Friday, August 29, 2008

SIP - Systematic Investment Plans

Second in the series for tools for investments:

Let me start with listing few of the traits:

1) You can not shelve huge amount for savings at once, but can take afford small amount periodically.
2) You have no understanding of equity market.
3) All your savings always lie in bank deposits.
4) You have more or less risk aversion, and want minimal risk.
5) You can stay invested for period of 5 – 10 years.
6) You always seem to be waiting for the “right time” to invest

If you have more or less similar traits, Systemic Investment Plans (SIPs) are appropriate for you. SIPs are just like recurring deposit schemes of the banks. Through SIPs you will be investing in Mutual Funds at regular intervals and can leave the worry about following things:

1) Timing the market. If market is going low, you will be buying at cheaper rates and if market is going up, you are getting returns.
2) Selecting the right mutual fund every time you have lump sum money available with you.
3) You are investing in equity, small amount every month, so cost will be averaging over the period of time. Cost averaging will keep the risks at bay.
4) Avoid panic sales
5) Invest as little as Rs.500 / Rs.1000 per month
6) Becoming a disciplined Investor
7) Taking advantage of Power of Compounding

So, you convinced that SIPs are ideal for you. Next step, decided which mutual fund you want to start with, consider few of the following things:

1) Fund House – performance of various funds of that fund house
2) Fund Manager – look at the performance of various funds managed by him.
3) Track Record of Fund – This will give you the confidence that this product is in market from quite some time and has survived so far implying, chances are that it will survive further also.
4) Investment Portfolio of Fund – My personal preference, when it comes to investing through SIPs is to avoid sectorial funds. Reason, simple, the sector which is hot now may fall in next one year, and SIP is a long term investment. So, I prefer diversified portfolio based funds for SIPs.

There are many sites available where you can get all this information. My favorite is though I also consult before making my call and invest for at least 3 years in any fund and then leave it aside for another 3 – 5 years.

Wednesday, August 27, 2008

Things I always waste my money on!

I generally live by frugal means. I don’t like to waste my hard earned money, but I am not perfect:(. There are so many things that tempt me beyond my self-control and I buy them impulsively. On my last birthday, 3rd August, I took a resolution that I’ll restrain myself from buying at least two such things this whole year.

Finally I found some time, and listed few of the things I am always tempted towards.

1) Wallets - One of the biggest blunders I do quite often with my money, buying all those wallets. I have fascination for wallets, and I have approximately dozen wallets with me. I only use one at a time, and rest all just be there in my store.

2) Strange Dresses - Buying all those dresses from the places I visit, that I have almost never wore in my life. I don’t have any more space in my closet now.

3) Key chains – I love key chains. I have approximately 100 of them. I will stop buying any more of them.

4) Balloons – I love balloons. They are not very expensive either. But I guess I am grown up now and should stop buying balloons. :(

5) Handcrafted Stuff – My biggest weakness. Will not buy those hand made bags, bangles and other decorative stuff any more.

6) Sun Screens – We have long summer, and I have delicate skin. But I hardly use all those sun screens that I buy when summer begins. And sun screens generally don’t last more than 2 seasons. Bye bye extra sun screens.

7) Buying gifts for others – One thing I have hard learnt, gifts need a big occasion. There are other ways to pamper your loved ones. Will try them for my near ones rather then gift therapy from now on.

8) Stationary (dairy, pens, pencils, markers and what not) – I am not a student any more and don’t need those smart diaries and pens. May be limiting them to one diary and few pens. :(

As I am writing this, I know how tough this is going to be. Let’s see how far I can go with my resolutions.

Tuesday, August 26, 2008

What will you buy as a souvenir while travelling?

We all love holidays, don’t we? Seeing a new place is always exciting and I love to bring gifts for everybody when I am holidaying. And Every time I get “not-so-ravishing” comments for the gifts I decide not to buy anything for anybody next time onwards, but given how generous I am when it comes to gifts, I forget my resolution and it becomes a vicious circle.

One day while analyzing my monthly budget, I realized that whenever I travel, I always overshoot my allocated budget, and major contributors are gifts for others and the souvenirs from the place. That’s quite obvious because rest of the things, (like stay, travel) is generally pre planned. And given I am not such a big foodie, food never consumes my money. :)

This time I have decided to think about this little more and lay down some rules to follow while travelling, mainly not to overshoot my budgets. Some of the things that I have come up with so far are:

1) Buying clothes native for that place are big no – no
2) Buying the handcrafted stuff from that place has to stop. They take up more money later to fit in my living room; else they go in my closet unused.
3) Do little research on the place before going, specifically looking at the weather condition prevailing there. Use it to decide what all to pack.
4) Purchasing something that is too delicate not allowed.
5) Things that can’t fit in my bags need not ne shopped for.
6) Only those gifts are allowed that can be used in my native place.
7) Decorative stuff as gift items is strict no. Everyone has their own taste for decorating their homes.

I am quite sure there can be many more things to be avoided. I can always append this list later, but this might be a nice starter for now.

Monday, August 25, 2008

Love yourself – not what you wear or carry!

I have a long time friend who visited me this weekend. While we were chit chatting about different things going on in our life, we also touched upon the finances. It started with her comment, “Your standard of living has improved so much since we last met, you are still the same, very cautious with money. You have not changed even a bit in past so many years.” And we were casually discussing ideas that I put in my money, when she told me about her finances:

“I don’t know how you manage to save! I am working from last 7 years non stop and no matter how much I earn, I always seem to be short of money. Credit card bills, telephone bills, and my salary vanish almost as it comes. Inflation is at all time high, I am worried whether I’ll be able to support my expenditures like this, I don’t know how can you even save when you earn slightly lesser then me?”

And I know her, so I simply asked, “Do you want to know truth or good!” and she said “good” blinking and we moved on with other topic.

She needs no one to tell her the truth, she herself knows it. But still, she told me to list down her 10 habits that she uses to waste her money on (and believe me, she told me that whatever I am listing as anti-frugal, it’s so much required)and also said that I should publish them on my blog. (OK, I am keeping my promise :) ). Here is my list:

1) Who needs to buy 10 new pair of branded clothes every month?
2) Who needs to have kilograms of non-precious jewellery in their closet?
3) Who needs the latest and expensive most mobile phone to stay connected (and it means changing your set every 2 months)?
4) Who needs uncountable pair of shoes?
5) Do you really need extra iPod, when you have phone that has almost similar capabilities?
6) Dining and wining out at costliest most restaurants almost half of the month is by no means a must?
7) 6000+ monthly telephone bill is unexplainable, even if you get breakup of all calls?
8) You are subscribed to your office transportation, why can’t you get up 15-20 minutes earlier and catch it up all working days, rather then driving 7 – 10 times a month.
9) Makeup, I think you are pretty good even otherwise, costing thousands every month?
10) Last but not the least to say, those extravagant beauty parlor trips? I mean shampooing you hairs or oiling them can be done yourself. Don’t visit specialist for them please!

God! No one can teach you frugal living and managing wealth, but time. All the best! :(

Sunday, August 24, 2008

Taking things for-granted

This whole week was very bad. I had to take two offs from my work because of the mouth ulcers I got. And need not to say that I hate being at home because of any kind of illness. :(

While I was killing my time in front of my TV set, (I was at a place with no Internet connection :( ), I was missing my home the most. I always took my home for granted. I mean, off from work, I know I have to head home, done with outing, head back for your home, do anything in this world, and you know you are going to go back to your home. But when I was not there and couldn’t come back to that place, then I realized how much I love my home. I took it for granted and thought that it’s anyhow always there for me.

And it’s not only my home, there are so many things that I take for granted. So I decided to list few of the things that I could recall:

1) Home
2) Partner
3) Parents and Siblings
4) Health
5) Confidence
6) Sun Light

And I am sure there are so many other things. I guess the last item illustrates that I am already off the track in my listings. :)

But how this helps, I mean how I can help myself by this list. Well in lots of ways actually:

1) Start loving all these things more.
2) Start thanking the almighty power for these supports in my life
3) Start taking good care of these things
4) Or may be stopping taking some of these things for granted.

How about you? Can you list some of the things that you take for granted? How can you improve your attitude (or may how can I) towards these things? I am really curious to know.

Saturday, August 23, 2008

Personal Finance – How it helps!

This week, I got some time to review my monthly and annual budget and what I saw was very disheartening, I am very tight on my monthly budget. And my annual goals some how seems to be absolutely out of place, I by no means can achieve them this year. I applied all the mathematics that I could think of but all in vain.

I felt so depressed and felt why am I doing all this? I mean I spend my time on keeping an account of everything and dealing with money judiciously. I can be like rest of the people and enjoy my life smoothly without worrying too much about the future. But then, instead of worrying and thinking about others, I rather listed why I am short of my goals this year:

1) I got married recently, so used lots of my funds in process
2) I am in the process of setting up my new home, so I need at least the basic stuff for my place
3) Inflation is quite high
4) My husband has different spending habits then mine.

These points highlighted the main reason; my budget was not prepared for reason 1, 2 and 4. And this is something causing the problem. I guess, next year I’ll be able to take into consideration these things as well and set achievable goal.

This also gets me to one of the main learning: Just because I practice good Personal Finance doesn’t mean that:
1. I’ll never miss my targets.
2. I will never face hiccups in the process.
3. I will never have unpleasant experiences.

The only things that sound personal finance will help me with are:
1) I’ll be more prepared to deal with financial problems.
2) I’ll have data to look into past and see where I went wrong, so that I could learn from
3) I can better plan for my future.

So personal finance is basically not a magic pill, rather it’s an institution that equips you with necessary knowledge and tools to deal with problems and be better prepare for future.

Thursday, August 21, 2008

And the Bad NEWS :(

Inflation reached another high, 12.63% for last week.
Now what is next? Interest rates have already been hiked 3 times to control this inflation!

Things to do in $5 in Delhi (New Delhi), India

$5 is Rs 200 (approximately) in India. There are so many things that can be done in Rs 200 in Delhi. I have tried many of them myself and will be trying remaining soon. So here’s my list:

1) Dilli Haat – Only thing it will cost you is Rs 15 as entry ticket. Nice clean market and with nice food available.
What all to do – Look around for nice handcrafted stuff available there. You can easily get something useful and good for Rs 150. Else, you a foodie, get the food from all the states there on special counters. Momos, pav bhaji are all worth trying once.

2) Nehru Planetarium - The Nehru Planetarium in New Delhi is situated in the green surroundings of the Teen Murti House, earlier the official residence of India's first Prime Minister, Jawaharlal Nehru and now a museum in his memory.
What all to do – Visit the Memorial Museum, Memorial Library or watch the Sky Show. Currently you can watch “Chandrayaan” instead of Sky show, but its equal fun. At the end enjoying its greenery, have a walk

3) Visit Museums – There are many museums in Delhi, some of the best being:
a) Air Force Museum – A Collection of Aero planes & armory
b) Archaeological Museum - Paintings, Textiles, Costumes
c) Gandhi Museum - Personal Belongings Of Gandhiji
d) Indian War Memorial Museum - Arms, Weapons
e) National Gallery Of Modern Art – Nice paintings and library
f) National Science Centre Museum - Display the various Scientific Instruments
g) National Rail Museum - Collection Of Locomotives And Carriages
h) Doll Museum – Collection of Dolls
Price – The only thing one needs to spend on are entry tickets, and they will cost from Rs 10 to Rs 30.

4) Local Markets - like Sarojini Nagar, Connaught Place
What all to do – Roam around in the market, shop for clothes or other house hold stuff within Rs 200 or instead eat in local food joints for same. Rs 200 will be more then sufficient and you can save as well.

5) Watch plays, movies – So many multiplexes, India Habitat Center, Alliance Francais, Shri Ram Center of Art.
What all to do – Watch movie in Rs 150 or even in less in some of the theaters. If you prefer watching plays instead, so many places to watch. Ticket’s cost varies from Rs 0 to Rs 200.

6) Delhi Darshan in DTC Bus - DTC daily operates Sight Seeing Tours from Scindia House. The fare of Delhi Darshan Service is Rs.100/-. The Delhi Darshan ticket of Rs. 100/- will be valid in all city services on the pattern of DTC Green Card. Children between the age of 5 - 12 years will be charged half ticket i.e. Rs. 50/-.
Places you will be visiting – Red Fort, Raj Ghat, Indra Gandhi Samriti, Qutab Minar, Lotus Temple, National Rail Museum, Birla Mandir (Shri Laxmi Narian Temple).

7) Delhi Metro Tour – Buy the one day card for Rs 70 and browse the extensive, latest metro network in Delhi. One of the best public transportation medium is absolutely worth exploring.

8) India Gate – Go to India Gate and enjoy the green and clean surroundings and breathe taking view of India Gate.
What all to do – Go equipped with balls, Frisbees or just a pack of playing cards, or watch monkeys perform, blow soap bubbles all over the lawns, play with balloons and even get your insides turned inside out on a ferris wheel, loll on the cool lawns, lick a bar of ice candy and watch the floodlit arch and the fountains nearby that seem magically lit up with coloured lights.

9) Visit Forts: Old Fort, Red Fort, Humayun Tomb, Tughlaqabad Fort
What all to do – The colossal forts in Delhi, besides portraying a grand architecture also narrate the history of the erstwhile maharajas who reined this place. Standing amidst the greens of lush manicured gardens, they indeed create a magnificent sight.

10) Zoo - The New Delhi Zoo is a place for animal lovers. It is generally clean, very relaxing place to spend a full day. The entrance price is only 50 Rupees, including the map, which is an exceptionally good deal.

11) Akshardham – It’s a newly constructed awesome temple in New Delhi. It has found its place in Guinness book of world records as well. Place known for its beautiful carvings and architecture has to be visited once at least.
What all to do – Look at the beautiful carvings all over the temple. The awesome architectural work will force you to appreciate its beauty. Watch light and water show, have food in its cafeteria.

12) Have food in one of the local food places – dhabas in CP, local Chinese and South Indian Food Joints
What all to do – This is a must for all delhites and foodies. Awesome Indian food at awesome prices, we delhites survive on it.

Wednesday, August 20, 2008

Off the target: Annual as well as monthly

Yesterday I was unwell and had to take an off from office. Being alone in house and ill, is depressing and gets you to so many doubts.

First and foremost doubt that I get at such times what if from this point onwards, I’ll never be able to go to my work ever? I’ll have no regular source of income and how will I cope with all the things. This is what uncertainty does to you and these are the best times when you should motivate yourself to save for your retirement. No one knows what’s going to happen tomorrow, so the best we can do is to save for our future and keep our calm in tough times.

Motivated by all this, I reviewed my annual budget / expenditure book for 2008 and found that I am on a very tight line, little below then what I wanted to save and it seems this year I’ll certainly short my target :(. This is bad news for sure.

And the second depressing thought that generally comes at that time is monthly budget. These additional medical expenses leave a big dent on your monthly budget and it gets awry. What helps at that time is the some cushion that you initially incorporated in your budget and some cash that you saved in the mean time in the month.

Do read Add Grace to Your Budget on same topic, my favorite blogger talked about same thing few days back. Thanks Rachel, your words helped me keep my cool at the time, when needless to say, I am tight on my monthly budget.

Tuesday, August 19, 2008


We all talk about inflation but I have never seen inflation as prominently as I am seeing it right now. In the last 2 months, I have seen prices of everything going up almost every week. I buy vegetables every Tuesday for my home. 2 months back I could buy all my required stuff in Rs 100 for week. And yesterday it was, Rs 200. Double in just 2 months. Tomato prices have gone up from Rs 10/KG to Rs20/KG, and so is the case with all other vegetables. :(

Thinking about all this, gives me goose bumps. I am sure this is temporary phenomena and prices will soon get stable, but till then, how to manage this extra burden on static budget! And I really wonder that it’s only we who are facing this problem (I mean Indians) or this is the situation everywhere. And then I realized (reading some news reports, articles) that this is prevailing situation at most of the places for now. :(

I hope inflation gets stable, and in the mean time I have to spend more time on beating inflation through more frugal living. Even if nothing seems to work, I have to stick to my principles:

1) Spend less then what you earn
2) Make a budget and track my expenditure to stay on budget
3) Be frugal while spending
4) Avoid any kind of debt

Stay calm and stick to what works for you. Rest all will be fine. :)

Monday, August 18, 2008

Starting with Smart Savings: Money Multiplier Account

When I passed my college and joined job, I was a financial illiterate. All my savings used to lie in bank account and that’s it. Then I came across ‘Rich Dad and Poor Dad’. But once I finished reading the book, I realized that I am also one of the abundant species of “Financial Illiterates”.

I decided to change my breed, and from then started my regime of “Smart Savings”. I decided on my long term goals and decided that not only I’ll be saving regularly; I will also use those tools to save that will help grow my savings at rate > 10% annually. Why more than 10%, because banks will give you 10% returns. So if you spending some time on investments, then returns should be > 10%, otherwise I call it a failure.

When I started Smart Savings, basic problem I faced was deciding what all tools to use. There are so many instruments in the market to perplex you. But now after 2 years, I can list some tools for a fresher in the field that one can explore to start with:

Money Multiplier Account: Its one of the product of ICICI Bank, Corporation Bank of India. (I know about these two banks only. There can be other banks, may be you can consult your bank!) Money multiplier account is nothing but a Fixed Deposit (FD) Account. The only difference is that you don’t need any special request to break it in case you need that money. A Money Multiplier Account allows you to set a minimum balance to be maintained in your Savings Account. You can put in a request for the transfer of the excess of the minimum Savings Bank Account balance to Fixed Deposits. So you enjoy a higher effective rate of interest on your deposit.
Generally most of people will keep their 3 months expenses worth money in their bank accounts. They won’t use FD schemes for them, thinking that in case they need money before FDs mature, it will cause extra hassle. And moreover, I can’t use my money on the spot. What I mean by that let me explain:

Let’s say I want to buy some furniture. First I have to go to my bank to close that FD (or at least call them for same) one day prior of my shopping. Then if I didn’t get what I wanted to buy, I again have to go to the bank to create FD. That’s a pain. With money multiplier account, when you need the money you can withdraw it by issuing a cheque or through an ATM. Thus, you don't lose out on liquidity either!
The Money Multiplier feature gives you the liquidity of a Savings Account coupled with high earnings of a Fixed Deposit. It’s just like cash in your savings account, but will fetch you an interest of FD. It’s worth exploring and the best feature of my ICICI bank account. :)

Sunday, August 17, 2008

Medical Insurance

Today I visited someone close in hospital. She is undergoing knee surgery. I wish her all the best for her fast and safe recovery.

Visiting hospital always gets you into deep thought. It’s a traumatic experience for all, patients, relatives, and friends. It incurs deep problems, both emotional, and financial. It is one of those financial emergencies that occurs (most of the times) without any prior notice and has huge cost. Some of the regular steps that I take to cover and reduce my medical expenses include:

1) Have an yearly body checkup
2) Have an yearly dentist and eye specialist visit
3) Eat healthy diet
4) Have some kind of daily exercise, may be a small walk to market, or take stairs to work instead of lift.
5) Have a proper medical insurance

Steps 1- 4 are precautionary, they reduce my chances of some big medical trouble. Step 5 provides me a sense of security that if some emergency happens, there will be someone to partly take care of my expenses. The things that I keep in mind before choosing my insurance plan are:

1) Insurance costs a lot but having none costs more.
2) Right age to get yourself health insurance – As Early As Possible (ASAP).
3) Benefits and costs vary widely from plan to plan. If you have choices, you'll have to examine each one closely to find the best deal.
4) The cheapest plan is the one with the best price for the benefits you're most likely to use.
5) Most policies cover doctor visits, but benefits for mental health, prescription drugs and dental care are strictly optional.
6) The more flexibility you demand, the more you'll pay.

Choose your medical insurance plan properly, and at appropriate age and save yourself some big trouble at the already troubled time.

Saturday, August 16, 2008

Mom’s Teachings; Always Helpful

Yesterday was my mom’s birthday. Birthday’s are some how special, at least of special people. While coming back from her place I was thinking about all the impact she has on my life. From cooking, to reading, everything that today I am capable of doing, has her impression. Infact, sometimes I feel that whole of my life has huge impression of her. The bond of, mother and daughter is special, and ours is not at all different.

How I spend money and how I save my money is again something I have learnt from her. She was a full time house maker and for me she was a perfect one. She taught us many principles of wealth management that form my basic principles of wealth management. Among many of them, few of the important lessons I learn are:

1) Regular earning is important. So keep on learning new skills so that you can keep one constant source of income.
2) Never spend all that you earn. Always save something for a rainy day, no matter how small that amount is.
3) Never let your savings sit idle. Invest them in a way so that they are adding to your income.
4) Be frugal when it comes to spending.
5) Buy the best thing at first, so that it has low maintenance cost.

Thanks mom. All the learning’s are important and I am fortunate enough to understand their importance.

Friday, August 15, 2008

My Interview :)

Hi Friends,

Find my interview posted at:


Happy Birth Day India

15th August 1947, got us the independence. And today, on 15th August 2008, is India’s 61st birthday. We, as a country have grown quite a lot from where we started. Forget about span of 61 years, I have seen so many changes around me since my childhood, that I generally feel that I am quite old now :(. Span of 20 years too seems to be so big at times.

1) India emerged as a Major IT hub.
2) India also emerged as major outsourcing hub.
3) Green revolution made us food sufficient
4) White revolution made us milk sufficient.
5) Real estate is at all time high
6) Automobile industry is growing like never before
7) Telecommunication network seems to be expanding every day
8) Retail market has just started, it has a long way to go
9) Bollywood is trying to improve (will do. 2007 was good year after all)
10) Tourism is adding new wings, like medical tourism.

There is so much happening around, that I am sure we have made huge progress economically, but given amount of workforce, huge markets yet to be explored, I am quite sure we have long way to go ahead. All that is needed is, everybody is contributing their bit, and India will definitely progress ahead.

Happy Birthday India.

Thursday, August 14, 2008

what to buy?

Shopping and buying stuff is one activity that no one can survive without. Problem here is that there is so much out their to buy that deciding what to buy and what not to buy is a daunting task in itself! So one day we sat and made rules for deciding what to buy:

1) I absolutely need it.
a. I need it to save my time, for example Vacuum Cleaner, Washing Machine.
b. I need it to save my health, for example, my new sitting arrangement (so that we don’t get tempted to lay on our back and watch TV on our sofa cum bed), new mattress.
c. I need it to save my money, press, sewing machine.
2) I can afford it. If not, better save for it.
3) I have space in my home for same. I don’t want to clutter my space.
4) I have no alternative for it.

And once I started following these principles, they helped. I am savig huge amount on daily basis now. :)

Wednesday, August 13, 2008

Anxiety after impulsive buying

I wanted to do my drawing room, it just looks so plane otherwise.

On last weekend we went to Cottage Emporium and place was ‘Shopping Paradise’ for handicraft fetish people like me n my hubby. And we bought a dining table and little sitting arrangement. I kept reminding myself all the while that it’s not a good idea to buy all the things at one go, but couldn’t resist the stuff available there.

This is real example of impulsive buying. Our drawing room definitely looks very good now and given rakhi next weekend, redo is rightly timed as well. The only problem is anxiety now; impulsive buying always leaves me with doubts, like:

1) Was it really a good deal?
2) Will the stuff be durable enough?
3) Will everybody like it as much as I do?
4) Did I really need this stuff in first place?

I wonder whether it’s only me who gets anxious after Impulsive Buying or there are many more just like me! But for now, I am just keeping my fingers crossed to get good comments (even OK will do) from relatives visiting us this weekend. :)

Tuesday, August 12, 2008

Power of Rounding Up: Saving Rs. 15000

I love to do my budget and tracking my expenses. That gives me a sense of situation in control. Every time I track my expense, I round it up to next multiple of 5. Let’s say I bought A, B and C for Rs 21, 25, and 27 respectively on the same day. In my expense book they will be entered as: A, B, C – 75 (21+25+27=72).

At the end of day, all my coins go in my piggy bank. Once my piggy bank gets full, I take out coins and exchange them for notes. This amount then goes in my miscellaneous earning accounts in my account book. I was browsing my money book last night and realized that in last 2 years, I have saved approximately Rs 15000 out of this saving habit. Wow was the feeling after my results.

I loved the power of Rounding Up. It acts just like a phoenix.

Monday, August 11, 2008

Identify Your Financial Goals

In my last blog, I shared my motivation for spending time on ‘Smart Savings’. Once you are convinced that ‘Smart Savings’ is worth exploring, take the first step: define your Various Financial Goals. Let me explain this with some example.

Assume, you earn X amount and can save some Y amount, where both X and Y is variable. You can use Y to get an optimum corpus but key here is to know when you might need this money! Ok, no one can answer this for sure, because future is uncertain. So, comes the planning. No plan can be perfect. I mean my plan can never work for you, why? Simple, I have different financial background, different needs, different liabilities, and different age. So, always plan for yourself. Don’t copy from someone else’s plan, but only learn. Factors to consider while doing the planning are:
1) Your current age
2) Age when you want to retire
3) How much money you want to save and spend (and when)?
4) Current Liabilities

Converting it all into financial goals, know how can you divide the money in following categories:
1) Long Term – Corpus that is adding directly to my long term goals (eg. having 1 crore rupees at the end of 20 years).
2) Mid Term – Corpus that you can save now but may need 2 years from now, or 5 years from now. Idea of time period will help you in selecting the right investment tool.
3) Cash in Hand – Corpus that may be needed tomorrow. Basic principle that all experts (me anytime not an expert) suggest is; have 3 months of expenses available as cash.

Now fill your goals quantitatively, that is determine what’s your long term goal, what’s mid term goal and what’s short term goal. Various instruments that I am aware for these different types of investments are:

Long Term: ULIP, Gold, Pension Plan, PPF, ELSS, Mutual Funds, Real Estate.
Mid Term: Equity, Mutual Funds, Bank FDs, Stocks, Real Estate, Postal Savings Certificate.
Short Term: Savings Bank Account, FMPs, Money Multiplier Account, Bank Fixed Deposits.

There are many more investment tools which I keep on exploring as I get time, and latest I am learning is F&O.

For now, try to quantify your goals and see how much portion should go where and take advantage of principle of computing to achieve your wealth related goals.

Friday, August 8, 2008

Savings Smart - Let your savings grow on themselves

Wealth management is my pastime since childhood. I use numerous techniques to handle my money and always try to learn more. My basic principles behind increasing my wealth include:
1. Earn more
2. Spend less
3. Spend smart
4. Manage savings judiciously

Earn more: Increase your earnings. Improve your skills so that you get good salary. Always be ready to learn new things, as they will give you edge over others and will help you earn more.

Spend less: Spend less than what you earn. If you spend all that you earn, your wealth will never increase.

Spend smart: Spend smart and will have more blogs on same here subsequently.

Manage savings judiciously: Yes I am earning and spending less then what I earn! Now why do I need that! Simply for same reason for which you want to save in the first place: “Future Security and increasing your wealth”. Let’s take a meager example; there is a man, ABC, who earns Rs 10000 per month. He follows principle# 2 and spends Rs 8000 only. So he saves, Rs 2000 monthly. He keeps his savings with him and not in bank and he is doing this from last 12 months.

So total he have (10000 – 8000) * 12 = 24000.

He wants to buys a bike whose cost is Rs 50000 and increases 2% annually. So if in current year its cost is Rs 50000, next year it will be:
50000 + 50000 * .02 = 50000 + 1000 = 51000

To buy that bike, ABC needs to save for 27 months approximately.

But the main thing to notice here is cost of bike is going up every year, but his savings are not growing on its own. This is called “Inflation into Picture”. And what it means is once you will stop earning, cost of living will increase day by day, but your savings will only be depleting. So, while you are young and can take some risks, learn the art of ‘Smart Savings’. One of the naiveté and least time consuming approach may explain it better.

Now consider the second scenario, ABC saves his money in bank and for simple calculation sake, let’s assume that bank gives 4% return after every 12 months. So how much money will this gentleman have after 1 year, i.e. if he started in Jan 2007, how much will he have in Jan 2008:

Month Principal Interest Total
Jan 2000 2000*4*12/(100*12) = 80 2080
Feb 2000 2000*4*11/(100*12) = 73 2073
Mar 2000 2000*4*10/(100*12) = 66 2066
Apr 2000 2000*4*09/(100*12) = 60 2060
May 2000 2000*4*08/(100*12) = 53 2053
Jun 2000 2000*4*07/(100*12) = 46 2046
Jul 2000 2000*4*06/(100*12) = 40 2040
Aug 2000 2000*4*05/(100*12) = 33 2033
Sep 2000 2000*4*04/(100*12) = 26 2026
Oct 2000 2000*4*03/(100*12) = 20 2020
Nov 2000 2000*4*02/(100*12) = 13 2013
Dec 2000 2000*4*01/(100*12) = 06 2006

At the end of 12 months, now he has Rs. 24516 instead of Rs 24000. And his dream is not Rs 51000, and he needs Rs (51000 – 24516) = Rs. 26484.

Now in the second year, he starts with 24516 + 2000 = 26516, and it goes like this:

Month Principal Interest Total
Jan 26516 26516*4*12/(100*12) = 1 27576
Feb 2000 2000*4*11/(100*12) = 73 2073
Mar 2000 2000*4*10/(100*12) = 66 2066
Apr 2000 2000*4*09/(100*12) = 60 2060
May 2000 2000*4*08/(100*12) = 53 2053
Jun 2000 2000*4*07/(100*12) = 46 2046
Jul 2000 2000*4*06/(100*12) = 40 2040
Aug 2000 2000*4*05/(100*12) = 33 2033
Sep 2000 2000*4*04/(100*12) = 26 2026
Oct 2000 2000*4*03/(100*12) = 20 2020
Nov 2000 2000*4*02/(100*12) = 13 2013
Dec 2000 2000*4*01/(100*12) = 06 2006

At the end of second year, he has now Rs. 50012 instead of Rs 48000. And bike is Rs 52020. So one more month saving and he achieved his target in 25 months, instead of 27.

So, got the point, mediocre 4% annual returns on his savings helped ABC to achieve his goal one month faster. That is why one needs to manage his savings judiciously.

Inflation and interest figures used here might be fictitious but not the facts. There are many tools for investments with various terms and conditions and it’s too late for today to discuss them. Will write about my techniques in some other blog, for now think about ‘Smart Savings’.

Spend 5 days in Rs 100 per person

While browsing news channel, I came across one exciting game. They asked few of their employees to spend a day out in Rs.100. And then they had a show how they all used their money.

I got enthused by the idea and shared same with my hubby. He apparently appreciated the thought. And we decided that we will try to live 5 days on Rs. 100 each. So from Monday to Friday, we have to go out every day and only thing that we could spend was Rs 200 in whole. This of course didn’t include petrol cost and grocery for home. This only included outing expenses and we went out everyday after our office.

Monday: We went to Sarojini Nagar. It’s a street market in South of Delhi. I am in street market, so resisting shopping was tough. I bought one pair of socks and one bag to collect dirty clothes, and oops we already spent 60 bucks. Given we need Rs 10 for parking, we were left with 130 bucks. We had a round in the market and just browsed all the stuff available. I found one Capri that I really needed, but couldn’t shell 100 bucks for it. So I decided, can buy it later in this week. Went to a local food joint and had dinner there in 93 bucks. So after rounding off the payment, we still had Rs 30. Wow, I can take toll back, and remaining Rs 10 went for pani puri. So Day-One was success and fun. :)

Tuesday: We went to Dilli Haat. It’s a local handicraft market, again in South Delhi. Entry ticket was Rs 30 for us. :( So we decided to have food first and then see if we can shop something, as I only have Rs 160 now. Remember Rs 10 is for parking. We had one plate momos and one plate noodles, and that costed only Rs 70. Wow! Rs 90 left so I bought some bangles for Rs 50. Took toll back and still saved Rs 20. Great day.

Wednesday: It was CP this time that is in Central Delhi. We parked our vehicle in inner circle. We ate street food and finished our dinner in Rs 50 only. Then I bought a skirt for Rs 120, and that had huge bargaining effort involved. My calculation showed that after giving parking expenses, I can still use toll for going back. But they have hourly charges for parking after more than 4 hours, and I parked my vehicle for around 5 hours. I had to drop Rs 20 and no toll to go back. Day went ok as CP is tedious. :(

Thursday: By now, we have almost mastered this trick. And I wanted to watch a movie. Long live Shakuntalam. My old college time favorite theatre. Ok, we will bear without dolby and all, but watching ‘tashan’, yuck. But movie is needed, I am missing my bollywood quotient for the week and hence really feeling depressed. So we watched ‘tashan’ at Rs 70 per head and ate road side chinese food in Rs 50. Day again a success and visiting shakuntalam was definitely nostalgic and real fun.

Friday: Last day of the regime. We were happy that from tomorrow we don’t have to appear so stingy. And I was really tired as usual so we decided for Mac D’s and that was kind of lavish. We had burgers, French fries, soft drinks and burgers again all within Rs 180 and again saved Rs 10. Wow.

Last five days were full of some real fun, excitement and lots of adventure. We will like to spend this routine every once in a while and now I really want that Capri :)

Thursday, August 7, 2008

Learning from July

Month of July was quite a success when it came to managing expenses. I analyzed it and thought one of the best things I achieved is avoiding the marts for my grocery shopping.

Well in one of the previous months, once I made a list of things I need in my grocery and went to a mart. When I came home I realized that I have spent double then what I expected to spend on these items and still have not bought all the necessary items. No the mart people were not duping me. It was actually be who proved to be spoony. I bought all those things that were not there on my list and I hardly need.

So I decided that for this month, rather then visiting marts for my grocery shopping, I will visit my neighborhood store for same. And it did really help. My budget was a success in the first month itself, where both of us were really suspicious about our budget initially.

If you are in India, you can also give it a try. It worked for me, may be it can work for you too!

switching to cash from cards

'Cards are in. Plastic is the money. You are as rich as the credit limit in your cards.' Nice to hear, but all these phrases made my initial money management a hell.

When I was bachelor I was known among my peers and family as good finance managers, so I was really shocked when I saw that we are spending more than what we are earning. And worst part was I still have a big important purchases list ready for next month. This is where I decided to take control of my house finances.

For the initial month, I did nothing and just make a note of every rupee (penny U can say) spended. Then at the end of the month took some time out and analyzed where am I blowing my money! List of cuplprits was long and included,

1) Big Bazaar and alikes (Our Walmart :-( ) - I always over spend there and that too mostly on things I hardly need.
2) Eating out - Newly married and not staying with my in laws. Trying to manage home and work and fun. Losing some good nutritious food and huge sum of money.
3) Petrol (Gas) - I have to visit my in laws and my family every week. And what more, we really like to go out as well. :)
4) Gifts - Yes. I love to give a gift and am one of those who find the occasions to gift someone.

And the worst part was, we were using my Husband's credit card, and in the next month's beginning, most of out salary used to go for last month's bill.

So i decided to take some preventive measures, right from now. I know I am newly married and this is the time to best enjoy the life, but I still prefer enjoying judiciously. :)

1) Credit Card will only be used for Petrol.
2) We will take out 15K and try to manage all our monthly expenses from it. If we need more, we will again get cash but will keep the tempetation of using cards to least.
3) Will try to manage my home well, so that can avoid eating out.

Well, it worked just OK for me last month. I could manage in that money, except the electricity bill. I am following the same trend this month too. Let's see if I could succeed this month as well or not.

One week has already gone and I am quite on target. I spended less then Rs. 2000. All the best baby.

Anonymous Indian.

The First Step


This is my first step, here I am starting my new blog, Indian Thoughts.

What provoked me to start this one, was reading quite aggresively on personal finance management related blogs recently. While doing same realized that couldn't find any of Indian blogs for same.

But why the discrimination, (remember, I hate all kinds of categorization and discrimination!)? Let me answer! Reason is obvious, when I read PF blog of some one in US or UK, I can certainly relate to the concepts they are talking about, but implementation part, umm not really!

So, here I am. I am a house maker as well as a professional. I am quite frugal myself and working on my family budget everymonth to optimize same. Let me share my approaches with you all and how I apply what I learn from this blogging world.

Anonymous Indian