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Are you up for these 3 Financial Challenges?

Malvika — Wed, 04 May 2011 07:10:28 +0000

Let’s begin learning:

The safest way to double your money is to fold it over once and put it in your pocket. ~ Kin Hubbard

Kin Hubbard is right in saying that if we do not spend money unnecessarily we would be able to save money and double it. However most of us like to spend and would find it difficult to not spend at all. We feel that it could stress us further.

Accepting the3 financial challenges could help you in controlling unnecessary spending. Once you control and avoid unnecessary spending you can save more and invest more. So you can achieve your financial goals easier and earlier.

Here are the challenges:

A Day Away from spending

The challenge of not spending for a day could be difficult, but could help save and render some important life lessons. It is true as most of us have regular daily expenses on coffee, tea, lunch, and snack at regular intervals and fuel to travel to and from work.

Effective planning with implementation of this challenge involves ensuring that your fuel tank is full on the earlier day. Then setting the coffee vending machine the night before could ensure you refreshing brewed coffee to enjoy before you leave for work. Similarly, carrying homemade lunch and healthy snacks like salads, nuts, seed and snack bars could help you eat healthy and save money.

It is not as difficult as it appears. Once you start practicing it, it becomes part of your habit like fasting. It opens new ideas to you on saving on daily routine expenses.

A Week Away from Credit Cards

We all tend to spend a lot on small and big purchases with using the credit card. Credit card tends to make us spend excessively on unwanted purchases.

Buying things on cash would only make us spend on things that we absolutely consider necessary. It is found that sometimes postponing the purchase and preferring to pay cash could make us realize that the need was just momentary.

During the week away from credit card, you will be able to understand some of your spending pattern. You will come to know on what items you make impulsive buying and on what items you make need based buying.

As you are using cash to buy and not plastic money, you may want to negotiate the price. This develops your negotiation skills.

It is also true that buying unnecessary things with credit cards causes financial stress and spoiling of important life relationships. So avoiding credit card for a week could make you a need based buyer and better negotiator.

A Month Away from Eating Out

The last challenge of not dining out for a month could be difficult for many today. This is difficult but you would realize on implementation that it saves you a lot of money that is usually spent eating out in restaurants and cafeterias.

Avoiding eating in restaurants would not only create huge savings, but also would help you avoid excesses in foods. In addition eating out only on special occasions as a family would help you enjoy the food. It would make the family realize the value of spending money lavishly.

When we have a kid around one year old, we won’t offer any outside food. We will pack the home made food or snacks for the kid. You can follow the same for the grownups.

Again this is not as difficult as you think. Think of having a homemade food as a family in a park or beach. This will bring a different experience and enjoyment to your family. This will give you new ideas on having more fun with lesser money.

A Final Note

All these challenges do not mean that you should not spend at all on dining out or on getting good things of life. It only means you should spend the right amount of money for the right reasons. This self-control would not only help you save more but also in preparing you psychologically for a consumerism

I am sure you would learn a lot with these spending challenges once you try them.

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.

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

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Tips for Saving Money

Tushar Mathur — Fri, 31 Jul 2009 17:37:37 +0000

Tips for Saving

Set financial goals
Saving without a goal is akin to traveling without knowing your destination. It doesn’t take you anywhere. Financial goals bring purpose and clarity to the saving process.

Save regularly
“Pay yourself before you pay others”. Saving has to become a habit and should be handled with equal importance just as any other monthly bill. By putting away small amounts periodically, you do not feel the burden since the process is spread over a long period of time. Earn-save-spend is the ideal approach rather than to save what is left after spending, in order to achieve your financial goals.

Start early
By starting early, you benefit from the power of compounding, rightly perceived as the eighth wonder of the world. After a certain period of time, your money grows exponentially due to the effect of compounding.

For instance, a recurring monthly investment of Rs 1000 over 25 years grows to Rs 13 lakhs at an assumed return of 10 per cent compounded annually. Starting early provides more options with regard to the possible investment avenues and also allows you to take on more risk since there is sufficient time to recover if an investment goes sour.

Create a budget
A budget is the most fundamental tool of personal finance. It gives you a clear picture of your financial affairs. It makes you live within your means and avoid unnecessary borrowings. It highlights areas of concern and facilitates elimination of wasteful expenses.

Watch your expenses
The first step in controlling expenses is to know where each of your hard earned rupee is spent. This would help differentiate between lifestyle expenses (avoidable) and basic living expenses (necessary). The former is the one that mostly causes a strain on your budget and needs to be controlled, if not totally eliminated. Small changes in the style of living can result in major changes in your saving corpus.

©2009 Copyright by Invest In India

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7 Steps towards effective Personal Finance Planning

Tushar Mathur — Wed, 13 Feb 2008 06:02:22 +0000

We invest to safeguard ourselves for a rainy day. If you’ve just started investing or want to start, then you could use this 7-step plan to become your own investment consultant!

Managing your investments becomes easy when you make it a habit to save, even if it’s very little money. You need to keep a meticulous account of personal income versus expenditure on a monthly basis before you start investing. Here are some steps you can follow:

Step 1: Create a budget and track your expenses

A budget helps you identify problem spending areas and also helps regulate your cash flow. Tracking your expenses against the budget helps you control spending and free up cash to clear existing debt and save for retirement or your child’s education. For example, your budget allocation includes a certain amount for groceries for a week. You discover on comparing that amount against actual expenses that you have overspent on buying additional items that you did not really need. This will caution you against making similar expenditure next week and at the end of the month, you will end up saving money!

Step 2: Pay off your existing credit card debts

Are you surprised that paying off credit card debt is a step towards investments? Credit cards charge a high amount of interest along with the principal repayments. When you clear this amount, you‘ll be glad to realize that all the interest amounts and late fees you paid to credit cards can be utilized for your savings and investment program.

Step 3: Save effectively for a rainy day

Emergencies often arrive unannounced. Ensure that some money is set aside to cover monthly expenses for at least three months. These funds should be invested or set aside in instruments that can be readily accessed should you need cash. For example, keep these funds in a savings account in a bank or invest in a money-market mutual fund.

Step 4: Design a disciplined savings program

You can open a recurring deposit account. In this case a particular amount from your income gets deposited every month for a fixed tenure. You can also invest in a series of fixed deposits (FDs). For example, if your cash reserve is USD 24,000, this amount can be divided into six FDs of equal amounts, each with a 6-month maturity. At the end of 6 months, you’ll have a fixed deposit maturing every month. You can continue to roll them over to create a source of regular income and minimize risk.

Step 5: Invest in education, pension, and retirement insurance plans

You can get life cover, education cover and save for retirement when you invest in insurance. Besides this, you get tax exemptions to reduce your current tax payout. For example, you can invest in the insurance plans which offer not only life insurance, but riders for investment of the premium amount so that you get good returns when you retire.

Step 6: Buy yourself your dream home

Investing in a house is one of the best investments you can make. First, your payments towards interest and real estate taxes are tax deductible. Second, your property increases in value over time.

Step 7: Invest in a diversified investment program or systematic investment plan

Your risk tolerance level goes a long way in defining your investment approach. If you’re not averse to taking risks, then you may want to invest in an equity based mutual fund. Else, you may want to invest in a plan that involves bonds and other safe securities. Also, ensure that you keep in mind your investment objectives before you subscribe to an investment plan.

©2009 Copyright by Invest In India