Tuesday, March 11, 2014

Phishing mail

Hi Readers,

Today, I am going to talk about phishing mails or scams as it is known. What is it? It is an act by which unauthorized individuals try to collect the username, password, bank account details, credit card details etc through electronic medium. Normally they send emails, SMS luring you that you have won a prize money of some other country and you need to fill up a form with your details and bank details etc so that they could send the amount across.

If you reply them, they try to hack your email. And they collect information from you that they use to transfer money or do any kind of financial transactions using them. And you are looted of your savings or credit card balance limit. Today, I received a mail that has British flag on it. They make it look real. They could send you ten pages long document providing you details of their scheme.

So, now is the bigger question , what we should do when we receive such SMS's and emails.

1- Do not reply.
2- Report it in your banks. Banks can block those sites and ensure no one could do anything from that site.
Just you have email the content to your bank customer care department.
3- Do not download any thing from websites that you do not trust.
4- Have a antivirus loaded on your system.
5- Never share passwords and login id's.

Here, I have found that HDFC bank provides one email id where you can report such fake emails.

I will try to find what other banks do in such case and will post on my findings.

Wednesday, February 12, 2014

Retirement planning

People often ask question such as: 

·         Are my savings enough to sustain post-retirement period?
·         How can I get regular income from my investments to manage my regular expenses?
·         Should I invest for short term or long term?
·         Which asset class will suit my requirement?
·         What should be my asset allocation in Equity, Debt and Gold? 

You see, all these are very relevant questions. And even if you are in the earning phase of the life cycle yet, you ought to be cognizant and plan well, or else you may have to confront the horror of being callousness or even procrastination in planning. 

Being aware of the seriousness of all these questions, herein below we have explained each of them for the interest of our readers:

1.     Are my savings enough to sustain post-retirement period?

Some may be under the impression that if you have monthly expenses of Rs 2.5lakh per annum and you require it for post-retirement period of 20 years, then a sum of Rs 50 lakh (2,50,000 * 20) should be enough. Well, while it seems very easy, the reality is quite different. You see, over the span of 20 years you ought to take into account the inflation factor, as it reduces the purchasing power of your hard earned money. Take an example of your grocery bills. Assuming it costs you Rs. 1,000 today, the fact is, it will not cost you the same 1 year later. Assuming inflation of 10%, your grocery will balloon by Rs. 100 and cost you Rs. 1,100 after a year.

So to answer this question you need to calculate your retirement corpus by taking into consideration the inflation factor.

2.     How can I get regular income out of my investments to manage my regular expenses?

As you know, once you retire you do not have any regular monthly income. So what you got to rely on is your savings. There are some financial products such as pension plans from insurance companies, dividends from mutual funds / stocks, interest from Bank FDs, Post office Monthly Income Scheme (POMIS), Senior Citizen Savings Scheme (SCSS) etc. which can provide you income at regular intervals. We generally recommend investing in various products and not rely on only one, as all of them have different features. We also recommend keeping 2 years of your regular expenses in liquid funds to maintain the liquidity and in order to face any medical emergency that may arise.

3.     Should I invest for short term or long term?

Even though post retirement period is quite long generally ranging between 20-30 years, you still need to be very careful with your investments as you are totally dependent upon your savings. We recommend having investment from short term to medium term and try to avoid very long term investments as liquidity is one of the main considerations, along with risk appetite having generally reduced with progression in age and lack of regular earnings (from salary or business / profession).

4.     Which asset class will suit my requirement?

Suitability of asset class depends upon how much risk you can take on your investments. Generally risk taking ability is low during post retirement period as there is no fresh regular income; so most of the investments should be debt.

5.     What should be my asset allocation in Equity, Debt and Gold?

As answered in the previous question,
 asset allocation also depends upon the risk taking ability of an individual. Generally, it is recommended that retired individuals to allocate higher proportion of their hard earned money in debt instruments and relatively smaller portion towards allocation in equity and gold. For individuals who have a moderate risk profile, 10-20% can be invested in Equity, 70-90% in Debt and 5-10% in Gold. 

As you must have observed planning for post-retirement period is a lot more different than planning for pre-retirement period. You need to maintain liquidity and keep risks low with your investments and at the same time ensure that you earn sufficient return so that you can comfortably live your retired life.

Credit Card does and don'ts

The use of credit card has increased drastically. If you ask people from older generations about their credit card usage; you will realize that they probably didn't even own a credit card, or even if they did, then used it only for emergencies. But that was then - in the past. Among the many customs and trends that have undergone a change over the last few years in the country, credit card usage probably ranks very high. Swayed by the consumerism in the country, many individuals own multiple credit cards and swipe them rampantly. The urge of owning things on credit and enjoying a lavish life style, has got many under a credit card debt. As soon as the minimum amount or a part of the amount is defrayed, users get exposed to a stupendously high interest rate. People don't realize when their "little" purchases become too many, and get them into a debt. 

So coming to the rescue of such individuals, we have mentioned some points which can enable you to reduce your credit card debt wisely-

1.     Assess all your dues: The first step towards elimination of your credit card debt is to evaluate all your obligations. Hence you must make note of all the credit cards you own, analyze your online accounts and paper bills and the interest rates applicable on each card etc. This will help you to determine the total amount you owe and the cards that bear the highest rate of interest. Once you have obtained this figure, you must start paying off all the high rate dues with low interest loans. This will help you save money on interest payments. Create a plan to repay your dues and classify the ones you will need to clear first. This will give you a clear picture of your future course of action. 

2.     Renegotiate interest rates: You can try to reduce the interest rate you are paying on your credit card by interacting with each credit card company. Even if you manage to reduce the rate by a small percentage, it can help you save a huge amount on interest payments. The companies may or may not renegotiate interest rates, but you must ask them as there is no harm in trying. 

3.     Create a budget to pay off credit card dues: Track all your monthly inflows and outflows. If your outflows leave you with very little to save and repay your credit card dues, then it is high time you started monitoring your spending habits. Establish a monthly budget for all your expenses and be determined to follow it. Curtail all the unnecessary expenditures and save wherever you can. This might mean reducing all the outings and even rationalizing on the necessities such as electricity and telephone bills etc. It goes without saying; don't add on to your debt by shopping more on credit cards etc. Having extra credit can sometimes create a feeling of having access to large sums of money and can lead us to buy things that we really can't afford. Keep track of every small expense, as it is these small expenses that often amount to big bills. In order to boost your monthly inflows and pay off your credit card dues faster, you may also consider finding an additional source of income. This could be done by working part time or encouraging your spouse to find a job or a source of income. Moreover, any windfall gains such as lottery winnings, lawsuit judgments, large inheritances, divorce settlements etc. must be deployed towards reducing your dues. 

4.     Implement your strategy: Once you have determined a method to budget your expenses and pay off your dues, you must start implementing the same. Do not delay or procrastinate these payments as the debt amount keeps increasing. It is also prudent to keep a track of your progress. You must revisit your finances in a disciplined manner to ensure that you have not deviated from the planned course of action. 

By adopting the above mentioned steps you can get rid of sleepless nights and live a stress-free life.  

For those who don't own a credit card as yet but are thinking of gaining possession of one, remember that rather than making fences later it is prudent to be cautious right from the beginning. Keep the following points in mind before using a credit card:

·         Terms and conditions: Read all the terms and conditions carefully before you opt for a credit card. If you find anything in the terms and conditions of the credit card that was not conveyed to you or is contrary to what was conveyed to you, then seek a clarification from the bank. If you are not satisfied with the clarification, cancel the card. 

·         Annual Fees: It is important to be aware of the amount of annual fees that the company is going to charge you each year. Some companies also issue 'life time free cards' i.e. no annual fees are charged. However, its best to double-check with the company what the executive has promised you about all annual fees being waived off. 

·         Minimum payment due: This is the minimum amount that you must pay for the purchases done in that month so as to not attract a penalty for default on payment of card dues. We would recommend that you pay the entire sum as carrying forward your payment to the next monthly cycle; will lead to a higher amount due on account of high interest rates plus taxes levied on the credit card. 

·         Payment by EMI: On the same lines, whenever you make a large purchase (usually over Rs 10,000, although the amount varies across banks) you may get an offer from the bank to opt for the EMI facility to make the payment. Again pay the EMI amount in the credit card bill in full, along with the other things you've shopped for or paid for. So to simply put, pay your credit card bill in totality before the due date in one go. Also ideally, give the EMI facility a miss as the interest on the EMI can be exorbitant. 

·         Borrowing cash is expensive: Credit cards can be used for making purchases on credit as also for borrowing cash. While making purchases on your credit card (so long as you pay on time) is okay, borrowing cash on your credit card is a very expensive affair and hence must be avoided. 

·         Insurance benefit: Many credit cards are known to offer an insurance cover. We recommend that you ignore this benefit and go for the core offering - credit card. This insurance cover is unlikely to be sufficient for you and more often than not is linked with quite many terms and conditions and may be difficult to claim. 

Tuesday, October 15, 2013

Financial assumptions that youngster should avoid.

Hi Readers,

This post is dedicated to younger generation, mostly to freshers who have just graduated and have started working. It is at this crucial phase, that most of the middle class youngster actually take part in finance. Finance is normally managed by the parents till the child starts working.

When the youngster starts working, he/she opens up an account. Since, youngster are more attracted to modern technology and gadgets, they take up credit cards, new and costly handset, a new bike, before they even sit back and think about money that they earn.They spend hefty sum on handbags, mobile phones, bikes even without realizing how big the hole has been made on their own wallet.

Youngster have several excuses such as, have no time, it is complex, no idea where to begin and how.

Firstly, to understand and manage personal finance, one has to consider self as an asset. What is an asset? Asset is something that pays you, earns income. So, you are inevitably an asset which generates income for self.

The second things is If you save and invest part of your income, then that will pay you more. If you spend more than your actual income, you would need an alternate source to fill in the gap.

So, better late than never, start financial management and take this seriously. Once, you start learning about it, this will become easier. This can help you build a debt free life. When to take debt and how to pay back, how to assess how much to invest and spending wisely would come to you naturally in a couple of years.

The point, which is important in this whole process, is to get started and to take it seriously.

Secondly, most youngster have a casual approach to life, like just enjoy. Go on holidays, get all things that you like without a proper plan on place. Today, the job market is not the same that used to be 70's and 80's. So, you have to make cautious decision to have a backup in case of any disaster like loosing a job. You to evaluate the risk, keep money aside for it before jumping into fun.

Living a frugal life is not easy for youngster these days, everyone wants to look cool over net. But, to have this life you have certain risk , just don't keep the risk under pillow. Take this into account and build yourself adequately to have a longer sustainability in disaster. 

Thursday, September 19, 2013

Made in India

Why we Indian's do not like "Made in India" tag the way we like "Made in xyz" for all the product we purchase? During British Raj, India was ruled by Britishers, but all the products were India made and India was one of the strongest country economically. Today, though we are Independent but we are so much fond of Made in other country tag that actually our economy is at mercy of Foreign Direct Investment.

Be it something to eat, wear or use, we want everything made in other countries. Who wants to party in local dabba's, idli dosha joints, the idea is so boring that such party never happens. When its party at Pizza hut, Subway, McD or Dominos this is a hit.. Why such a mentality for our products? 

I still remember the time in 1980's when everwhere it was Black and white TV from Konark. Today, this company has vanished into thin air. We have Samsung, Sony, LG etc taking over it. No doubt these foreign brands are ruling over Indian market, however, their product else where in the world costs less compared to India. People who visit other countries get back home, electronic gadgets be it Camera, Laptop, LCD. But, why is it that same product in India cost so high compared to else where in the world? 

All this is because of the composite tax that Indian government imposes on these products. How is it going to benefit India, when FDI is suppose to provide us Global products at higher cost and at the stake of local manufacturers? 

I feel really sad to see the tags "Made in XYZ" on simple things like clothes, undergarments, plastic utensils etc... Why our country cannot manufacture something of same quality and look? We are still the third largest economy in Asia, but we are importing from our neighbours CHINA and Srilanka. How are we going to outperform? Will there be a day, when we can proudly say and boast around with "MADE IN INDIA" tag ???

Wednesday, August 28, 2013

A thought on Food security Bill

As we all know the Food security bill we can passed in Lok Sabha and will be produced before Rajya Sabha tomorrow. Is this something that we can afford right now. India needs to strengthen its economic situation by reducing the current account deficit. When India is under a large debt how can she afford to distribute food at subsidized rate.

Now, lets see the condition of India. According to 2013 statics BPL population has reduced to 22% of population. Indian government provides Rice, wheat, sugar and kerosene at subsidized rate to this 22% of population. The most eye catching being Rice @ Re 1/- per KG. Indian government also purchases a minimum amount of food grain produced from the farmers directly. So, where lies the problem and why this Food security bill is a necessity.

As per statics, India needs to improve sanitation and fight against malnutrition. However, our government has come up with another food security bill that would give subsidized food for 67% of population.

Here, is some view on the actual condition of people at remote village. The scheduled tribe or tribal population is the poorest, they need a socio- economic growth all together. In general, India needs to improve the sanitation and malnutrition problem. However, the corruption in India which has spread to this grass-root level also affects the actual statics of BPL. People in remote village get their ration card if they have connection with politician, in-spite of their overall income. Yes, it covers the actual needy but there are people who are covered even if its not a need.

By passing this food security bill, can government improve the present situation? Its a No. Why? Providing cereals only at subsidized rate will not improve Malnutrition, because pulses is required to fight malnutrition. The second reason being, government is buying these cereal from farmers, it is transporting these food grain to cold storage's located 100's km away from the purchasing place. At present situation, media reports food wastage every other day at these storage's. So, how can government be able to distribute food efficiently to a larger mass without improving and efficiently functioning these storage's. It would just end up purchasing the grain from same farmer and providing him the same produce at a cheaper rate. This will be total loss for India.

Where India needs to focus is at the efficient distribution and maintenance of  these cold storage's. Once, it improves this condition only then it can increase the capacity. Only by increasing capacity all of sudden will not help India, instead this would increase the wastage to a larger amount. What about sanitation, non- of our political leaders have anything to say about it? Why so?

This could be because if government announces setting up free toilets in villages, it will not be able to grab more attention, than when it will announce distributing cereal @ Re 1/- for a larger mass. For the villagers, the poor and illiterate, sanitation is obviously not something they are attracted to, but food is a need and attraction. They are used to the poor sanitation and could not easily understand the need of it.

Yes, we educated mass understand the vote bank politics, and know such bills will be beneficial for all the contesting parties in election, so this bill will never be opposed. But, how many of this educated mass actually vote. Many of us have migrated from our native to another state for employment or for higher education, on the election day, we have voter id's of our native place as per residential proof and this actually hinder's us in giving vote. And  the remaining educated mass who do not vote because, we have no faith on any government parties. Yes, as Indian's we should never miss this opportunity and vote, but there most be some easier option to do this just like registering for PAN card and using it any where in India. True, setting up a system that could identify people at all places would be difficult but this is not impossible.

If this could be possible to vote on internet ,many more educated mass who understand the policies and rules would be able to participate efficiently. But, yes at the present scenario, this food security bill will no doubt attract the poor to vote for the party. I wish our government could take up more steps to actually stabilize economy than provide subsidized food.

Wednesday, July 31, 2013

Poverty Politics

Have you marked the western tourist, taking the pictures of beggars and urchins? Internet is flooded with pictures of India that has only pictures of beggars, tribal and poor. Till date, when western country papers write a story about Indian society or quality of life, invariably,the article will have pictures of beggars and unhygienic places. As per the report by planning commission we have made remarkable jump from 2005
to 2012 by reducing below poverty line population from 37.2% to 21.9%.

The planning commission released for a change, some numbers to cheer. There are lesser number of Indian's living below poverty line than were in 2005.According to the commission, in 2012 21.9% or 269.3 million live under poverty line. This figure is much lower compared to 407.1 in 2005 or 37.2%.In 1994, 45.3% lived below poverty line. No doubt we have come a long way since 1994 and the jump from 2005 to 2012 is remarkable.

The credit goes to economic growth of India. the Indian economy during last eight years has shown a growth of over 9%. At the same time, rural prosperity has increased. Agricultural wages have increased. During the 11th Plan period(2007-12) agricultural wages have raised much faster at 6.8%.

All this was possible due to growth. In Bihar growth in agriculture and money coming from migrant workers helped people to cross over the BPL mark. Similarly, in Odisha mining and migrant money helped. However, this had little or no effect in Chhatishgarh. The state could only reduce poverty by 9.47% in-spite of showing 8.69% GDP growth. So, if growth could reduce poverty why it did not have any effect in Chhatishgarh, where more 40% population is still below poverty line which is double the national average.

We have to achieve growth by improving education system, healthcare and food distribution and by providing more employment opportunity. Growth will not be able to reduce poverty after a certain point if all these things are not taken into account.

To add to this, our politicians made another remarkable statement stating that one can have full meal at RS12/- and RS5/-. How is this possible I do not see rice in near by grocery shop below RS40/- per Kg. The Rupee mark of RS27/- in rural area and Rs33/- in urban as the poverty line mark needs to be recalculated.

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