Are you a NRI and looking for how to do financial planning? Then you are at the right place. Read this complete article.

In addition, you need to have a clear plan in your mind about whether to stay long-term in the country where you got the job or would like to come back to India after some years of working.

 

Financial planning for NRIs…

NRIs first need to set up an emergency fund…

Yes, NRIs first need to set up an emergency fund.

In addition, this emergency fund must be equal to 6 months of monthly household expenses + E.M.I., if any.

And you should deposit this fund in an NRE bank FD, as this FD is tax-free and low-risk.

NRIs should not invest in real estate in India…

NRIs are not allowed to invest in farmland in India.

But some NRIs are buying farmland in India, which is not legal.

In addition, I suggest NRIs not buy any house in India.

If you do not have your own house in India, are you planning for your own house when you come to India?

Then it will be a wise idea to accumulate the corpus required for the own house and buy it only after you come back to India.

Moreover, you should remember if you are coming back to India in 15 years? The house structure will deteriorate to some extent in these 15 years.

And you may not like the house design after 15 years that you have chosen today.

Finally, do not fall into the trap that you cannot buy or construct the house after 15 years,  as inflation is rising.

Again, there are ways to invest money properly and earn inflation-adjusted ROI and still buy the house that you are looking at after 15 years.

NRIs should not create black money with hard-earned white money….

One more reason why I say not to invest in real estate or lend money to relatives and friends is…?

Because it will create black money for you.

In addition, you may be thinking that I will not sell my real estate in India or I will manage black money in India.

But there is a high chance that your children will settle in the residing country only.

Then your children can manage these physical assets properly?

So, avoid assets which accumulate black money for you in India.

And invest your hard-earned money in financial assets and you will accumulate white money only.

Insurance Planning for NRIs…

Even though you are not residing in India, I suggest you take health insurance for your entire family in India.

In addition, this health insurance coverage should match your standard of living.

Moreover, you should have health insurance coverage ranging from 1 crore to 3 crores today, with a minimum base cover of 25 lakh and the balance cover should be from the super top-up policy.

However, if you are sure that you are not returning back to India, then there is no need for health insurance cover in India.

But you need global insurance coverage in your residing country.

And you need to take life insurance cover in India or in your residing country based on the need-based analysis method.

In addition, you need to take personal accident insurance for both wife and husband for a number of years; expenses must be covered.

And you can take this policy in India or at your residing country.

Finally, you need to take a critical health insurance policy also in your residing country.

And the coverage for this policy must be close to the accidental policy.

Again, if you belong to a high-net-worth family, you can ignore life insurance, accidental insurance and critical health insurance.

But a health insurance policy is a must for everyone.

NRIs must have a financial plan in hand…

NRIs must create a financial plan in hand and strictly follow the 6 steps of financial planning.

In addition, the “time value of money” concept in financial planning will help NRIs determine which goals they can meet in the future and which they cannot.

Risk Profiling for NRIs…

Nris must do their risk profiling before starting their investments for their future financial goals based on the financial planning.

In addition, once your risk profiling is done, you know what type of investor you are.

And based on that, you need to do the asset allocation and invest accordingly in financial assets like NRE bank Fd, mutual funds in India, etc.

Finally, you need to do the rebalancing of the portfolio at least once a year.

However, you should keep in mind the taxation rules both in your residing country and in India.

NRIs may consider investing for child education in residing country…

Are you about to come back to India or want to diversify your investments?

Then it is ok to invest in India.

But you children may complete their higher education in your residing country only.

So, its better your child’s education purpose investment beats inflation in your residing country.

As in the long run, we do not know whether Indian inflation will be high or your resident country’s inflation will be high.

Moreover, we do not know the rupee depreciation effect in relation to your residing country.

Finally, when you are taking back the money invested in India, if the rupee is depreciated in all these years in relation to your residing country for your child’s higher education, your return on investment will not be great.

Nris also may need a Fianncail advisor for financial planning…

Not everyone can learn everything.

In addition, investment management needs a smaller number of mistakes and a high number of right things to be done.

Moreover, in your wheel of life, you need to spend time for Physical activity, work, family, sleep, personal space, etc.

After spending time on the above important thing in your life, you may not be having enough time to spend time learning and implementing your own financial planning.

Again, based on your risk profile, you need to invest in assets where some risk is there.

And you should know the ways to cater to those risks in the investment.

Finally, fear and greed also play a big role while investing in mutual funds.

NRIs should not buy products from banks…

In spite of great knowledge and skills, NRIs get fooled by the bank employees.

In addition, NRIs feel that the banks are giving them the right investment advice.

But the actual fact is that banks are there to earn money and they are not for you to earn ROI.

Moreover, many banks will not do basic things like risk profiling for their bank customers before offering a mutual fund scheme.

Finally, most banks are not SEBI-registered investment advisors.

Writing a will is a must for NRIs…

I have seen and heard that many NRIs fail to write their will when they are alive.

But their family members may not get any assets that the NRI owns in the absence of a will.

So, do not forget to write a will for yourself.

 

Conclusion about Financial planning for NRis…

There is nothing wrong with doing the financial planning and investment planning on your own if you have time and ability.

But if you feel at any point in time that its better to have a financial advisor for yourself.

Then, please do remember that financial planning by charging fees and investment planning can both be done only by SEBI-registered advisors in India.

However, there are only around 1000 investment advisors registered with Sebi as of the date.

So, find an advisor for yourself in your district, if not in your state and take advice from him when needed.

However, it may be noted that a large number of financial advisors advise Nris belonging to USA and U.K.

And this is due to the strict tax rules of those countries and their complexity.

In addition, it will be hard for the financial advisor to specialise the products and their rules and conditions of other countries.

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