We are carefree when we have a regular income coming in which is enough to provide for a quality of life that we wish to live. While living in the present attitude is perfect for living a peaceful and positive life, but it helps only until the times are good, when the good times take a U-turn, it hits real hard. Therefore, it makes a lot of sense to be prepared for the worst. According to Warren Buffet, “If you don't find a way to make money while you sleep, you will work until you die.”

This passage focuses on the need to create a source of secondary income, also known as Passive Income, and also highlights the products which you can invest in for generating an extra monthly income for yourself.

Need to Create Passive Income

Emergencies: We generally face financial difficulties in times like Job Loss, Medical or Family Emergencies, Reduction in income due to change in government policies, cyclical fluctuations, etc. Many of us have our Emergency Funds prepared for such untoward situations. But the no or low income period may stretch beyond the Emergency Fund. If you have a source of passive income, it can take care of your survival until you are engrossed with the emergency.

Financial Freedom: Having a source of fixed passive income imparts mental peace and Financial Freedom. Financial Freedom is a state when your expenses are taken care of irrespective of whether you are bringing any new money in the house or not. It's like come what may, no income low income, you will still have money for your daily bread, your kids will still go to school, your normal life will not be interrupted for lack of money. Being financially free let's you live peacefully and positively in real sense and not just a live in the moment attitude.

Post-Retirement: You may or may not need your passive income over your life, you may be lucky and not face any major financial hiccup, but after retirement, passive income becomes a must. You need money:

> To provide for your routine expenses. Regular income is over now.

> To provide for increased healthcare needs. Although, many of us might have insurance covers, the insurance policies will cover treatment for diseases and hospitalization. But the actual medical costs are much higher during old age. There are routine check-ups, medicines, physiotherapy sessions, tests, etc., which are mostly not covered by insurance and are expensive, an MRI alone costs anywhere between 6 -10K. Your passive income will be your best friend after your retirement.

Accelerate your income: Further it's not just about emergencies or extreme situations, having extra money is always nice. It's helps in advancing your standard of living, and lets you spend on stuff which you otherwise might have sacrificed.

How to Create Passive Income

Basically, you need to squeeze more money from your money. You create a portfolio of assets which are capable of generating income for you. It's like a chain, your money works to earn more money for you.

And the concept is not new. One of the primary reasons behind investing in India is generating a source of passive monthly income. We have traditionally been investing in Real Estate, with a view to get a regular rental income, or in Fixed Deposits/Post Office Monthly income schemes, with interest payout options. The interest payout becomes the source of monthly income in this case. But these conventional options have their own set of flaws. In Real Estate, there are hassles like maintenance charges, you may not find a tenant immediately after one leaves so there can be gaps in rental income, rental yields are also low. In case of Fixed Deposits, the interest rates are very low in the range of 6-7%, and that too taxable, so the monthly income will also be low.

There are monthly income options offered by Mutual Funds, like the Dividend Payout option of Mutual Funds and SWP option in balanced funds. These methods are more convenient and than the traditional options, investing is completely hassle free. And the return prospects in Mutual Funds are higher, the last 5 and 10 year returns from the average of balanced Mutual Fund schemes are 15.55% and 11.27% (As on June 30, 2018; Average of 17 schemes). So, even if your SWP is 8% of the principal amount, the extra return gives your investment a chance to grow after you meet your monthly income needs. You can seek help from your financial advisor for guidance on which scheme you should invest in and how much you should invest for your monthly income requirements.

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There is an investor who has four saving accounts, Rs. 10,000 lying in one, Rs 15,000 in another, Rs 2,000 in the third one (the investor has paid penalty for not maintaining the minimum balance here), and Rs 65,000 in the last one. This guy had invested Rs 50,000 in a bank FD in 2012, another Rs 20,000 in 2014 and Rs 30,000 in 2017. He is heavily invested into property, apart from the house he lives in, he has two flats and few hectares of land in the outskirts of the city. Further, he has taken a traditional endowment policy for which he pays a premium of Rs 75,000 a year, and has a family medical cover worth Rs 1 Lac. The investor's goals aren't drafted and he is absolutely clueless about how his goals will be met.

There is so much clutter in this investor's finances, that if,

• This man needs Rs 15 lacs for his son's higher education after few years, even though he has properties worth crores of rupees, he may or may not be able to have the money in the hour of need, because of the super illiquid characteristic of real estate.
• The health insurance may not be sufficient, considering the ever rising medical expenses.
• In case of an emergency, he will have to accumulate cash from four different saving accounts.
• He has a majority of his portfolio concentrated in real estate, so there is lack of diversification.
• In case of his sudden demise, his family would also not know, where the investor has invested, forget the family, even the investor during his lifetime won't remember where all he has invested.

And this is the situation of many investors in India. This situation arises because we invest a random amount in random investment products without any investment horizon in mind. And what happens as a result of this approach is when need arises, in spite of having numerous investments, we are not able to accumulate enough money to meet the need.

The solution to this is, not investing more, rather organizing the investment protocol, having a holistic approach towards investments and financial planning.

So, what is Holistic Financial Planning?

Holistic financial planning means incorporating all aspects of personal finance like age, income, expenses, savings, financial goals, tax, insurance needs, commitments, liabilities, etc., and preparing a blueprint for achieving your goals taking into consideration all of these aspects.

Just like, carbohydrates, protein, calcium, vitamins, iron, all these elements put together make a complete diet, if any one of the above is missing, it can cause a deficiency in your body and can make you sick.

Similarly, ignoring any of the elements of personal finance, may leave the investor crippled in times of need or when a goal arrives. Holistic financial planning is a 360 degree approach to investment planning. It states that all the elements of personal finance must work together to achieve all the financial goals of an investor over his lifetime.

So, how do you do your holistic financial planning?

Each investor has a set of unique needs and preferences, therefore there is no universal financial plan which is the right fit for all investors.

Further, it's not just about about having a comprehensive approach and integrating all the elements of personal finance, these elements are interdependent. One investment can be of dual use, like you can invest for saving tax as well as the same investment can be mapped to a long term goal like buying a home. The portfolio needs to be optimally diversified. You must prepare yourself for emergencies, protect yourself and your family with adequate insurance, and you must identify and exploit the opportunities as they come.

It's ideal that you seek professional help. Sit with your financial advisor, spend time with him and share your complete financial standing, the assets and investments you own, what you owe, life goals, needs, priorities, etc., for your holistic financial planning.

Your financial advisor will aid you in designing a financial plan which takes care of all aspects of your life and goals. He/She will keep your emotions under check, so that you don't fall for impulse and take investment decisions triggered by market movements.

Once your holistic financial plan is prepared, there is a need review it from time to time with your advisor, to incorporate any change in your income, expenses, goals, priorities, or any asset allocation changes that may have happened in the portfolio due to markets movements.

To conclude, a holistic financial plan works by looking at the bigger picture, it takes into account every facet of your life. It ensures that all your financial goals and emergencies will be met by properly planning for them. So, sit with your financial advisor and prepare your holistic financial plan.

Sameer, an IT professional, starts his month with Rs 35,000 being credited into his account. In the first week itself, he pays off his bills and rent and other essential expenses, he often treats himself in fine dines and clubs, he's a generous soul and doesn't mind paying for his friends' share at times. However, towards the end of the month, he is often seen seeking 'udhaar' from his friends, to meet his basic expenses. And this is his routine for almost every month.

And Sameer is not an exception, there are so many people who are living a life similar to Sameer's. And this salary to salary approach is generally seen in young people who are early in their careers.

So, are you also among one of those who start their month in riches and end up in rags after 30 days. Are you too living Sameer's life?

Young people are stuck in the mess, primary because of excessive spendings, their love for gadgets, fashion, expensive food, better lifestyle, and in the pursuit to have all of it, they end up spending much more than they should. Mismanagement of finances, extravagance and a living in the present approach is creeping into the young blood.

The repercussions are:

1. You don't save for your future goals. A living on the edge approach doesn't let you grow and achieve your goals, because you are stuck with making both ends meet, at the end of every month.

2. You aren't prepared for emergencies , you might end up losing the job and in absence of any savings, it'll be about survival.

3. By the time you'd realize you'd be far behind others. When your friends will be buying their first house, you'd be struggling with your credit card debt.

Ideally, the best time to start investing for your future is when you are early in your career. You don't have the responsibility of a family on your shoulders, which extends you the leverage to save more, for short term goals like buying your first car, as well as create a strong financial backup.

So, What you need to do, to get back on track?

Budget: First of all, prepare a budget and follow it religiously. Write down your expenses, so you'll get a clear idea about where all you are overspending. If you like gadgets, download a Budgeting App on your phone. You'll be able to track your expenses, you'll be alerted before approaching the expense threshold, and it'll help you manage your bills, etc.

Spend judiciously: Cut impulsive spends. Make it a point to always consider your need before you take out your card. You would realize that much of the money you spend goes into discretionary expenses, a large part of which could be avoided.

Identify your Goals: Define your goals. It could be saving money for a professional course, a hobby like joining the swimming club, a 10 day trek to the Valley of Flowers, saving for marriage, first car, etc. Or it could be long term goals like buying a house or even retirement. Whatever it is, whatever fantasies you have, pen them down.

Consult a financial Advisor: Once you have your goals ready, look for a knowledgeable and trustworthy financial advisor, who will help you in designing the masterplan to achieve your goals.

It'll be a step by step plan, considering your goals and your current financial standing, your advisor may even suggest you to put some goals on hold. Your financial plan will serve as a guide for you, it'll tell you how much money you need to carve out for each goal. It'll help you cut your discretionary spends, since you have your investment commitments.

Invest: Lastly, it's important to start. No matter how small the investment amount is, but you need to put your vehicle in the first gear.

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With the ITR filing deadline not even a month away, it's time to start gearing up to file your return, if you haven't done already. Waiting for the last moment may not be wise for a number of reasons, there may be discrepancies in the TDS and the tax due, you may require additional documents or data, and moreover the tax filing website is often sluggish because of the heavy load on the last day. For any reason if you miss the deadline, the penalty for late filing may go upto Rs. 5,000, and you can also commit mistakes in haste. So, we suggest you to utilize the time in hand, collect your documents and data so that you can file the ITR in time. You can file the ITR by yourself on the e-filing portal: www.incometaxindiaefiling.gov.in, and there are various other websites, also providing a platform to file returns. Alternatively, you can also reach a professional for help.

So, here is a quick guide on how you should go about filing the income tax return.

Before moving on to filing, you need to have the numbers ready, and the corresponding documents, like documents supporting income, expenses, bank account details like ifsc code etc., for claiming refunds.

Once you are through with the groundwork, it's time to file the return.

- The first step is to select the ITR form applicable to you. If you are a salaried individual, with income less than Rs 50 Lacs and/or income from one house property, and no business income, no capital gains during the year from sale of any assets, then ITR-1 form will be applicable to you. ITR-3 or ITR-4 for business income or income from profession. There are various other ITR forms, please refer the following table for other cases.

Source: www.incometaxindiaefiling.gov.in

Business/Profession: If the business or profession is on a small scale and the incomes and expenses are simple and straightforward then you can file the return on your own. If the calculations are complicated, then we suggest you to seek expert help.

Salaried Individuals:

Enter the incomes

This year, the IT department seeks a detailed breakup of the income earned by salaried individuals, like the basic salary, value of perquisites received, profits in lieu of salary, deductible allowances received. Be careful while filling in the details. You'll get the break-up in the Form 16 that you get from your employer.

Enter other incomes, apart from your primary source of income,

- Rental incomes

- Long Term and Short Term Capital Gains received during the year, check the exemptions allowed under Section 54, 54B, 54D where the capital gains is on the sale of a property.

- Interest incomes, like interest on FD's, PPF or NSC redeemed, bonds, savings account, interest income on tax refunds, etc.

Note, that interest income from Savings account is exempt upto Rs 10,000 u/s 80TTA and this exemption is not applicable to FD's.

Also the bank deducts TDS @ 10%, if you fall under a higher slab then you'll have to pay the extra tax.

Enter the exempted expenses

- The investments and/or expenses falling under Sections 80C, 80D, 80G, etc.

- Home Loan principal and interest are exempt under separate sections

- Investments under different sections

- Make full use of your salary breakup, uniform allowance, HRA, transport allowance, etc., subject to the bills furnished by you to the HR department.

- Even if you did not claim for an exemption which you had already paid for, while submitting the proofs in the March month, claim for it now. You can always claim a refund.

Check the form 26AS, to cross check the TDS. This form is available on the tax filing portal. In case of any discrepancy between the TDS appearing in the above form and in your form 16, or other TDS documents, then reach your employer or the payer of the respective income.

 Enter the TDS details

Pay self assessment tax, if any. If the tax liability is more than the tax paid as per the form 26AS, then pay the additional tax by filling the challan 280 also available on the tax filing portal. You will have to enter the details of the Self assessment tax paid, like the BSR Code, Challan No., tax amount paid, etc., in the return.

In case of a refund due, enter the bank details in the ITR form.

File the Return.

And Lastly, e-verify the return. You can do it within 120 days of filing the return. There are various online methods to e-verify like Net Banking, Aadhar OTP, bank account, etc. Alternatively, you can also send a hard copy of the ITR-V to CPC, Bengaluru.

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