Seven Must Read Self Help Books

I decided to take a break from financial blogging and decided to write on some thing else. As I mentioned earlier, this blog is for financially illiterate people, and to keep them visiting, I should occasionally write about non financial topics.

This time I selected to write on books. What are my favorite books? If I include fictions also, it is a very difficult question. So, I exclude those and concentrate on self help books. You cannot be a successful man or woman by reading or copying ideas from these books. But, those books help you to see your life and problems in a different angle and brings in new ideas, which you never thought of before.

Here are my favorite Seven self help books. I deliberately mentioned "must read" to raise your curiosity. These are just my personal choice. You may have a different taste altogether.

1. THE SEVEN HABITS OF HIGHLY EFFECTIVE PEOPLE by Stephen R. Covey

This is a book, which does not need any introduction. First published in 1989 and sold out more than 25 million copies, I believe most of you already read this book. If not, don't waste time, grab one and read it.








2. NOW, DISCOVER YOUR STRENGTHS by  Marcus Buckingham and Donald O. Clifton

This is a book, which triggered a paradigm shift for me. I believed I can ignore my strengths and need to improve my weakness for a successful living, until I read this book. But when I read this book, I realized that I need to work on my strengths rather than my weakness. For an example, just imagine in his childhood Sachin Tendulkar realized that bating is his strength and he needs to improve his bowling. If he ignored bating and tried to improve his bowling, would we have a bating genius now? Just read this book.



3. HOW TO WIN FRIENDS AND INFLUENCE PEOPLE by Dale Carnegie

 I am a big Carnegie fan, and I would recommend all books written by him. All his advises are simple, practical and effective. Read any one of his books, and I am sure you will agree with me.








4. RICH DAD POOR DAD by Robert Kiyosaki

My friends say whatever I talk to it will end up in finance. Here is the best finance book, I have ever read. The tag line "what the rich teach their kids about money that the poor and middle class do not" is enough to make you curious to read this book. I believe after this book, people used to use the term Rich to denote financially intelligent people.






5. YOU CAN NEGOTIATE ANY THING by Herb Cohen

Who will be winners in this world? People with greatest talent, dedication and education? This book says the winners are people who are not only competent, but also have the ability to negotiate. Learn the negotiation techniques from this book.




 





6. MEN ARE FROM MARS WOMEN ARE FROM VENUS by John Gray

This is a book I recommend to all married couples and people who plan to marry soon. We know men and women are different in their attitudes and behaviors. How different? The book answers this. By understanding the fundamental difference of genders, we can improve the relationships.







7. WHO MOVED MY CHEESE by Spencer Johnson

The less than 100 pages book, which can be read in one hour time, helps you to deal with change. When I first completed this book, I thought it says about things I already knew. In some of the situations where change is forced on me, which is similar to scenario described in this book, I adopted quickly and moved on. But I believe it is due to the nature of my profession. This book may be useful to thousands of other people. 

Do you have some other books to suggest? Please leave those names as comments.

Money, Happiness and Luck

The astrologer in the newspaper column advices me (not specifically to me, but to all, who shares my sun sign) that happiness is not related to money. I smiled reading this, wondering how he knew that I am unhappy because of money. Some times, you should believe in astrology.

Can some one be happy if he gets half the salary for two months? No? Exactly that happened to me this month. Next month also same will happen. Don't think I made some mistake at work and the company fined me. Then why the half salary? It is the Income Tax.

At the start of each financial year, we need to submit our investment plans for tax exemption to our employers. They will reduce Tax Deduction at Source (TDS) based on these plans. At the end of the financial year, we need to submit the proof of our investments. If these proof match with the plans we submitted, then every thing is fine. If not, they will reduce TDS based on the proofs.

So, what happened in my case this month? I have submitted the investment plan at the start of the financial year. At end of financial year, our company allows two time frames to submit the proofs. One week in  December and one week in January. There are many companies that allow to submit investment proofs until February last week, but we are not that lucky. So, if we miss these two windows, we are done. They will reduce the taxes without any tax exception from last two months salaries of the year (February and March).

Then, why did not I submit the proofs during these time frames? No, I was not on vacation. We Indians are not in the habit of taking one month vacation. Then what happened? During the submission window in December, I decided that I will submit in the January. Not due to procrastination, but I wanted to include my payments in the January in the proofs. And in January, I had to go on an official trip on a very short notice.  I have not even get time to think about investment proofs, I am in the flight. When I returned from the trip, Alas, the time frame is over.

Anyway, whatever happened is happened. What is the learning from this? No more agree to office trips on short notice? Well, that is not always practical. Submit whatever proofs available in the first window itself? But, Anticrastination is one of my problems, and I am trying to get rid of it. Change to a company, which allows more time frame to submit investment proofs? I can think of it.

On the other side, what is the impact of this half salary? The money which is deducted will not go for ever. I can claim this from IT department, when I submit IT returns. So, I may get back this money, may be in six months time. So, only problem is managing these two months.

What are the options in front of me to survive these two months?

1. Go in an aggressive cost cutting mode, to live with half the salary.
2. Use my emergency funds.
3. Live on credit cards.
4. Break one or two of my investments and live on it.
5. Lend money from friends
6. Go for a loan.

Well, obviously I will use the combination of 1 and 2, and may be 3 in worst case. If luck is on my side, I will not have to go options below it.

Now, come back to the learning from this. Unlike many of my friends, I planned my investments for the tax from start of last financial year. Continued those investments without fail during the entire year. All these planning and efforts went futile, just because of a bit of bad luck. Yes, I am coming to my point, Luck.

What is the biggest ingredient you needed to get rich? I will say it is luck. I know it is not inspiring, but I believe in luck. Because of luck you are born to this parents. Because of luck you selected the school or college you went. Because of luck you got this job. Because of luck you started investing early. Because of luck you continued your investment for long period. Because of luck you got good returns. Because of luck you are rich.

Convincing? My be not. Just because of luck, you cannot do every thing. For example, you need to put some efforts to start investing early. And to keep those investments even during hard times. But, remember, from where you came to know about the idea of investing early? From a friend? From a book? From a movie? Isn't it because of luck you happened to hear it? Well, many are unlucky not to hear about the idea of investing early in their careers. And some heard, but did not give any attention. Some gave some attention, but did not put efforts to do it.

Thinking more about it, to get rich you need luck and efforts. Only one is not going to work. So if you have not started investing early, at least be lucky enough to start it now. Put on efforts, and luck will follow. One or two times, bad luck may take you over, but not always. Start now. All the best.

Generation Gap

When I started blogging, I had one doubt. "Will any one read my blogs?". I have seen many financial blogs, which have thousands of readers, but those are written by financial experts and read by financial snobs. People read those blogs to find out which stock to buy, or which mutual fund to buy. On the other hand my blogs target financially illiterate people. And that is the big challenge. They are financially illiterate because they don't read any financial articles or blogs. It is like writing against smoking. People, who really smoke, not going to read those. So, my doubt was who is going to read my blog?

Then I thought at least my friends will read it. As I am writing it, out of curiosity they will visit my blog. So, I was expecting very few visitors to my blog. 

However, today when I see so much visitors, I am really happy. This is many fold what I expected. Really happy and would like to thank all my readers for your encouragement.

With that introduction I want to share my thoughts today. I was reading a blog on other day, which says many youngsters (hear the 20+ working professionals) are forced by their parents to avail big consumer loans for cars, home, etc even in the beginning of their career. When I thought about it further, three incidents came to my mind. Which I will narrate below.

Incident 1

My friend got Rs 5 Lakhs by a property sale. He wanted to invest that money in a bank Fixed Deposit. He is not really looking for the returns, but he wants to keep it as an emergency fund. Fixed deposits are very easy to break, so come any emergencies like job loss or medical emergency, he can use that money.

But things changed when his parents came to know about this. His parents wanted him to change his car, and go for an expensive car. Obviously, his wife joined with his parents, and finally he had to surrender to the combined pressure. He purchased a new car.

Incident 2

My friend was planning to get married. When he did a ballpark estimate of the marriage expense, he found that it will run into nearly Rs 10 Lakhs. He was not really happy to spend that much hard earned money. He talked with his parents about an idea of a register marriage. He will marry his fiancee in a register office, and only very near relatives and close friends will be invited. He estimated Rs 50,000 cost for this kind of marriage. If you can just ignore what others think, you can save Rs 9.5 Lakhs.

The idea was immediately rejected by his parents. But he was not ready to give up. After great deal of emotional blackmailing, his parents conditionally agreed this. He can go for such a marriage with one condition. The brides party should agree this.

He immediately called up his future in-laws. Again the idea was immediately rejected. The brides father kindly offered him to sponsor all the expenses of their marriage. But a firm no for other kind of marriage.

Finally, my friend has to go for a traditional marriage. They married and lived happily ever after, but Rs 9.5 Lakhs less richer.

Incident 3

Some one told me this incident, but I don't remember who. Here also the hero is a young man. He wanted to start a business. His father is ready to spend Rs 20 Lakhs for him, but not to start business. His father is ready to spend this money as bribe to get a job for his son. A job with Rs 10,000 as salary. Here also the son has to surrender to his father's wish. He goes to a 9 to 6 job nowadays. Let alone starting the business, should he invested the money in one of those micro financing companies, who pays 1% monthly interest, he should have been receiving Rs 20,000 monthly without leaving his home. Anyway, he believes his employer invests like that and paying him half his earnings.

Conclusion
What is the learning from these incidents? who thought wisely in these incidents? Younger generation or older generation? I am sure every one will not agree to me, but I think thoughts of younger generation are more prudent. If you think owning car, a bash marriage and a permanent job are important than your financial security and financial freedom, you will disagree with me.

Why do the older generation forces us to go for consumerism?  Of course, they do love us, and don't want to do any harm to us. Then why? To understand this, you need to follow the thought process. Our previous generation enjoyed the job security. Medical expenses and children's education were cheap on those days. So, they don't care that much about a personal emergency fund. To add to this, they got good returns for their investments, whether it is real estate, gold, or even from Provident Fund. They had a guaranteed retirement benefit.

But not all honey and milk for them too. It was hard to get a loan during those days. Credit cards were not heard of. Now we can get car loans, home loans even without visiting a bank branch. They may think why don't we make use of it?

What's the learning from these incidents? I am not saying immediately to reject any financial suggestions from your parents. There are many wise parents as well. But whenever you get a financial advice, no matter it is from your parents, friends or neighbors, please do understand this advice is based on their experience and their situation. Please judge it carefully, and make sure it suits you as well. 

Love your parents.

The Art of Closing Insurance Policies

Why do so many people purchase Maruti cars? Because they produce quality cars? Or maintenance is cheap? Or availability of service stations? In my opinion none of these is true reason. The actual reason is people trust that brand name. When a few of my friends purchased cars, they first checked how much money they can afford. Then they checked which Maruti car is available for that money. Is it Alto, Rits, Swift, Ertiga or SX4. Then they purchased those cars. Easy. Maruti, Life Insurance Corporation (LIC), SBI - all these companies enjoy the benefits of a trusted brand name.

I do not say people are missing any thing by purchasing Maruti cars, because Maruti produce quality cars. However, this is not the case with LIC and SBI. SBI as a bank is very competent. However, when it comes to mutual funds or Insurance - it is a different story. However, people blindly buy SBI mutual funds, just because those are from SBI.

The things are worse with LIC. Nowadays I am mastering the art of closing LIC policies. Not mine, but my friends. If one of my friends talks to me for half an hour about his insurance, he is convinced to close his policy. Why? I will teach you how to do it.

During any conversation when your friends mention about their LIC policies, jump on. But do not show the excitement. Casually ask them how much they pay as premium and what is the insurance coverage and maturity benefit. And then, ask them why they joined this scheme. The three possible answers to this question are 1) I want to save/invest some money. 2) I want my dependents to live a comfortable life even without me. 3) both 1 and 2.

No matter what they say, you can prove that they are losing money. Let's check one by one.

1) I want to save/invest some money
Don't be surprised by this answer. Many educated people buy insurance policies just for investment purpose. Don't tell them that it is not a good idea to mix insurance and investments. That will not sell. But you can tell them that how much money they are losing because of this policy.

For example, if a person pays Rs 5,000 as monthly premium, the insurance coverage will be Rs 12 L, for a 20 year term for most of the policies. On maturity, the insurer will get this amount as maturity benefit.  Usually this will be the guaranteed maturity benefit. Then they will pay bonus, which was declared every year. The LIC gives no guarantee at all for this bonus. However, many insurance agents convince the policy holders otherwise. This is the hardest part. Your friend will not believe you when you say the agent lied to him, because the insurance agent was his uncle, father's best friend, or his best friend's spouse. To convince this, go to LIC home page, and show him the details of his policy. 90% people do not read this information before they buy LIC policy. Usually, it will be difficult for them to digest the truth the agent cheated them, so I will tell them it may not be intentional. While the agent was talking about the policy, he may be confused with some other policy, because they talk about all the policies. This will relieve my friend, but I know the truth. Big commissions are paid to LIC agents for each policy, so they use one or two white lies to sell policies.

Now tell your friend that from LIC we can expect 5-6% compounded growth for your premiums from the past data. Next is the most tricky part. Go to any website which helps you calculate returns for recurring deposit. For example InvestmentYogi Calculators. Show him that what will be the return if he invests Rs. 5,000 per month for 20 years in PPF. PPF pays 8.6% returns compounded annually. In any case, the difference will be above Rs. 10L. Just convince your friend that he is losing more than 10L because of this LIC policy.

We are the people who bargain with autoriksha drivers to just save Rs 10. We drive through entire city to check price of mobile phone before purchasing one, just to save Rs 100. Then what if some one losing Rs 10 L? No need to tell any thing, watch your friend dialing his insurance agent to know how to close his policy.

I said PPF deliberately. Do not mention bank recurring deposits, because they don't have tax benefits. (80C benefits). Don't say mutual fund, because the returns are not guaranteed. If your friend learns from this mistake, and spend some time on his investments, he will soon realize the benefits of mutual funds. Leave it until then.

2) I want my dependents to live a comfortable life even without me
Well, this is the purpose of insurance. Unfortunately, LIC gives negligible insurance coverage. For Rs 5,000 premium, usually it is Rs 12L. Seldom sufficient for today's IT generation, whose annual salary runs above it. Just show your friends that for Rs 1000 a month, he can get nearly Rs 50L coverage, if he goes for an on line term insurance. (of course, conditions apply)

Now it is your job to explain your friend what a term insurance is. Most people have not heard of it, no insurance agents will explain this, because these are online policies and agents will not get any commission. go to wikipedia page on Term Insurance. and show him what a term insurance is. In a nutshell, the term insurance is a type of insurance in which you pay premiums to get insurance coverage for a certain term. In a term insurance there is no maturity benefits.


3) both 1 and 2
People, who buy insurance policies both for investment and insurance, were the easy preys to the insurance agents.  Because, when they ask about PPF to their insurance agent, the agent will say it has no insurance benefit. When he asks about term insurance, the agent will say there is no return. So, these people go for LIC endowment policies.

But it is equally easy to convince them that they made a mistake. If they are paying Rs. 5,000 as premium, ask them to split this to PPF and term insurance. If they invest Rs 4000 to PPF for 20 years, they can get Rs 24L+. Then if they spend Rs. 12,000 yearly (Rs. 1,000 per month) on a term insurance, they can get near to Rs 50L insurance coverage. This is far better than any endowment policy.

Conclusion
What will I get by making these people to close their LIC policies and switching to other investment tools? Nothing. On the other hand, I want people to manage their money well. I want people to get more returns on their investments, and more insured. And I want to stop these insurers and agents cheating their clients.

That's all the purpose of writing this blog.

New Year Resolutions

I was reading the interview with CEO of a well known stock brokerage firm. This firm is in business from 1980s. I was wondering how much money these people, staff and management of these kind of companies, would have made out of share market. In 1980s people were not much aware of the stock market. I wish I invested some money in the equity market in the initial years of my career. But, I was fully unaware of these things on those days. But these people are lucky, they have been working in equity business from 1980s.

But I was surprised when this CEO told the interviewer that he is not in the habit of investing in equity market. He even started purchasing mutual funds from last year only. I thought it is like some old small restaurant owners. They cook for the community, but never have food from their own shops. Their lunch was brought from their home. Is it like that? This CEO advises all people to invest in shares, but never invests by himself.

But this news relieved me. I am not only person, who is not practicing what he preaches. Yes, I am not practicing many things I write in this blog. Shocked? But, I started thinking about money just two years ago, and I promise you in next two years, my finance will be better managed. I am on my way.

Then what I need to improve? I think about it, as the new year is around the corner. Yes, it is time for new year resolutions. Usually, I don't believe in new year resolutions. If I find some thing is bad, I will stop it immediately. Similarly, if I find some thing is good, I will start immediately. I will not wait for a new year to stop or start new things.

Still, I think what I can improve in the new year, financially. These will be my new year resolutions. Not in any particular order.

• I will setup enough emergency fund, just in case any thing goes unexpected.
• I will get enough insurance coverage.
• I will get enough medical insurance for me and my family.
• I will stop using my credit card.
• I will start tax planning from the start of the year.
• I will reduce my monthly expenses, so that expenses are well below earnings.
• I will start goal based investments. Now I have only one goal for my investments, get rich.
• I will diversify my portfolio by including some of the areas, where I do not invest. 
• Work hard, improve my competency at work, and do some apple polishing to my manager.

Enough? You can pick up any from these for your own new year resolutions.  New year is, of course, a great time for a new start.

Happy New Year!

Lies in the Tax Planning Session

We are into last month of the year, and people will soon start thinking about tax. In this month and in the first quarter of next year, we can see lot of seminars, articles on newspapers and magazines, speeches flooded everywhere. Ideally, the best time to start tax planning was last April, start of the last finance year. All these magazines should publish articles on tax planning during last April. So that people can join to Mutual Fund Systematic Investment Plans (SIP), Public Provident Funds (PPF), or even to insurance plans and keep on investing the entire year. But now we need to invest all money altogether. Some private employers will collect the investment proof to avoid TDS in December itself. So, we need to invest Rs 100,000 now to get full advantage of 80C.


People who are lucky to have Rs 100,000 in their Savings Accounts are lucky species. They can comfortably invest for tax saving. For others, what can we do now? Get personal loans? Go for Gold Loans? I have seen people are doing all these. If you have no money to invest for tax saving, just be a happy tax payer. I know losing a major part of your salary is painful. But, suffer that for long term advantage and promise to yourself that you will not repeat this again. Repeat what? Ignoring tax planning the entire year. Next year, start tax planning from April itself.

By the way, can we blame all publications for not reminding us about tax planning during the start of financial year? No. They publish what readers want to read. If they publish tax articles on April, who is going to read? We dig the well only when we are thirsty.

These thoughts came to my mind when I went for a tax planning session recently. That session turned out to be a canvassing by an LIC agent. The trainer quickly touched Home Loans and PPF to make it a tax planning session rather than an LIC session, and soon reached to his favorite LIC policies.

I am listing out some of the lies he shared in the session.

• Home loans are the best investment method, because it saves tax and real estate will always appreciate.
• Gold prices will never come down, so it is the safe investment.
• Never go for term insurance, you will not get any maturity benefits.
• Always go for LIC for insurance, because India Government is the guarantor for your investment in LIC.
• Income from Mutural Funds are taxable even if you sell after holding one year.
• Types of insurances - Money Back, Endowment and ULIPS. (Like any insurance agent, he will not speak about term insurance unless asked)
• Money back insurance policy is the best investment method (it contradicts with first point). If you join 5 policies regularly for next five years (one policy this year, another one next year, etc). So after five years the money back paid by first policy can be used to pay other policies. 
• Finally, the biggest one. Insurance and investment are same, so you can mix both.

I am not going to explain why I call these lies. Research and find out by yourself, if you want to. Or simply believe these and invest your money in endowment policies, money backs, ULIPS, wherever you like. After all, it is your money.You can do whatever you want with it.

Are You Working for Money?

Years ago I went for a job interview to a multi national company. One of the questions asked was "What do you work for". It did not take a moment to think, I answered "Money". The interviewer did not ask for an explanation then. But now recalling that question, I ask to myself, am I really working for money?

I have worked on many days 10 or 12 hours. There is no overtime pay in our company, so the company always pays for 8 hours a day. So, why do I work more hours? If I was really working for money, I would not have worked that extra time.

Not only me, I have seen many people working extra time ex-gratia. There are different reasons for this, passion for the job, satisfying their ego, insecurity feeling, competition, work culture, workaholism, you can name many. But if you say you are working the extra time for money, that will be a big lie.

Some companies have a grading system, which puts their employees in a rat race. For example, at the end of the year each employee is given a grade like A, B, C and D. So, every employee try to get an A, by beating other fellow employees. The employees are forced to work more time than their co-workers to get an A.Usually, these grades are linked to the percentage of salary hike the employees get. So, if they work extra time, they get an A. and A gets more money. So they are working more time for money?

But if you want to make more money, the easy and sure proof method is work 8 hours in your primary job, and for rest of your time work for a part time job. If you don't like to work for a part time job, start a business, where you can spend minimum time. But these methods are not comfortable as working long hours for your job.

If you are a workaholic, my advice for you is to start your own business, rather than working for some one else. Because, if it is your own business, as you work long time, you will be benefited. On the other hand if you work for some one else, you work hard, and he will make more money.

If you can strictly stick to the policy working-for-money, that has lot of advantages. For one, you will not care to work extra time, unless there is extra payment. For another, you will not care much about a confrontation with your manager, for another you will not care much about the rat race.

The primary reason for we are all working is money. Then we should not forget this primary reason due to the challenges and pressure we face at work.