Busting some personal finance myths

The purpose of insurance is not to protect your life and limbs, but your wealth. Initially, all you can rely on is your human asset to build wealth. Your goal is to gain employment, earn an income, and build some assets.

If something happens to the human asset that may affect its ability to earn an income, insurance will ensure that the wealth for you and your family is preserved.

Life insurance is necessary earlier in life. Acting as a shield, it safeguards your assets.  It is not an investment, even if it is marketed as one. In the long run, insurance becomes more expensive if it also serves as an investment

In India, we are living through a transition when corporate interests and insurance companies take over health care. The treatment options are unnecessarily elaborate and costly to feed the revenue targets of service providers.

In reality, a loan is only a way of taking advantage of tomorrow's income today. The interest on the loan is the price to pay for this. If there is enough income to pay an installment, but not enough wealth to purchase the asset today, a loan is useful.

 Investing with the govt is a safe option. Because of this, the government gets away with paying the lowest interest rate. The base rate is the interest rate at which the government borrows. No one can borrow at a lower rate.

Reverse mortgages are distress options, not normal ones. The appreciation of your house is sacrificed in exchange for an income you desperately need. The reverse mortgage is your last option if you have only one asset and no other income or wealth.

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