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How to be proactive on your potential financial problems?

Malvika — Fri, 30 Dec 2011 08:52:31 +0000

Most of today’s problems are yesterday’s challenges overlooked. It is always considered a wise thing to perceive problems before they arise and attend to them at the earliest. By doing so, you will be spared from the trouble you may have to undergo in the later stages. Here are few pointers to assist you in identifying the problems related to your spending and saving patterns.

Potential problems related to your spending habits

You are finding it difficult to repay your debts.

Potential Problem: You decided to splurge in on your salary and went ahead purchasing everything you ever wanted on monthly installments and did rest of the shopping on your credit card. A few months later, you come to terms with reality not being able to service all your debts.

Possible Solution: You must take into consideration the fact that all your loans combined should not go beyond 30-40% of your salary. It is imperative that you bore this fact in your mind before taking any new debt.

You find yourself in a tight financial corner every next month.

Potential Problem: You spent a little too much on your vacation and are now feeling the pinch for not being able to pay up for the insurance premiums that you are required to pay the next month.

Possible Solution: In order to deal with such a situation, you need to monitor your accounting constantly on a monthly as well as annual basis to see how the cash flow is. This will help you to manage your cash flow in an effective manner.

You are unable to determine what you really need and whether you can afford it.

Potential Problem: You probably got a little too excited when received your bonus amount and made up your mind to purchase a big and brand new refrigerator or an advanced split air-conditioner to tackle the summer heat or a car to swing along the countryside. But, what you failed to assess initially was whether you would be able to meet up with the increased electricity or petrol bills generated in your monthly budget.

Possible Solution: You can deal with such problems by planning well-ahead and deciding firmly on entities you regard as relevant to your needs. You need to assess before you buy whether the recurring expenses of the equipment you’re going to buy in fits into your monthly budget.

Potential Problems related to your investment habits

You are unable to contemplate or relate to the product you’re in possession with.

Potential Problem: You have decided to invest in the real estate sector after seeing your peers make good returns, especially when the prices were rising. However, nobody explained to you the fact that your money could get bottled-up in there in the absence of a good deal. In the same way, you may have five insurance policies but not enough life insurance coverage.

Possible Solution: It is important that you know the purpose of buying a financial product is it will help you solve your financial problem. Not all products in the market will solve your required needs. By setting yourself goals, you will be able to zero in on the perfect asset choice.

When you need money, your portfolio is in negative:

Potential Problem: You worked hard and even managed to save up regularly cutting away all your unwarranted costs. Yet, when you come close to meet your goal (say buying a property), you realize that your portfolio doesn’t support your need.

Possible Solution: Before deciding to go in for the kill, you need to choose your assets wisely keeping your goals in mind. For example, it is quite risky to keep all you money in equity in case you are aiming for a short-term goal. As a result, your capital may get exposed in the event of the market falling.

You focus your investments in only one asset category:

Potential Problem: You made huge returns from the stock market last year. So you decide to concentrate your investments only in stock market. You have suffered in the 2008 crisis or 2000 technology bubble burst and incurred major losses and are quite suspicious if things would work out; and decide to stick just to debt investments. It must be noted that neither of the strategies will pay off.

Possible Solution: You may decide to go by your insticnt, but it is not always advisable to blindly invest everything you’ve got in a single asset class. In order to reduce the risk factor and still be on the charts, you are required to broaden your time horizon of investment. Also you need to diversify across various asset classes to reduce risk.

You have understood how to be proactive on your financial problems. Unimplemented knowledge is a burden. Our problem is not ignorance but inaction. You can be different from other by being alert to your financial problems well in advance.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

Save it for better tomorrow

Ziaulla Namani — Mon, 18 Jul 2011 16:11:31 +0000

‘Money saved is Money earned’ is an old adage said by many wise men. If you second this thought then this article is sure for you.

The point discussed below will help you to save the precious commodity, money.

Use below mentioned principles and save something from your salary on a monthly basis.

You are aware of the money coming in on a monthly basis, so accordingly you should plan a budget to keep a check on the money going out. This will help you take into cognizant the earning and expenditure. Try controlling the out going money, for this one should list out and write each penny spent over any thing. Buy groceries and other daily uses in bulk and look out for offer/sale.

Credit card is the plastic money and the most expensive debt we carry in our pocket. Do not use credit card haphazardly thinking that it’s good you are not paying for it now. Make sure you clear all you debts on time.

One should straight away put some money in investments or savings for e.g. in buying of share or gold coin and other such options of saving money.

One should avoid eating out daily. No food can be better than home food and it cuts down your budget also. Also the fast foods eaten out can be avoided thus help avoiding your health being on the stake.

Wise use of electricity will cut down your bill hence more savings.

Akin to this find chalk down other points which will help you in saving your hard earned money.

This savings will come handy during recession or trying times.

So, happy savings!!!!!!!!!!!

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How to Get out and Stay out of Debt?

Malvika — Tue, 05 Apr 2011 07:19:08 +0000

11 ways to get out of debt and stay out of debt

In spite of steady, regular income there are so many individuals who live paycheque to paycheque, carry their credit card outstanding, and fail to save anything for retirement. If you are one of them, now is the right time to take action to come out of debt and stay out of debt. It is not only possible; it is unbelievably achievable.

List down all your debts

You need to take stock of all your loans. It could be credit card due, personal loan, car loan, housing loan, education loan, loan from FD, loan from insurance policies, loan from your employer, hand loan and so on. For each and every loan you need to note down how much you owe, the present interest rate, EMI, Number of months to be paid.

Negotiate for lower interest rates

If you could negotiate the interest rate and bring it down then you can come out of debt faster. Most of the credit card companies come forward for negotiation if you really show interest in repaying. They need not run after you to collect the debt. It will reduce their expenses. So they will be happy to negotiate. Balance transfer offers from credit cards are also a way to reduce your interest rate.

Refinancing and consolidation

Replacing a loan with another is known as Refinancing. By doing a refinance it should reduce your interest rate and it should bring down the time you are in debt. But most often people go for refinance that provide them lower EMI but increasing the time they stay in debt.

Categorise your debt

Housing loan can increase your net worth over a period of time. Housing loan gives you tax benefit also. For a business man car loan provides some tax benefit. Based on these factors a debt needs to be categorized. This will help us in comparing different loans.

Prioritize your debts

After sorting out various loans, now we can comfortably prioritize the loans. Obviously this will be based on the interest rates and tax benefits. At times paying off a small loan first can give you a lot of motivation to get out of debt.

Creating and Executing a Debt payoff plan

You need to create a debt pay off plan with different scenarios. So that you can find out how some more savings or a different repayment order will help you to get out of debt faster. When creating a plan, you need to choose one which is comfortable to your attitude. Otherwise, you may not execute it properly.

Refrain yourselves from applying for fresh loans

You need to make a vow that you will not be adding any fresh loans, till you come out of all your debts completely. Think for a moment, how you will feel when you become debt free. This will give you a lot of positive energy to come out and stay out of debt.

Postpone buying major assets

Buying a property or any other assets need to be postponed till you get out of debt. With your new ownership comes the new, probably large and unpredictable expense. This can make you deviate from your debt pay off plans and at times the consequences could be uncontrollable.

You stop using your credit card

There are two groups. One group of people uses the credit cards responsibly. That is they will repay the credit card dues in full when they receive the bill. The other group will pay the minimum amount due and carry forward the balance amount due. If you belong to the second group, you need to stop using credit cards temporarily. Take out and keep your credit cards in the locker. Once your financial situation and buying habits improve, then you can start using your credit cards again.

Change your spending habits.

Being in debt obviously means that you have been living beyond your means. The solution is very simple. Spend less than you earn and you will get out of debt soon. You need to change your spending habits. Then only this simple solution will be achievable. If you buy things you don’t need, you’ll soon sell things you need. Don’t save what is left after spending; spend what is left after saving.

Involve all your family members

You need to inform all your family members and dependents about your debt status. Then you will be able to take decisions with much more clarity. Moreover, if your family members know about your debt, they will also change their spending habits and support you in getting out of debt faster.

Consider the postage stamp: Its usefulness consists in the ability to stick to one thing till it gets there. Similarly, you need to stick to your debt pay off plan till you get out of it.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

©2009 Copyright by Invest In India

External liability on India rose to $628 billion

Ziaulla Namani — Tue, 05 Apr 2011 04:27:29 +0000

As per the PTI report, the data released by the Reserve Bank of India (RBI) says that the
India’s external liabilities rose by $22.7 billion in the quarter ending December 2010, over the previous three months, to $628 billion, mainly on account of increase in portfolio investment, FDI and debts.

The data released by RBI says that the country’s increase in external liabilities rose to $628.6 billion as on December 31 from 605.9 billion at the end of September.

The data further showed that the direct investment into the country during the quarter ending December 2010 went up by $6.2 billion to $198 billion.

Portfolio investments during the same period grew by $7.6 billion to $171.7 billion over the previous quarter.

Liabilities in the nature of trade credits, loans and currency and deposits during the quarter increased by $9 billion to $258.9 billion due to availability of overseas funds at substantially lower interest rates than in domestic markets.

Loans to Indian companies went up by $5.5 billion or 4 per cent during the quarter ended December to $140.1 billion.

During the October-December period, currency and deposits liabilities grew marginally to $51.4 billion.

India’s outbound investments also grew by $4.6 billion over the previous quarter to $407.5 billion in the October- December.

With this, the net claims of foreigners and NRIs on India rose to $221.1 billion during October-December 2010, up by $18.2 billion or 9 per cent from the previous quarter.

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Some Common Investment Mistakes done by NRIs

Malvika — Mon, 26 Oct 2009 05:56:56 +0000

There are some absolutely common investment related mistakes that normally NRIs do make, which ultimately proves to be extremely expensive for them, are as per the listed stuff below. Please keep the same in your mind before investing and they would certainly take you forward towards a better future.

Investing without a goal – In case you do not have a goal for your investments then start making them. This would make your money management more efficient and you help you decide and choose on investment tools in a better fashion. Like if you think you would not need you money for some thing before than a year then you are good to invest them in stocks or equities but in case it’s not like that you should think of more easily liquid able instruments to invest in. No matter what you do but start planning for tomorrow, don’t just do it for the sake of doing it.

Emergency Fund – Think what is kind of money that you have as a contingency fund for yourself and your family, what is the amount of insurance amount that you can expect in case some thing there goes wrong, or some one falls ill or in situation of a job loss. So considering these things start investing in insurances, trust me they are your best friends in the time of need.

Booking profits – Set targets for your investments and once the earnings for the same has been done, do not think twice before booking the profits. In case you are greedy then chances are you would loose on the whole of it. So stop being greedy now and start thinking rationally.

Panic selling – Stock market needs nerves of steel and is not for the weak hearted people. So stop selling your stocks in panic. Think plan do some analysis for your self before you consider disposing your holdings.

Borrowing money to invest – Investment is a good idea. But perhaps getting rid of debts first is a better idea. So it’s an absolute no-no to borrow money from some where or some one just to invest, and even worse if you plan to do the same in the stock market. The stock market is never guaranteed. Any thing can happen at any given point of time so never borrow money to invest in the stock market.

Hope these thoughts would be beneficial to you and just consider thinking on these lines before you make your decision.

©2009 Copyright by Invest In India

The Right Amount of Insurance

Malvika — Mon, 19 Oct 2009 10:53:00 +0000

There is never a right or a wrong amount of insurance. If an amount of
Rs. 5,00,000 is the right amount of insurance for your friend who has the same income, and is of the same age like you. Even then, it essentially might not apply in your case too. There are lots of things which need a consideration for choosing the right amount of Insurance for a person. A brief description of the same has been under mentioned to help you.

Annual Income of the person – For your family to continue living a comfortable life like they do, with you being around them. It’s a thumb rule that your Insurance amount should be atleast 6 to 8 times of your pay.

Your dependents – The number of dependents in your family is directly proportional to the amount of insurance you need for your family.

Compute your expenses – You need to sum up the total expense that you incur through out the month to maintain a certain living standard for your family. So that is the amount of money you would need from the insurance to keep things going, when the income from your end stops. Also do not forget to keep in mind the inflation rates.

Savings – Have you created any savings for your family, on which they could fall back. Just in case misfortune strikes.

Your current debts – In case you have purchased a house or a car recently with the help of a bank loan then it becomes all the more essential that you consider covering them all with insurance. Else if just in case some thing happens to you, then chances are your family would be in a soup, with those liabilities on the head and no income. Also chances are they would loose all that if the payments are not made for the same on time.

Needs of the Future – You ought to have a foresight to see the kind of needs those are going to arise in your family, in the near future or the distant future. Like higher educations, marriage of your daughter, illness in the family etc. So you ought to plan for all those expenses and then compute the insurance cover that you should ideally go for.

Tax cover – If you are buying insurance today just with the motive to cover your taxable income, probably that is being very unwise of you. You ought to consider the unpleasant situations and circumstances that your family might face and then buy them for the right amount. If tax benefits come along with it then the same is ought to be considered as a bonus received.

©2009 Copyright by Invest In India

In India, Use Credit Cards the Smart Way

Malvika — Sat, 17 Oct 2009 03:31:23 +0000

Are you worried about the right number of credit cards that you should be having right now in your wallet. The fact that the credit cards that you have are a real nice tool if they are used wisely, else they would not take long to turn into a death trap, cannot be denied. Thus we had our financial expert advice here the right way to use credit cards.

According to the experts having multiple credit cards is certainly not a bad thing. One should be taking advantage of the interest free period offered on then along the offers and discounts, which are sent to the holder of the cards as mailers from time to time are at times really beneficial.

As per the certified financial planners usage of the credit cards is a good way to keep a tab on the kind of expenses that you might have in your regular day to day life. The simple trick is to use multiple credit cards. Like use a specific card for buying petrol for your car, another one for the grocery, another one for the high ticket items like your DVD player, purchase of furniture, another one for your monthly bills etc. This way you would be able to keep a track on how much you are spending on what kind of items.

But in case you are using multiple credit cards then you ought to remember multiple due dates for those cards, the interest free periods, and the details of the offers for which you had used the specific card. In other words you would be required to know any thing and every thing about your card like the back of your hand.

Rolling over the credit is the worst thing that one can do with the credit cards. Like in the case of the impulsive buyers, who would just go shopping without considering how much they would be able to pay for the purchases, would not take much time to find themselves neck deep sunk into debts, with collection calls coming to them every day. Also do not forget about the huge amount of interest that would be payable on the purchases. So if you are in the habit of rolling over the credit just stop it immediately before you land up in big time trouble.

If you have a good payment track, chances are your credit limit would be enhanced soon enough. Thus be careful, about over spending and use the points that have accumulated in your card to get gifts free for your self or for your loved ones.

©2009 Copyright by Invest In India

Debt relief options to achieve a debt free life

Tushar Mathur — Mon, 17 Nov 2008 03:31:00 +0000

Increasing numbers of debtors are having serious monetary issues. Your debts will only minimize once you start paying them off but financial relief can be achieved overnight. With the state of today’s economy, consumer debt is increasing in number. There are many who are looking for debt relief.

What is debt relief?

Debt relief is kind of assistance provided to an individual who is in debt. It provides liberation from debts. Any one of us can fall into a debt trap. Simply consolidating a handful of debts will not relieve you from this burden. The initial step of getting out of debt is to work out on your pending bills. If you have no idea about the extent of your debt, you will not be able to do anything about it. So, it is advisable to go for debt relief programs which have proved to be beneficial for many who have financial issues.

Options for debt relief:

The most common options of debt relief are debt consolidation, debt management, and debt settlement.

Debt consolidation: Through debt consolidation you can consolidate your debts into one single payment. This is helps you to pay your multiple debts through a single payment. The debt consolidations programs are widely adopted by individuals to end their debt problems. Here a debt consolidation firm will contact your creditors and negotiate with them on your behalf. They will reduce the interest rates for you and club all your outstanding payments into one affordable amount.

Debt management: Debt management is seeking help from experts in finding a proper debt solution. Basically there are two types of debt management programs. One is secured debt management programs and the other one is unsecured debt management programs.

Debt settlement: It is one of the popular solutions when you are under the burden of heavy debt. The other option is to just file for bankruptcy. Among these two, debt settlement is preferred as it has a relatively less impact on your credit report.

You can start to plan your debt relief right from today, but do not expect things to change overnight. You can try to build a rapport with your creditors and keep them informed so that they will be able to help you with lower interest rates or monthly payments. They may even help you to structure a payment plan which may lessen the chance of adverse credit ratings. The option can be to take help from a credit counseling company. They may be charge you a small fee or no fee at all. They can help you to organize your budget and minimize your spending for some debt relief. They may also contact your creditors and work out repayment plan for you. Also never forget your bank as they can help you to give you an equity loan in your home’s value. This you can use to pay your debts.

All these options may vary from person to person. Try to find a debt relief plan which will suit you. All you need to do is lessen your credit limits and try to improve your credit scores. The debt relief solutions only guide you to manage your finances.

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