Monday, October 29, 2012

10 Useful websites worth bookmarking

Knowledge is of two types. First kind, you know it. Second kind, you know where you can find knowledge. In today's world, both of these kinds of knowledge are important. Even if you don't know it, if you know how to google or you know which website can tell you about it, then that is more than enough.

In this post, I present you URLs to a few websites, which are worth bookmarking for a money conscious person. These are more of my personal bookmarks, I have not conduct a review or comparison between their competitors.

01. - This is all about Indian Share market, Finance and Investing, commodity and what not. The portfolio section helps you to track the performance of your stocks, mutual funds, ULIPS, Fixed Income, etc.

02. - No one can learn how to swim without getting wet. However, this site helps you practice share trading without losing money. You can take it as a learning tool if you are new to trading, or investment challenge if you are experienced trader.

03. - Want to calculate your income tax, recurring deposit/fixed deposit returns, Loan EMIs? 22 finance calculators in this site are very handy.

04. - Want to invest in mutual funds online? This is the best site you can find.

05. - If you want to get rich, the first step is start tracking your income and expense. If you are in the habit of noting down your expenses daily, this site helps you do it online.

06. - People usually ask me which Mutual Fund is best to invest. I redirect them to this website. You can find the crisil rating of Mutual Funds here.

07. - Want to know your Employee Provident Fund balance? Fill in details here, they will SMS to your mobile.

08. - Want to e-file your Income Tax returns? This site can help you. Hope they will make the process more user friendly in future.

09. - Want to know your Income Tax refund status? check here.

10. - Know the interest rates of different Post Office deposit schemes.

Do you know any useful site, which not listed here? It will be great if you can share it through comments.

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Tuesday, October 16, 2012

Grand Father's E-mail

My dear grandson,

Please accept my congratulations on joining your first job. It is really great to get a job during your final years of study, and join in a multinational company immediately out of college. Things were very much different in my good old days. In our days, we need to finish our exams, scan the news papers every day for opportunities, prepare and attend the tests and interviews and finally get an appointment letter. It would have taken a few years after study before you join  your first job. 

I know you are celebrating your success. You deserve it well. I guess you are getting many pieces of advices on how to succeed in your career from virtually every one you know, from your neighbors, from your teachers, from your Dad's friends and whom not. However, please understand that it is your career and life, and you are responsible for every decisions you make. Whether to accept or reject these advices - it is upto you.

I will also give you advice on some thing different. Who likes advices? Better we can call these tips. There is high probability that no one told you these things, despite the heavy load of advices you received. So, I thought I should write this.

Once you join your job, you will start doing a new thing, you have never done before. Can you guess what it is? Yes, It is handling your own money. You may have limited experience handling your pocket money, but handling your own money is entirely a different ball game. I hope the below tips will help you to overcome your inexperience in handling money for a certain extend. However, certain things you will have to learn from your own experience. In that case, learn fast and move forward, rather than crying on spilt milk.

As I told you earlier, to accept or reject these tips, is entirely your own judgement. You are only responsible for your deeds.

Here you go.

1. Do not ignore money

This is my first tip. I am sure you got one piece of advice from your Dad's friend "don't think about money, work hard and money will follow". There is no bigger mistake than this. The old saying is that what you give attention grows, and what you ignore wilts.

I am not asking you to think about money all the time. What you need to do is spend some time regularly to plan your finances and to track your expenses. Spend some time to read articles and books on money management. It may not be your obsession, but you need to know the basics to succeed in this world. Believe me there are lot of things to learn about money, than you expect.

There are many instances people will judge you based on money you earn. But it is your life, no need to live it the way your neighbors want. But, please take my word on it, my dear son, without money no matter what else you have you will not be happy. So you can consider money as an umbrella necessity. Just like love and health, money is also very important in human being's life.

2. Spend below what you earn

This tip may seem simple to you. But you will realize how difficult to follow this, only when you start living your own. You may be wondering how some one can spend more than what he earns. There are thousand ways to do this. Below are a few examples
  1. Lend money/loans
  2. Break your previous investments
  3. Use Credit Cards.
 The third one is most common one. Credit cards are to money what smoking to health. Whatever advantages credit cards have, if you want to check your expenses below your income, say no to credit cards. People, who have the habit of tracking their expenses, know how complicated it is when credit cards are involved.

Follow this simple rule, and I am sure you will end up in trouble whenever you break this rule.

3. Track your expenses

Read this tip related to the previous one. They say what you can measure, you can manage. How to measure your expenses? Get into the habit of writing down your expenses every day. It may seem difficulty initially, but once you make it a habit, you will realize how useful it is.

Spend some time at the end of the month to analyze your expenses. And see how you can avoid some of the misspending.

If you have the habit of noting down your expenses, you will think twice before going for a eating out after work (not to mention the boozing)

4. Prepare for the worst

Life is more complicated than you think.  Emergencies pop from nowhere when you least expect those. You need to be prepared all the time for such emergencies. What I am going to say here is about two things, insurances and emergency fund.

Who needs a life insurance? To answer this question we need to understand the purpose of life insurance. Here is the definition of life insurance from Wikipedia "Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary sum of money (the "benefits") upon the death of the insured person.". Yes, that's it. If some one purchase a life insurance policy, and dies during the coverage time, the insurer pays sum assured to the dependents of the insured person. It is a great tool to make sure your dependents continue their life without financial struggles, even without you. I am sorry to discuss things related to death at this time, but then you cannot discuss life insurance without mentioning death. So who needs life coverage? A person who has dependents. But I know many bachelors purchasing multiple insurance plans, considering those same as recurring deposits.

I hope you are clear now that you don't need a life insurance coverage at this time, as you are a bachelor and your parents can support themselves. So say no to that your Dad's friend and insurance agent, who has already approached you to sell you insurance policies.

Having said that you need Life insurance coverage when you start a family. At that time make sure that you have enough coverage to protect your family. Don't purchase insurance policies where you have to pay huge amount as premium and gives you coverage equal to six months of your salary. I cannot discuss different kind of insurances at this time, but in current situation term insurances are most economical. I will write more on this when you start a family.

But this does not mean you don't need any insurance coverage now. I told you don't need a Life insurance coverage. There is another kind of insurance, medical insurances. These insurances protect you against medical emergencies. If you company provides you one, it is well and good. Otherwise spend some money to purchase a good one, which provides adequate coverage.

Treat insurance coverage and investments as separate entities and never mix those. Plan both separately.

The second aspect of preparing for the worst is setting up an emergency fund. This emergency fund is your investment in liquid cash (or which you can encash in short notice). This will help you to meet really emergency situations like loss of job, medical emergencies and emergency vehicle maintenance. Experts say you need to keep an amount equal to six months of your expense as emergency fund. I bet, without this emergency fund, you will need to break your long term investments, before it is that long.

If you don't have ready cash to setup an emergency fund right now, start a bank recurring deposit and invest regularly to meet your target.

5. Plan your retirement early

When do you need to start planning your retirement? After turning 50 years old? After a few years after getting a job? No, my dear son, you need to start planning the retirement from the first month of your job.

The golden rule is start early and continue investing regularly (read it monthly). Do you know that if a person invests Rs 500 monthly from his age of 25 and continue until his 60th age, he will be left with more than Rs 170,000? That too considering an return rate of 10% annually compounding.

Goal based financial planning is the game of the hour. You need to figure out your financial goals (like your marriage, children's education, children's marriage and of course your retirement) and start investing for each. This kind of planning will help you to meet your future financial needs, without getting into big debt traps.

We, Indians are risk aversive people and when it comes to investment, we always want to play it safe. But like in any other fields, taking calculated risks is unavoidable for success. Never insist that you will invest only in schemes which assure guaranteed returns. For example, your PPF account, assures you return with 8.5+% interest, whereas the mutual funds never guarantees anything. So, play-it-safe people goes to PPFs and bank recurring deposits. Wise people builds an investment portfolio, which is a mixture of both. Please remember that unguaranteed 20% is always better than guaranteed 10%.

When you take risk, there is a possibility for failure. Never dishearten, learn from your mistakes and continue your investments.

6. Pay your taxes gracefully 

Income tax is irrational and complicated. If you make more money, you will have to pay more tax. It is like the Goverment is fining you for making more money. You may think it is more of Robinhood style. Take money from the rich, give to the poor.

Whatever you think you are legally obliged to pay tax. However, understanding and planning tax will reduce your burden. I am not asking you to evade tax. On the other hand, understand how to save tax legally.

Go through your salary structure and understand different ways to save tax. It may not be practical to go through all legal books on I-T. However, your can read good articles to understand more on this.

7. Spend for charity

We are all lucky people and always spend some money for the less fortunate ones of the society. I am talking about charity. Do this regularly, and realize the great feeling. Just like investment, do this at the start of the month, so that you will not run out of money, before doing this.

8. Say No to illegal money.

Any discussion on money will not be complete without this one. During different stages, Life will tempt you with opportunities to make quick and dirty money. Believe in your values and say no. There is no meaning in making money without the peace of mind. As you understand more about money, you will realize that there are thousands of other legal ways to make money. So, Enjoy.

I would like to conclude now. This is of course a long email. When I started my career, no one was there to tell me these things. In schools and colleges, they teach us how to make money, but never taught us how to manage it. That's why I took all the pain to write such a big email. After all, it is your life and accept or reject these tips, it is up to you.

with Love,

Your Grand Father

Image Courtesy: Wikimedia Commons

Wednesday, October 3, 2012

Money can't grow in trees.

Probably this will be the quote of the year. It is a simple fact every one, including ruling parties, opposition parties and financial experts, should agree. If money were growing in trees, we should not have to work to get money. Instead, we should have been growing money trees.

Now this simple fact is associated with reforms by central government. First they allowed FDI in retail. Then cut the subsidy for diesel and LPG. Some of the other reforms followed. All financial experts welcomed these moves, however, the opposition parties cried foul. I am not keeping sides here, just sharing my thoughts. I am neither the financial expert nor politician.

The FDI in retail can affect the small and medium retailers badly. So they say. On the other hand, it can help the consumers thanks to more competition. Also, help farmers due to better distribution networks. But, due to big media hype, even the common man is thinking that FDI in retail will hurt them.However, with my limited reading, I can't find any one furnishing any data to prove any of these claims.

The shop owners in Kerala shut down their shops on 3rd October, 2012 to oppose against FDI in retail. We cannot blame them, who wants more competition in business? We, Keralites are the people who protested against computers, attendance punching in Government offices, and whatever we think come against our comfort level. Our CM confirmed FDI in retail will not be allowed in state. So, I am wondering if it were allowed, the shop keepers might have kept their shops shut down for a week. They are enjoying a monopoly here. I wish there are more multi-brand retailers here to challenge them.

Coming to second point, unlike the above one, increase in fuel price hurts the common man a lot. The most basic principle of financial management is that your expense should be less than your income. The Government forgot this for some time, and our deficit was very big. Finally the government has waken up on a fine morning, and cut the subsidy for fuel. This caused the increase in prices.

The stock market responded to it positively, the Sensex went above 18500. The foreign investors are coming back to India, I read.  Rupee is improving against Dollar. All positive news.

However, I read somewhere that increase in fuel prices will lead to hike in prices of virtually everything. This will lead to high inflation rates. Will not this high inflation rates hurt our economy? As the inflation goes up, RBI will increase the interest rates. That means, I will have to pay more for my car and home loan. Life is going to be miserable.

I have read in some of the newspapers that Pakistan is reducing fuel prices to make their economy stronger. And, we are increasing fuel price for the same reason. Who is right and who is wrong here?

We have seen many of the financial forecasts by experts gone wrong. These politicians may be arguing to get support of the masses. So, we will have to take a wait and see approach.

Happy waiting.

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