Financial Planning For Ex-servicemen

Serving in the Army, Navy or the Air force is the dream of many young men and women in our country. The respect this job commands is just too much to count. As you a man who serves in the defence forces guard our Nation’s boundaries, you just cannot forget financial planning. Defence personnel retire early. Officers may retire in their late 40s or early 50s.

Yes, the defence personnel enjoy a lot of perks, benefits and even a pension for serving in the armed forces, But, this doesn’t exclude them from sound financial planning.

Financial Planning For Ex-Servicemen

1. Put some money in FDs

After demonetization, banks were flush with cash and cut fixed deposit and savings bank rates. Citizens who used to invest in FDs and other traditional investments, pumped money in mutual funds. The year 2017 saw record inflows in mutual funds via SIPs.

Now things are different. Inflation is back. Inflows into eqity mutual funds, schemes including ELSS have declined for 3 months in a row. RBI has gone for back to back repo hikes in its bi-monthly policy review. The repo rate has been hiked from 6% to 6.5%. Banks have started increasing FD rates, bringing a smile on the faces of conservative investors, senior citizens and ex-defence personnel.

HDFC Bank has increased FD rates on various maturities by up to 0.6 percentage points. SBI will offer an interest rate of 6.7% for term deposits of 1-2 years, up from the existing 6.65%. Chances are more banks will raise FD rates and it’s a good idea for defence personnel to invest some money in FDs.

SEE  ALSO: Financial Plans For Retirement Benefits

2. SCSS for ex-servicemen

You can invest in the SCSS if you are 60 years or more. Ex-servicemen are eligible to invest in the senior citizen savings scheme (SCSS), regardless of the above age limit. A joint account can be opened in SCSS with spouse.

An investment in SCSS is extremely safe and comes with a Sovereign Guarantee. SCSS offers 8.3% a year (January-March quarter), payable quarterly and interest is taxed. Rates are revised each quarter and once you invest in SCSS, the rates remain fixed across the tenure. The minimum balance in SCSS must not exceed Rs 15 Lakhs.

The investment in SCSS enjoys tax benefits up to Rs 1.5 Lakhs a year under Section 80C of the income tax act and premature withdrawals are allowed. SCSS has 5 year tenure and can be extended by a further 3 years on maturity of the scheme. TDS is deducted at source on interest if the amount of interest exceeds Rs 10,000 a year.

3. Tips for ex-servicemen to manage money better

The rules of financial planning for ex-servicemen are the same as for you and me.

• Make a budget which not only accounts for every rupee earned, but also every rupee spent.
• Identify financial goals and make a plan on how to attain them.
• Understand inflation, (the rise in prices of goods and services with time), and make sure investments earn more than inflation.
• A soldier knows all about emergencies and plans for them. Make sure you have money set aside in an emergency fund for at least 6 months worth of living expenses. Yes, the perks are handy, but there’s no alternative to an emergency fund.
• Insurance is an essential part of financial planning. You know the importance of life insurance and health insurance. Defence personnel do not need health insurance. Service personnel and spouse are covered for life under the Ex-servicemen health scheme. But, defence personnel can avail a health insurance plan for his kids.
• The Government takes good care of the widows of defence personnel.

4. Ex-servicemen can pick up a job

A soldier is all about discipline. He knows how to hold a job. In the US, retired personnel of the armed forces get jobs in the defence industry. They work in Lockheed Martin or Heckler and Koch. Sadly, not many ex-servicemen work in the defence industry or take up jobs in Private Companies. But, all this is changing. Cab aggregator Ola had come up with a programme to help ex-servicemen called the “Ola Sainik” in 2015. More than 1 Lakh ex-servicemen will be absorbed as entrepreneurs on the Ola Platform by 2020. A few thousand ex-servicemen are already on board the Ola Platform.

Rival cab aggregator Uber, is not far behind and had launched the “UberFauji” programme. Ola and Uber have been facing problems with a few unscrupulous drivers and problems associated with background verification. Hiring ex-servicemen can solve these problems. Soldiers are all about discipline and Ola and Uber are reaping the benefits. It’s a win-win for both parties. Ex-servicemen get the benefits of high income and flexible timings.

An ex-serviceman who drives a car for a famous cab aggregator said that as a Punjabi and ex-serviceman, I can drive anything. He won the best-rated driver award in a particular region and also a cash reward and a gift.

Be Wise, Get Rich.