Just don't ignore it

My mom's mobile's bill date is same as mine. I prefer to pay my bill online via debit card or net banking mainly to avoid delay or inconvenience of visiting the physical outlet of the mobile company. I usually remind her to make her payment when I make mine or offer to do it so from my side. However, she usually refuses to take any help from me and prefers to make her own payment at the mobile store. Out of ten, in nine instances she misses the last due date and pays penalty on her bill amount. Also, whenever she makes any payment she is habituated to round it off on a higher side so as to avoid multiple note transaction.

This is just of the example where we find people not only make excess payment but at times even just let go extra money due to their casual attitude. We might be calculative in our big numbers but when it comes to small penny calculations, we are okay with the mismatch. For us , if the dhobi counts 50 clothes over our count of 45,we are OK with the difference of 5 clothes as it maybe our counting error. If we go to refill our fuel tank for Rs 200 and the attendant tells us he doesn't have change of Rs 500, we ask him to fill for the entire amount. We go to buy our daily grocery or shop at supermarkets, the attendant tells us that we are short of Rs 100 shopping for a weekly bumper draw, we buy an unwanted item to meet the target.

However, when there is a addition in any tax cess or rise in fuel costs, we all make noise over it. We can't bear to see the fact that we need to shell out an additional percentage for welfare of our country men but don't blink an eye when private tutors increase their fees. We hollow our thinking between our own and not so own.

What we need is a clear demarcation between need and want, urgent and not so urgent requirement. If we have made a budget of our requirements, why do we fumble at every given opportunity. Why do we change our step to match the external changes. If things are getting expensive, we have to consume it less and not pay more over shooting our budget. However, areas where we can control like making payment on time, avoiding over spending for paltry rewards, we should try to do it. 

 

Take help of your planner today and get a personalized budget as per your own requirement. For detailed conversation email us at saarthifp@gmail.com

Pregnancy Goal - Not just another expense

Among the various goals, we discussed in the month of Oct 2015, one of prime goal that we didn't discuss then was “Pregnancy Expenses”. We are habituated to include only those goals in our financial plan, which we believe could dig a big hole in our pockets. Rest of expenses, we shun it by saying “Yeh toh manage ho jayega”. So, how well prepared are you for this expense? It could be that you have grown up children and never could it incur to you – that how expensive raising a child could be.

The main purpose of this article today is to highlight some of expenses related to pregnancy.It might be helpful to plan your own family or help some younger sibling in your family. Some of the major heads in which we would like to highlight these expenses are:

a)Pre -hospitalization – It includes all your daily visits to a doctor- including your monthly ones or any special visit for consultation to a specialist. It is on an average Rs 500 – Rs 1000 per visit. 

 

b)Hospitalization – It is your actual delivery expense. It includes doctor's fees, operation charges, room charges or with C- section possibility it may also include various treatments for medical complications.The cost could run something between Rs 75000 – Rs 300000. (depending upon the hospital selected and medical complications)

c)Medicines – With the number of body tests increasing everyday, the medicines suggested for patients are also high. The doctors prescribe various supportive medicines in addition to vitamins and nutritive food supplements. With growing career importance, the average age of mothers' has risen to around 30, which at times requires them to take hormonal injections. You can expect the monthly billing to be on an average from Rs 2000 – Rs 5000.

d)Blood Tests – It is a regular feature to include at least three – five blood tests during any pregnancy. With India on its way to become number one in sugar prone diseases or various viral infections, there are many checks recommended by doctors. The average cost of these could be around Rs.1000.

e)Sonography Expenses –Around three-four sonography are normal for any pregnancy. It could be a simple 2D scan or a clearer 4D scan. The sonography expense increase as the pregnancy advances. The cost could range from Rs.700 -Rs 2500 per sonography. 

 

f)Fitness and Yoga – These are add on costs, which may be incurred or may be avoided. However with stressful life floating around, it is mostly preferred by couples to have a smooth pregnancy. Also, it has only positive impact over long run. It can be a minimal expense or if you take the best Lamaze classes in the city,then it could be a big hole in your pocket.

g)Baby Shower function - Indians celebrate all their life events with equal pompous. So, having a new member join their family is also an important event to be celebrate with all rituals and lavishness. The function could be a traditional one or quick set up with friends. The expense is entirely discretionary. 

 

h) Post delivery - Expenses do not galore only before baby arrival, they are huge even after a baby is born. Some of the commonly incurred expenses include - Stem cell Banking, Basic clothing for babies, Masseur for mother and child, domestic support in case of nuclear family , sweets across families,pediatrician charges, medicines for mother and if required for baby and even basic vaccination charges should be considered.

So, now we understand that the expense that we might just ignore as easily manageable one could actually be more expensive than bringing home a new mid size family car. So, plan for your pregnancy goal and do not ignore it.

Shubh Mangal Savadhan

It is a marriage season out there. All around people are hopping across marriage venues leaving behind their best wishes for the newly weds for a successful life ahead. After all the efforts back in preparations, planning and co-ordination finally an event has taken shape.The two different individuals are coming together to share their life together. Going forward among the various things that they will share and plan include their personal finances.

a) Understand your cash flow – To begin with it is necessary to make a note of following points:

• Are both the partners are working, if yes, then cash flow doubles else the couple have to survive on single income.
• Make a list of necessary expenses which are likely to increase with two people living together including living ,conveyance or lifestyle expenses.
• In case of home contribution, work out the likely increase in it.
• Understand the likely emergency provisions to survive for any contingency.
• Also make sure, if you have committed any funds to your respective parents, your spouse is made aware of it.

b) Distribute your monetary responsibilities – For a successful marriage, it is best to distribute your responsibilities along with your funds. Similarly even in personal finance, it is best to understand,who is going to perform what role. You can divide your bills clearances and payments versus spending in line with the budget. It ensures clarity of funds movement. This will give you full freedom of doing your work and to learn from your own mistakes.

c) Sync your savings – Prior to your marriage, if you have been making savings it could be in line with your goals and income. However, going forward, you have to sync your goals as a couple and rework your priorities. So, now the savings are suppose to be in line with your goals as a couple. Also, the previous savings should be now utilized to clear off your joint liabilities and outstanding.

d) Update your records – It is necessary to update all your nominations, contact details and all required documents including PAN card, Passport ( if you wish to), ration card and even your voters card. These records are basic and should be corrected under any circumstances. Get the process in motion at earliest.

These are few beginning points to bring your personal finances in place. Once, the wheels of personal finance are set, it is recommended to get your financial plan devised to improvise it further.

Life Planning – A step ahead of Financial Planning

The HDFC Life ad always reminds us life beyond just survival. It talks about living our dreams to the fullest, leading a self reliant life. But the stark reality remains we always measure our achievement with our bank balance. We compare it with our fleet of cars and number of social clubs membership we have gained. Do we always want to stay stuck with the thought “that I am financially ready for anything in life or after it” or we want to beyond it.

A Financial Planner always starts to probe client's needs and wants in the ascending format of pyramid.If the client has made a provision for all of his goals, he believes that he doesn't need any further help except for review. Most of planners leave their role at this juncture considering that the client has met or planned for all his life.But that is a misconception. We need to probe a little ahead and actually make them realize about their bottled aspirations and dreams. Move on Financial Planning – lets look at Life Planning.

Life Planning is to achieve towards those unfilled wishes which are left incomplete due to either our own phobias, time commitments or family responsibilities. So, have we all identified such desires which are deep down in our heart and unfulfilled? Most of time when I raise this question to any client , they rather listens to us with all rapt attention but are unsure about their reply. The first thing that they mentions is “I donate annually some amount to XYZ charitable trust” or “I pay for my servant's son's education fees”. WE MIX LIFE PLANNING WITH CHARITY. It is not the right way to interpret Life Planning.

Life Planning can be understood in following points:

a) Life Planning is not limited to economic achievements it is about emotional satisfaction. It is not always wealth accumulation sometimes its even giving away. Share your work knowledge to the novice in the industry. Help them build contacts. A charitable trust to sponsor local talent in sports, education or even helping with expensive medical equipment.

b) It can be measured with the joy of attempting something without fear of loosing something. Something like setting up a school for local street kids and teach them.

c) It is about living your entire life as if there is just a single day. Hosting a party for all your friends, families and loved ones to thank them for all their efforts and support.

d) Life Planning is attempting to do what you couldn't do till now. It could be as simple as creating a song album for yourself or watching a live jazz performance in Manhattan.

The concept of Life Planning tells us that we should retire from our active work life and not from simple joys of your life. Till now, we have lived every moment as a responsibility or as our duty for our family. Its now time to do what our heart intends to do. As it is rightfully said, we relive our childhood in our sixties. ”Pachpan mein Bachpan”. So,don't limit your planning let it evolve.. never let a dream just fade away.

 

New Year Resolutions for Personal Finance

To ensure that your loved ones enjoy a good, healthy life it is necessary to follow the below mentioned simple mantras of Personal Finance

1. Keep a monthly home budget and track your daily expenses.
2. Keep your life insurance cover adequate to match your earnings to support your family well being after you.
3. Invest in assets you have good understanding about. Avoid all un-neccessary loans.
4. Prepare a personal asset list (balance sheet) with its latest market value from time to time.
5. Keep a list of all your bank accounts and lockers.
6. Keep all life insurance policies intact and store in one safe place. Also, maintain all paid premium receipts it is required for claims. Keep all contact details of your policy advisor available with your family.
7. Involve your spouse / parents in all your financial investments.
8. Keep a nominee to all your investments, insurance policies and assets.
9. Clear all personal liabilities or mortgages at earliest.
10. Keep your financial planner aware of your financial decisions time and daily.
11. Do not leave any paper work incomplete and keep an up to date records of your regulatory requirements.
12. Plan your estate distribution at appropriate time to avoid disputes ahead.

Make the most of your Festival Sale

It is festival time and all our newspapers, emails are filled with all kind of attractive discounts and buy back schemes enticing us to buy the most of things on display. Now with the eCommerce sites vying for the maximum buy around the festival times, the discount wars have shifted its gears from offline to online markets. With the GOSF, spreading its reach even tier 2 and tier 3 city are now shopping online.

The banks are also an active participant in this bandwagon giving impetus to festival buying and increase use of credit money.Some of the popular ways you can make the most of your purchases are:

a)Buy back schemes – It has been one of the most successful method to entice the customer especially for consumer durable even in olden times, where buying an electronic good was a big event for any family. The scheme would attract customers to replace their old appliances with a new model and get a good amount of reduction in the purchase price. Although its a popular new purchase method even today, but now the value of replacement is limited and makes hardly any reduction in the purchase cost. There is a minimal reduction due to ever changing technology and cut throat competition. To make the maximum of this deal always compare two- three big vendors beyond your local seller.

b)Cash back schemes – These schemes are mostly an offering of banks with their specific tie – ups with exclusive stores or brands. It is a successful method to make the consumer use his credit/ debit card and also to make expensive shopping. Generally the cash back is around 5% of the value credited in your account in 60 days time frame . If it a bank offer it gets credited around your bill cycle. They are more or less like our old days cash discounts.

c) Free Shipping – This is an easy way to attract customers especially in an online shopping spree. Usually shopping beyond a certain money value is given free shipping. The cost of paying for transportation acts a deterrent to revisit the website.So, to make the value of shopping more the free shipping acts a good attraction. Websites like Ferns N Petals charge a premium to deliver their goods at specific hours or midnight making it an additional cost. So, if you have not planned your purchase well in advance, it is better to route your purchase from one single website to waive these charges.

d)Supplementary gifts – A small additional gift received along with the purchase of your expensive good always make you attracted to this format. It is mostly found that if make a purchase Rs 1 lakh you are given a gift of Rs.5,000 or so. So, its wise to make your purchase only if you find the attached gift worth your utilization. Sometimes, in jewellery, the making charges are waived off.

e)Privilege Points – The most interesting and attractive way to make your purchases is to earn privilege points. These points are easy way to make a future purchase. Some times, an airline adds to points on your credit/debit card and redeemed to buy tickets.

So go ahead and splurge this festive season ahead. Just be sure that whatever you spend is worth the value. Don't be attracted towards the attached strings but the actual worth of purchase made.

Which loan do we Repay first -Home or Personal?

Although in all our previous post we have been advocating the fact that loans should be utilized only when extremely necessary, taking loan has become the way of life. Many might deny the fact that we don't have any sort of loan or EMI payment on ourselves, but what they ignore is that using their credit card indiscriminately is also kind of a loan. So, to lead a loan free life it is essential that we schedule repayment of our loans at regular time intervals. It boosts our monthly surplus as well as give a peaceful mind.

We have been discussing few asset based loans in previous few posts(refer to our November 2015 posts for more information at www.saarthifp.blogspot.in). Considering the above and the traditional other loans, we should prioritize the loan repayments in the following order:

Priority 1: Personal loans

Target your repayment with this short term but high on interest Personal loans. The loan is given based on the credit history of borrower and his repayment capacity i.e. Income. The end use of the loan is not defined and is usually preferred for splurging on more of wants rather than wants of individuals. It is an unsecured loan thus , they are often offered at a higher interest rate with higher EMI payments. Similarly is the credit card repayment which needs to be equally prioritised.

 

ROI	13.00%
Period of loan	4 years
Amount of loan	6,00,000
EMI	16,096
Total repayment made in 4 years	7,72,632

Priority 2: Asset based loans

The asset based loans like gold loans, loan against property, loan against fixed deposits and insurance policies are usually borrowed for some unplanned requirements. Such loans should be looked to be repaid as they are just have an additional interest burden. Although, the amount of loan in gold and property is determined on basis of asset value and it is just acts like an overdraft facility for actual funds used. (Read more about the features at our previous blogs at www.saarthifp.blogspot.in ). In all the earning capacity of these assets is not more then the charged interest rates, hence they should be repaid after any Personal loan.

Priority 3: Home loan

Although ,Home loan is one of the commonly availed loans, we recommend to get rid of it at every possible opportunity. For years people have been harping the tax benefits associated with it but the truth is that the tax benefit is a very short term benefit versus a lost opportunity to invest the EMI savings elsewhere. The exit strategy for home loan also differs based on the tenure and type of house. in the housing loans, in the initial few years, most of the EMI payments are towards the interest payments and its only during the last few years of loan tenure that they account for principal repayments. Look to repay the loan in first ten years tenure of loan as the deduction for principal repayment is under usually crowded 80C whereas there is no limit for second home (for self occupied home limit is Rs 200000). So, as and when you get huge amounts or windfalls, plan to route it for home loan repayment.

ROI	9.55%
Period of loan	20 years
Amount of loan	25,03,000
EMI	23,413
Total repayment made in 10 years	28,09,563
Total repayment made in 20 years	56,19,127

Conclusion

It is very necessary that you analyze the pros and cons of whether to opt for an investment or to use the funds to repay the existing loan. It is necessary to decide your exit point for any loan and not make any emotional attachment to it.