains rules under the Income Tax Act.

A similar approach could be adopted for meeting the funds needed to meet expenses for children's education and their wedding also. Since these are usually long term goals, so setting up SIPs in equity mutual funds dedicated to these goals could help meet these financial goals, financial planners and advisors say.

Equity Linked Savings Schemes 

Planners & advisors also say that they have found self - employed teachers often struggle to meet their year-end tax obligations and invest in tax saving options. For this they could invest in equity linked savings schemes (ELSS) floated by mutual fund houses which also can give them handsome returns in the long run.

Safe investment avenues 

Mr. RAJIV JAIN, COO, Jain Brothers, a Delhi-based investment advisory firm, replied to some of the questions 

Question: 

MOST OF MY INVESTMENTS ARE IN FD,PPF,POSTAL INSURANCE. WHY SHOULD I INVEST IN MFs? ARE MFs RISKY?

Mutual funds are investment avenues that pool the money of like-minded people who are ready to invest in a growing economy, have a diversified portfolio, settle for professional advice, settle for adjusted risk in their portfolio and income tax efficient returns and looking for centurial growth of money. 

The above reasons are compelling to invest in mutual funds. Due to a large pool of investors, the individual risk is spread. 

So, individually you take on low risk. Hence mutual funds are relatively safe investment avenues & in the long run the volatile nature of the market rewards investors.

Question

I NEED TO START A COACHING CLASS IN A COUPLE OF YEARS. IS THERE A SOLUTION IN MFs THAT CAN HELP ME ACHIEVE THIS GOAL?

Yes. By investing a lump sum or in a Systematic Investment Planning (SIP) mode you can easily build a seed capital for your goal as in the past 5 years, as market has rewarded investors with a growth of approximately 13% per annum in pure large cap funds.

Benefit of rupee-cost averaging..!

Question

I WANT TO AVOID A LUMP SUM PAY OUT TOWARDS TAX SAVING AT THE END OF THE YEAR. IS THERE A WAY I COULD DO SMALL AMOUNTS ON A REGULAR BASIS TOWARDS INCOME TAX SAVING WHICH IS EASY ON MY POCKET?

Yes. You can opt for Systematic Investment Plan (SIP), a disciplined way of investing, which is always easy on the pocket and can give you the benefit of rupee-cost averaging.

Historical data show that which in the long term such an investing process always rewards investors, history had proved.

Question

I HAVE A DAUGHTER AND WOULD WANT TO PLAN FOR HER HIGHER EDUCATION AND MARRIAGE. WILL MFs INVESTING HELP IN ACHIEVING BOTH THESE GOALS?

Definitely. There are specific schemes from fund houses in which you can invest either one time or / on a recurring basis to fulfil your goals.

Protect the loss of income..!

Question

ARE THERE ANY MFs THAT HELP TO PLAN FOR RETIREMENT AND PROVIDE PROTECTION?

You can invest in specific retirement schemes by mutual funds where first you harvest during your earning years, i.e invest when you are working and then reap the benefits at your golden age of life, i.e when you are retired. 

This way you can easily protect the loss of income, pride and respect.

Question

 WHAT IS NPS & HOW DO I GO ABOUT IT?

National Pension Scheme (NPS) is a tax efficient pension scheme initiated by the central government to safeguard your loss of income during old age. 

The detailed information, eligibility, enrolment process etc. can be extracted from their 

website or could be obtained from designated financial houses that market the scheme.

From UTI MF Advt 

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