Rs 52 lakh: This is what a 30 yr old stands to lose due to tobacco use over 30 years

This is what a 30 year old stands to lose due to tobacco use over 30 years.

You might have come across articles about simple money saving tips. Cut down on power usage with energy efficient lamps and save Rs 300 a month. End the subscription to costly TV channels and save Rs 120. Give up on small luxuries like a cappuccino or a dinner date and see your savings zoom. Though all these penny-pinching measures are worth considering, you can save a much bigger amount every year if you just take good care of your family’s health.

ET Wealth estimates that the cost of smoking can add up to a gargantuan Rs 52.15 lakh over three decades (see graphic). Good health will not only bring down your medical bill but also prune your insurance premium. And this is when we have not even calculated the cost of treating serious illnesses such as cancer and heart ailments.

One cannot completely avoid falling ill. If there was such a formula, the medical profession and the pharmaceutical industry would go bust. But you can reduce the chances of falling sick by leading a healthy lifestyle that fortifies your body.

Kick the butt

Tobacco use burns the biggest hole in your finances. It hurts you at three levels. If you are addicted to cigarettes or gutka, it can cost you quite a packet. Even if you are a light smoker and consume five cigarettes a day, more than Rs 10,000 of your wealth is going up in smoke every year. Gutka users who use five pouches a day are chewing up almost Rs 7,000 in a year.

You don’t need a research report to know that tobacco users are more likely to visit their doctor than non-users. Every time you visit a doctor, you end up paying Rs 400-500 as consultation fee and Rs 500-750 on medicines. Smoking makes your body vulnerable to respiratory diseases and cardiac ailments, besides cancer.

Insurance companies are aware of these risks and accordingly hike the premium for tobacco users. If you smoke or consume gutka, you will have to pay 40-60% higher premium for your life insurance. A 30-year-old non-smoker will pay Rs 4,100 a year for an insurance cover of Rs 50 lakh for 30 years. But if he smokes, the premium will jump 40% to Rs 5,800. The medical insurance premium is also lower if one does not make a claim.

This isn’t all. Poor health caused by tobacco use also prevents you from leading a full life. Your career prospects can get affected if you fall sick frequently and miss work. This can be particularly debilitating if you are a self-employed professional. Even if you are salaried, taking medical leaves frequently can work against you. An energetic and healthy person is more likely to be shortlisted for a promotion than someone who is often sick.

Prevent, not cure

Kicking the smoking habit is not the only way you can save on medical costs. If you exercise well and eat healthy food, you are less likely to fall sick. Plenty of exercise, good rest and recreation will prevent heart ailments and lifestyle related diseases like depression, insomnia and anxiety.

It’s also important to get a minor problem treated before it turns into a major-and expensive-worry. A root canal treatment for a decaying tooth costs roughly Rs 8,000-10,000, besides numerous visits to the dentist. Instead, if you get your teeth checked every 6-8 months, any cavity can be promptly fixed. A check-up costs only Rs 400-500 while the treatment of a small cavity will leave you poorer by Rs 800-1,000.

The good news is that insurance companies are actively encouraging their customers to take these preventive steps. Customers are offered attractive discounts on annual medical check-ups, yoga classes and even gym memberships. Some companies even go to the extent of checking how many hours you are in the gym in a month. Understandably, your insurance company has a vested interest in your well being. Shouldn’t you too have a vested interest in your good health?



Reduce Smoking… Increase your Bank Balance calculator

Switch banks, but not just for a higher savings rate

Senior citizens, it seems, are clearly enjoying the fruits of the freeing of interest rates on savings accounts. After the Reserve Bank of India deregulated savings bank interest rate in October, banks like Kotak Mahindra, YES and IndusInd started offering higher returns (around 5-7%) on savings bank accounts. Until then, banks were mandated to offer 4% on savings deposits.



Rana Kapoor, managing director and CEO of YES Bank, says: “It’s the senior citizens who take note of the interest rate differential first. The new generation, which has more than one account and access to electronic channels like internet to get information and compare products, is the first to move.”

“New customers belong to various segments – corporate salary accounts, small-scale enterprises, self-employed professionals and salaried individuals,” adds KVS Manian, president, consumer banking at Kotak Mahindra Bank. “The response to the hike in our savings bank rate has been reasonably good, both in terms of new customers and our existing customers. Ever since we increased our rates to 6% on domestic savings deposits, our rate of acquisition has been hovering at around 80%.”

In the December 2011 quarter, the CASA (current account and savings account) deposits of these banks registered a substantial growth. For instance, YES Bank’s CASA stood at 5,913.5 crore at the end of December 2011, compared to 4,838.8 crore in the previous quarter. Similarly, Kotak Mahindra Bank’s CASA rose from 9,355 crore as of September 2011 to 10,615 crore in the December quarter.

Now, higher returns act as a huge incentive for customers to switch banks. However, should it be the sole criterion? Not always, say financial planners, though it is an important parameter. Here are some factors you need to take into account before taking the call:

Asses your situation

“Senior citizens do maintain high balance in their savings bank account for their regular expenses. Hence, they can consider earning some extra returns on their balance in the account by switching their bank,” says certified financial planner Pankaj Mathpal, CEO, Optima Money Managers.

In case of smaller sums, the absolute interest amount earned will not be lucrative. Since senior citizens prefer to keep aside a sizeable amount to take care of any medical or other emergency, earning 2-3 percentage points more would seem attractive. However, the rule may not be applicable to youngsters.

“I don’t see why youngsters should keep large sums in savings account instead of directing the same to other investments products meant for parking short-term funds,” says Harshvardhan Roongta, CFP and principal financial planner at Financial Suraksha.

Those who do not need a large amount of cash at their disposal would be frittering away the opportunity to earn considerably higher returns through other instruments like mutual funds or fixed deposits if they keep the money in savings account. Also, remember, the rates are subject to change, and hence, could also see a drop in future, depending on the situation.

Convenience is the key

The profile of the bank you would be migrating to will also matter. For example, the bank may be a believer of a strong virtual rather than physical presence. Thus, it may boast of a range of technologically-advanced services and channels, but fewer branches, and may not have one in the vicinity of your residence.

“Senior citizens may not be tech-savvy or comfortable with advanced banking systems like internet banking or even ATM transactions. They must keep this in mind before switching to new-generation banks as they focus more on hi-tech services compared to branch-level service,” adds Mathpal.

This would be applicable to all those who prefer face-to-face interaction with bank officials; more so if they are availing of locker facilities. Even if a bank does not have a branch, ensure that it has an ATM close to your place. On the other hand, for the younger generation and others who are tech-savvy, proximity to the branch need not figure on their priority list.

They would need to assure themselves that the new bank provides all the services on internet, phone and mobile platforms. After all, if you are a net-savvy individual but the bank lacks strong internet banking services, it could cause a lot of inconvenience. Likewise, if you are a frequent traveller, ascertain whether the bank’s mobile banking services are up to the mark.

Relationship with the existing bank

Another critical parameter, this will help you gauge whether moving your account from the existing bank to a new one would be worthwhile. Now, your bank account could be linked to your online trading account and home loan (for paying EMIs); also, you may have given an ECS mandate for mutual fund SIPs (systematic investment plans) or making utility bill payments. Switching over to another bank would mean setting up all these transactions all over again and thus a lot of paperwork.

“A differential of 200-300bps should be substantial in absolute terms to justify the switch. For instance, an average balance of 1 lakh for one year will yield an additional 2,000 per annum, and hence insignificant in this context,” says Roongta. Similarly, if you have been relying on your existing bank for investment advice, a change in advisor due to migration to another bank could alter your investment plans. Therefore, you need to satisfy yourself about the quality of advisory services, too.

Keep an eye on the charges

Finally, you would do well to compare charges levied by the current and prospective banks. Ensure that the latter’s charges don’t offset the higher returns on offer. Scan the schedule of charges available on the websites carefully to avoid unpleasant surprises later.




Credit Information Report (CIR), process

Cr score on net, how?

How disciplined and prudent you are in using your credit lines is what a credit score reflects. Your past use and repayment of loans and credit card dues is the basis on which your credit history is formed. Expressed in figures, it is called a credit score. The better your credit score the fewer the chances of your loan application getting rejected. Lenders have now begun taking notice of the credit score while considering a loan request. In the days to come, lenders will increasingly depend upon your credit score to determine your loan eligibility, credit limit and interest rate. So it makes sense to be aware of your credit history and score and keep it good. This awareness also gives you an opportunity to improve your score in the future if it is low. We tell you how to obtain your credit score online.

Online delivery. Earlier, Cibil was offering credit scores and credit histories only through courier, which took 2-3 weeks. Cibil has now come up with an online delivery mechanism. You have to fill up a request form, authenticate yourself and pay the fees, all online, and you will get the score online within seven working days.

Keep records ready. The online authentication process asks you questions related to previous loans and credit cards. For example, it may ask you about the credit limit on your first loan, or who was your loan/credit card provider. Before applying for your online credit scores, ensure that you have all past loan- and credit-card-related details with you so that you do not have any difficulty in the online authentication process. You also need to keep ready a scanned copy of your ID and address proof to attach with your online request, if required.

Online delivery only for credit score. The online delivery facility is only for credit scores, which, by default, also comes up with a detailed credit information report (CIR). Cibil charges `450 for the credit score and CIR. But if you are looking only for the CIR, which Cibil offers for `142, do note that it is only delivered by courier.

Resolve disputes online. Cibil has also started an online credit report dispute-resolution facility. So, if you find any error, check this dispute-resolution facility online, whether it includes your complaint category to be resolved online. If it does so, register your dispute online. If there is any error on Cibil’s part, they will rectify it on their own. However, if it relates to the credit granter, they will coordinate with the lender and rectify your data after its validation.