5 benefits if you use credit card

Even as many suggest not to use credit cards for making various payments, if used smartly there are many benefits one can avail from credit card payments.

What is Rupee Cost Averaging?

Though this may not be always the perfect investment strategy, choosing to rupee cost averaging has many benefits to help you in the long run.

Rupee cost averaging is the habit of investing a fixed amount of money over a period of time, regardless of market movements.

For example, if you decide to invest Rs.10,000 on the 1st of every month, for 2 years, you will be following the route of rupee cost averaging. There is no variation in the amount you choose to invest or the timing of investment

Systematic Investment Plan

Systematic Investment Plan(SIP) works best in case of rupee cost averaging. Lets assume that you have Rs.1,20,000 sitting in cash that you can invest right now. You may choose to invest Rs.10,000 every month for a period of one year. This is the strategy which SIP follows. 

As SIP follows fixed rule, independent of market performance, it is unemotional, diversifies your unit price and makes you less affected by the market movements which is normally there.This is best suited for salaried individuals who receive their income on a monthly basis. 

In addition to the above, it also brings in discipline to your investment style. As you all know that you should not put all the eggs in one basket, SIP brings in the diversification in your investments. However if you choose to invest in lumpsum, it will build an emotional investment strategy perspective and any market fluctuations can have a long term impact on your investment decision.

Alternatively, SIPs can hedge you from trying to time the market which is generally a losing investment strategy over the long run. It also minimizes the chances of feeling regret and possible anxiety that you invested when the markets were high.

To recap, choosing to rupee cost averaging has many positive behavioral and psychological benefits that can impact your investment style. The most crucial thing is whether to pick the SIP route or lumpsum and getting started. 

5 hand-picked YouTube videos related to personal finance.

This week, I have curated 5 topics related to personal finance.

Have you made your investments to save on income tax yet? If not, here's all you need to know about ELSS, the most attractive tax saving instruments.

This video will talk about the importance of tax return filing.

Learn about different types of mutual funds

This video talks about busting the financial myth about stock markets

This Mobile App helps to track your favorite stocks, indexes and F&O contracts on a real time basis.

7 steps of money management

 

When do you invest?

 

Is your investment behavior like this?

As I interact with investors, I realize that most of them, predominantly in the salaried class have the habit of procrastinating their investments till end of a financial year, precisely to be March. I am not saying that this is completely a wrong practice, but one should check that, how many times have they ended up making a thoughtless investment decision just to satisfy the tax monster, letting the surplus money sleep peacefully in the savings account by earning nominal bank interest and not spreading the money effectively through various timely investment vehicles?

Planning during this year's fourth quarter is more of adventure than normal as there may be pressure points shooting up from various levels of the organization to achieve targets, performance appraisals, top management visits and what not ! Despite knowing all these, we still manage to make investments randomly and be an impulsive investor.

A two pronged strategy will make your investment decisions unbiased, eliminate forced buying, better liquidity management, life goal oriented .. Last but not the least, it works as your tax saving tool too.

Financial Planning and Disciplined Investing are associated directly with stability and security. Financial Planning is a process that determines how we can best meet our life (Personal as well as Professional) goals, through the proper management of our financial affairs.  Disciplined investing is all about mind setting to start investing early during the year. It could be lump sum, bits and pieces, monthly depending on the comfort levels of the investor. 

When there are plenty of Financial Advisors, Agents, Relationship Managers presenting you with umpteen investment options, setting a financial goal is the first step to financial freedom which could be short term, medium term and long term respectively.

Short Term goals could be School fees of kids, Purchase of household appliances, Buying tax planning investments like insurance, tax saving funds etc. Foreclosing a loan, Foreign trip, Buying a new vehicle, Saving for buying a property falls into Medium term and thirdly the long term goal which covers building retirement corpus, estate planning, wedding expenses, post retirement living essentially life planning. 

To sum up, Financial Planning is like an endowment plan which ensures life goal protection and a sober investment mechanism. 

A well thought and systematic investment pays a better interest ! 

Hope you enjoyed the article - if you have any thoughts or suggestions feel free to add in the comments section.

Hiring a Financial planner? Events that prompt you to seek one

If you are thinking of hiring a financial planner here are some of the key events that should prompt you to seek one!

Women & Money

Women's day is around the corner so we look at how women have started playing a major role in taking financial decisions!

Financial moves to make in your 30s

I am excited to talk to you today about what happens if you are a late starter when it comes to your investment and you are getting started at your 30s? What do you need to think about?

Let's dive in and talk about it.

The biggest thing is most of us in our 30s, its been a long path to get here. Chances are we have not invested to date because we did not have enough money, no stable job, did not know what to do after higher studies and we bounced around. May be we got stuck with some life events and unforeseen reasons. These kind of things lead people down a path where money and investing was a challenge between their 20s - 30s. Now we are in the 30s and know that it is time to get started. 

Here is what you need to think about when you get started investing in your 30s.

Understanding your goals

The biggest thing you need to do is to decide on when you want to save, what life events are going to be important for you and what is really going to happen etc. The first step to addressing it is having an emergency fund of at least six months already saved should something happen to you because you have someone relying on you. You probably have a husband or wife, you have a child on the way etc. You could lose your job and you need to have at least six months emergency fund to live on

Organize your finances

You need to have a tool for setting up and viewing all your investments in a dashboard. In case if you are not organizing, you are adding more complexity to your investments to manage and view it. Kuvera.in is a good tool to track and monitor all your investments in one place. So make sure you get yourself financially organized.

Take care of your family

Make sure you have a will in place, life insurance, health insurance, personal accident insurance etc so that in case anything unforeseen happens to you your family can rely on it. If you have a family, these things are mandatory before you get started in investing and building wealth for the future.

Saving for the future

This is for deciding how much you need to save, how you want to save and set up a retirement plan.

Planning for the big events

Decide on what big events are going to happen and planning for them, because if they are not part of your plan, chances are that you are not prepared for them. So, are you going to get married? Do you want to have kids in your 30s? Is your sibling going to get married? Do you want to take a big vacation?  What are these plans? These are essential questions you should ask yourself as you are building your financial moves for your 30s. This will help you to strike a balance and make sure you are achieving everything.

In your 30s, it can make sense to meet with a financial planner to discuss creating a financial plan if you do not feel comfortable building one by yourself. If the above steps of making a will, choosing life and health insurance after comparing the best suitable products cannot be done by yourself it really makes sense to approach a financial planner to put together a plan for you.

Way forward

The best order for most people to save for the future in their 30s is to first contribute towards an employee provident fund in addition to the mandatory contribution. This can be followed by starting a Systematic Investment Plan (SIP) to set up a retirement corpus. The biggest thing here is that you need to start. If you are in your 30s right now, get started and get your goals on paper. 

6 tested and proven steps for financial planning

This write up is not giving personal advice. It is meant to provide factual information for educational purposes, and I do not know your personal circumstances and financial goals. And thus this article should not be taken as constituting professional advice. 

As an introduction I am going to ask you why you should be reading this article? Now there are two groups who may be interested. Whether you are a financial planning client or an actual financial planning advisor. 

So if you are a client or thinking about becoming a client of financial advice, it's helpful to know the process and what is happening in the background and what is going to occur when you approach the financial advisor. Financial advisors should love having well prepared clients. So you may go there with more of your eyes open once you go through this article. It will also help you assess the quality of advice you are receiving as a client. Because after all, clients should be the centre of all advice. Your typical financial advisor may just be a product salesman basically trying to make you buy anything and it does not fit into your financial circumstances or needs. A good advisor would be professional with his or his client interest as his priority. 

This article may act like a bit of refresher for either a financial planning client or advisor.

Step 1 - Collecting the client information

This is the very first thing a financial advisor will do. He/She will collect the financial and non financial data about the client. This includes information on your income, your assets, liabilities, employment status, family details etc., insurance details, retirement savings details and a whole variety of information. The better picture client can give, the more appropriate advice they can give you. Most of the financial planners use a data sheet to obtain the same.This is more or less collected in google forms. 

Step 2 - Determine the client objectives and goals

The client should list his short, medium and long term financial goals. These goals should be classified into specific requirements. For example if the client says I want to have a comfortable retirement, then the planner will have to work out what a comfortable retirement is for the client. Perhaps it is a certain level of income for the client after retirement. 

Step 3 - Perform a gap analysis to identify financial problems

Now we need to check the alignment of financial goals versus the current financial situation. Are the goals unrealistic? For example client might say, I need to buy a 3 crore villa in the next 5 years. Then the planner looks at the goal and it just may not be a realistic goal. Then this gap analysis has to be discussed with the client face to face and resolve it.

Step 4 - Developing the financial plan

This is where the planner goes ahead and works on the plan based on previous steps. The plan needs to be in depth so that the client can take an informed decision whether to proceed or not. This plan cannot be too brief or too detailed and should be free from maximum jargon. The plan includes scope of advice, background of the client, financial goals and objectives, gaps analysed and how it is going to be resolved.

Step 5 - Present the plan and implement 

Now the financial planner has to go back to the client with the fully prepared document and present the plan to the client. The advisor can answer any questions that clients have and resolve any concerns. It  is important that the clients understand the pros and cons of implementing the strategy advised. 

Step 6 - Review the plan

The planner has to provide updates on how the products and investments are performing throughout the period. The advisor has to provide updates on how the overall plan is performing and track the financial goals. Planner has to seek information about the client whether any personal circumstances have changed and accordingly review the plan.

Emergency? Investment survival kit for family

 Here is your first aid kit for your family survival in case an emergency pops up !

PS: The voice is disabled in this video to grasp content in a better manner !

10 Bad financial habits to stop today!

 

Top 9 ways to repay debt

People and businesses take on private debt because they want to buy something today and pay for it in the future. For example, buying a home or factory with a loan gives people access to a property before they generate the income to pay for it, and in this case the building itself can be used as a security to be seized if the borrower does not repay the lender. People on low income needing to borrow for current consumption, like food can rarely offer any security, and with such a high risk of bad debt. The rates of interest on so-called loans can be massive.

Debt often gets a bad name but nearly all innovation, art, medicine and food production requires upfront spending before income can be achieved. And it's debt that can help people without wealth to create some. 

Today we discuss top 9 ways to repay debt:-

Create a budget:-

The very first step to solve the debt problem is to establish a budget. This gives you a clear-cut idea about your income and expenses. You need to start segmenting each expenses and zoom it further to identify where all you can cut expenses. This will favor you to scale back on your spending and organize extra funds which can be used to clear your debt.

List out all your debt:-

Second step is to point out all your debts in an order. It could be based on the size of the loan (balance principal payable) or the cost of the loan (interest rate) or on the basis monthly commitments (EMI). This will give you an overview on how to prioritize your repayment

Apply different repayment strategies:-

Once you point out all your debts, you can follow different repayment strategies to pay off your loan. The common ones are:

Avalanche method

In this method point out your debts from highest to lowest by interest rate. You may pay the minimum monthly commitment on each, then allocate as much extra as you can each month to the one with the highest interest rate. This method favors you to save the most money on interest. 

Snowball method

In this method, you need to make it a priority the smallest debt first irrespective of interest rate and initiate clearing the smallest one first. You need to pay the bear minimum monthly commitment on each one, except the smallest. Next step is to go on to the next smallest debt. By this way you are likely to gain momentum and seeing the loan basket disappear for good.

Use Balance Transfer:-

This feature will help you gain the benefit of switching into a low interest rate market from an existing high interest rate loan. Some financial institutions even give the feature of free balance transfer which will favor you to reduce the cost of loan and save more, which can be allocated into principal of the loan for a faster loan closure.

Dedicate your company bonus:-

If you are an employee who receives yearly bonuses or on half yearly basis, you can allocate that for your loan closure plan. You need to be also careful about your impulsive temptation to spend those bonus on luxury items or vacations. You are the one who has to weigh your financial situation versus impulsive spending.

Sell unused household items:-

One tends to have lot of household items which is hardly used. For example gifts received during birth of your children as children have outgrown or gifts received during your marriage and has become old etc. These can be sold and the amount can be allocated for paying off debts. You could use quikr.com or olx.in for that.

Review and change your habits:-

If you have taken loan and deep diving in that, identify that it is your spending habits or impulsive buying that got you into this situation. Whenever you feel like following the same habit and wants to do an impulsive buying, think again and realize whether you really need it now or not? Or is there an alternative to it?

Set benchmarks and gift yourself:-

You need to set a target for paying off your loan and whenever you have achieved the milestone set by you, reward yourself with a gift like sign up for a hobby that you like etc. This will motivate you to set higher benchmarks and follow your debt pay off strategy as per your plan. 

Discipline :-

Of all the above, this is the key thing which needs to get you going. Once the plan is set, you should follow it rigorously and review your plan at regular intervals to make sure that you are on track.

10 tips for a budget travel

It’s easy to get carried away with spending money while you’re on vacation. 

With all of the temptations at every corner, here are a few ways you can make sure you don’t overspend while on your vacation.

Teach your child about money!

 

Do you wish to pass on the basic lessons of money to your kid? Then this video is for you.

Starting a Business - Tips to help you Succeed

If you are a want to be entrepreneur, odds are you already have the drive, but, you might not know how to start building it. This video will help you with the tips to succeed.

Buying home for the first time? Guide to it

 

Today, I am excited to share with you the first time home buyers step by step guide, whether you are a first time home buyer or you have not purchased a house in a while, or the last time you bought a house it just wasn’t a very smooth process, you are in the right place.

Let’s break down from beginning to end exactly how the home buying process works. We will break it down into four parts.

a)      Applying for a mortgage – You have got to have a partner in the process if you are going to buy a house.

b)      Making an offer – Engaging with the seller

c)       Closing – The period of time where you actually purchase the house

d)      Break the loan payment down into parts

Your loan payments obviously are going to be with you for a while. This write up is going to help you if you are absolutely clueless and just know that it’s a good idea to purchase a house and simplify the process of buying. So let’s get started.

You might think that the very beginning is going out and looking for houses. May be you are driving around town looking for houses now. You know that it is fine but the real beginning of the process is knowing whether you can buy a house at all! You may have got the money to purchase the house and if you do this part is not as important for you but for the majority of people does not have finances right there to pay for the house. So you are going to need a financial partner, someone to invest it in this house with you and banks that provide home loans are the ones that are generally going to do that for you.

So the step one in the process of buying a new home is applying for loan. You are going to apply for a loan so that you know what you have available and what kind of house you can purchase. Generally, you will get pre-approved loans to borrow a certain amount of money. But one thing to remember is that pre approval is not 100% sure but a financial institutions way of saying that it looks to us at this point that you could borrow this amount of money. Later on in the process they are going to consider if any job scenario changes that have happened and preapproval is unlikely to go through.

Now the second step is once the loan is preapproved, it is time to truly go house shopping! Now you have a sense of how much money you can borrow, how much money banks are willing to invest in your new home. Once your dream home is found, you are going to make an agreement with the seller on some last minute renovations to be made before owning it. One needs to look at house insurance as well as part of the agreement.

The third step is making the agreement official and agree on the contingencies mentioned by the buyer and seller agrees or makes a counter and both the parties go through and agree on the same and the purchase of house happens. So now you have purchased the house and you are ready to move into house that will provide you tons of joy, maybe grow your family etc. whatever your future interests are in life.

The final step is to break down your equated monthly installments. There are 2 parts to it and that is principle and interest. The principle is the part of your monthly EMI that goes towards paying down your debt. You borrowed 25 lakhs and every month you are paying a little bit to pay that down in 15 or 30 years as per the agreement with your bank. Principle is not the main part of your payment. It depends on how your loan is set up but often times at the beginning of the loan, the main part is actually interest. Interest is part of your monthly payment that goes toward paying the bank for the privilege of borrowing their money. As you know, banks don’t do this for free.

Alright, what we learned: we applied for a loan, we navigated all the different parts of the home buying process. Now you understand how these things work, exactly as to how buying a house works from beginning to end.

 

Free Financial Goal Setter and Planner

Here is a free resource for you to set your goals and plan for it. 

Mail me @ apurushothamancfp@gmail.com to send you a free financial goal setting and planning tool.

 

Financial Preparation for Millenials