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.
fake.email@hdfcbank.com

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

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.