Are you growing up or growing old?

At twenty, we worry about what others think of us. At forty, we don't care about what others think of us. At sixty, we discover they haven't been thinking about us at all….
                                                                                                              -- Author Unknown

          In Urban India, people are turned to have very narrow definition about ‘Young’. Guys started telling any 25 plus female as ‘Aunty’. For them, being young means, having zero figure, wearing skin tight jeans, having short hair and wearing high hills all days. Any one, who is not fitting in this bracket is called ‘Aunty’ for them, irrespective of age, I guess. Anyone wearing salwar kameez, is ‘Aunty’ for them. If this definition is taken in to consideration, ladies from 18 to 25 is only young.  If the age span of average Indian is considered 70, that means, you are going to be ‘OLD’ for more 45 years.. That’s so bad.. What do you think??

Yesterday, I have attended a party and met few friends who know me from last 7 years, when Istarted doing my Post graduation. One of them was telling me that, ‘Ohh Hetal, You are looking like an aunty.’ That sentence stuck a chord. I wished to say him, “Really, then you are looking like a grand father!!!’But alas, my good nature stopped me to do so. (I wish I should not have that 'good nature')

        The same experience many of other girls have faced. Mainly, girls in long relationship where there is no legal commitment, as the time passes, male partner start thinking the female as old, and this is the right time to find the new hot chick for new relation. Indian males are thinking that they are young eternally.  No one can preserve the same youth, the same hormones for lifetime. Obviously, as time passes, years are added in your ‘age figure’. And so, the wealth of experience, knowledge and money should be continuously increase. You cant wear the same cloths ,you were wearing in your college, when you have dignified designation in an MNC. You cant wear the same make up, that you used to wear in college. And as you grow up, the maturity shows on your face and body language. You don’t talk that stupidly, which you use to do in your college days.

          I protest any person commenting of ladies’ age and body shape. Criticizing the beauty of a female is same as criticizing the earning capability of male. Every female is beautiful, every female needs care and praise. And the one, who criticize his female friends with respect to beauty, he ends up in broken relationship..

        I am really enjoying growing  up with my hubby, sharing each moments of life, struggling, getting settled down. Because these memories are treasures that we will cherish when we will retire… I am really growing up..not only growing old.. Wish everyone shall be lucky to say this...

Common mistakes that ruins our Financial Planning

Basic Rule # 1
Basic Rule # 2
Basic Rule # 3


Mistake No. 1: Excessive/Frivolous Spending
 It may not seem like a big deal when you pick up that double-mocha cappuccino, stop for a pack of cigarettes, have dinner out or order that pay-per-view movie, but every little item adds up. Just Rs.25 per week spent on dining out costs you Rs.1,300 per year, which could go toward an extra mortgage payment or a number of extra car payments. If you're enduring financial hardship, avoiding this mistake really matters - after all, if you're only a few rupees away from foreclosure or bankruptcy, every paisa will count more than ever.

Mistake No. 2: Never-Ending Payments 
Ask yourself if you really need items that keep you paying for every month, year after year. Things like cable television, subscription radio and video games, cell phones and pagers can force you to pay unceasingly but leave you owning nothing. When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning your from financial hardship.

Mistake No. 3: Living on Borrowed Money
Using credit cards to buy essentials has become somewhat normal. But even if an ever-increasing number of consumers are willing to pay double-digit  interest rates on patrol, groceries and a host of other items that are gone long before the bill is paid in full, don't be one of them. Credit card interest rates make the price of the charged items a great deal more expensive. Depending on credit also makes it more likely that you'll spend more than you earn.The best way to avoid spending on card is not to have any.. and if you must have credit card, have only one and cautiously track your spending.

Mistake No. 4: Buying a New Car/ not affordable house
Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car. Furthermore, by borrowing money to buy a car, the consumer pays interest on a  depreciating  asset, which amplifies the difference between the value of the car and the price paid for it. Worse yet, many people trade in their cars every two or three years, and lose money on every trade. We Indians are ok with riding the bikes, scooty or activa. It actually saves partol, and saves money as well as it saves time for traveling also.

The same rule applies when you buy a house. Don buy 2 BHK if you really needs and can afford 1BHK. Dont buy it because your friend bought it, dont go for costly interior decoration so that your friends/relatives like that and praise that. Remember, the praise will be for few minutes, and you may end up paying for years and years.

Mistake No. 5: Living Paycheck to Paycheck : Don't spend all you get as paycheck. Invest some part of your paycheck religiously. Make it as a discipline ..as a habit..At lease 30% of your pay check should be invested in different investment vehicles.

Making a Payment Vs. Affording A Purchase
To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn't the same as being able to afford the purchase. Finally, make saving some of what you earn a monthly priority.

Basics of Finanacial Planning - Part 3

Basic Rule # 1
Basic Rule # 2

Basic Rule # 3 
                  ... is to evaluate your portfolio time to time.

As we have seen in first 2 Basic Rules, understanding money and investing it on time is very important. Not only investing it on time is important, but evaluating your portfolio and keep it up to date is very important next step.Evaluation gives you clear sight of where you stand and how long you will have to go in order to achieve your goal. If portfolio is evaluated time to time, assets will be evenly distributed among equity, debts, bullion, bonds, long term FDs etc.

The true investor should have these 3 'E's to evaluate his portfolio.
1.Experience
2.Education
3.Excess cash

    Experience is the key for investment. But as stated in previous blog, financial planning is trial-and-error tool and one minor mistake can lead your portfolio to havoc. Learn from others experience, its good. But don't trust on others tale-a-tell. People tend to show their 'fake' success and create stories on that. Don't fall in the trap. Even the person, who is giving you tip for investment, is successful investor, his tip may not suit you, as you both are different personality at all. Investment is like Homeopathy, same medicine will not suit other person, even with same symptoms.Start investing small amount and then learn to invest. You may suffer some loss in starting, but as the invested amount is less, the loss will be also less. Remember, practice makes the man perfect.

   Education here, does not mean your high school certificate, or college degree. Even if you know basic maths and compound interest, you can play well in investment field. Education means, knowing more about your options. Be up to date about your portfolio, learn to read Profit/Loss account, Income/Expanse account and Balance sheet. Keep yourself updated by reading about companies, markets and upcoming trends in industry.

   Excess Cash is also very important for investment. If you don't have excess cash and you are struggling for your  day-to-day living, its not possible that you invest. even in that condition, if you get money by lottery, then also, you will blow them all. Spend less and save more - this is the sure way to get excess cash.

  This is all for the day, keep reading for next blogs, next Basic Rules..

Basics of Financial Planning - Part 2

Basic Rule # 1 

Basic Rule # 2

                 ..is to convert earned income in to portfolio income or passive income as effectively as possible.

  This is the most important step and remaining steps are completely depending up on success of it. Many people struggle to select the best options like shares, Mutual funds etc. The options are called ‘Investment vehicle.’ Remember, there is not trial-and- error in financial planning. One minor mistake can lead your portfolio to havoc. The investment vehicle suited for one person may not suit your need. Also, the investment vehicle designed for long term needs (e.g.Insurance , ULIP) may not suit your short term needs.

  This step should start as early as possible, preferably when you have started working (or ideally even when you are studying). When we are fresher in the market, our salary used to be very less and shopping list is very big. And as our own earned money gives us independence of buying what we like, we tend to spend money. We think that it is our right. After working five or six days like dogs, we deserve all the luxuries that our money can buy. But dear young professionals, you have the best asset in your account, which can tremendously affect your wealth building, and it is TIME. Your father, uncle or boss can have more knowledge, but you have more time. And the compounding interest depends mostly on the factor :Time.

  Let me give you one example. Riya and Tony have joined a Software firm as trainees, They are fresh graduates. They are working on same floor, just few desks away. As trainee executives, the salary they both are getting is moderate, even Tony feels that is is less then other firms offer and he is always in crunches of money. Riya leads simple life but not compromising with her basic needs and needs from her profession. She saves  Rs. 2000 every month and put them  in to a Mutual Fund after thoughtful study, for 5 years. The Mutual fund gives her average 11% p.a. return. So, at the end of 60 months, she will have Rs.160494 in her kitty and effective yield of 14.57%. Saving small amount every month is not a problem. The maturity amount she gets at the end is good one and also adjusted with inflation.

  After 5 years, while  Tony is  still struggling with his finance, blaming recession and his company for his financial struggle, or even hopped many jobs to get settled money wise , Riya could have bought a house or car or may be again put all her money in some other investment vehicle to build her wealth.

  Remember, Rs.1000  monthly put in investment vehicle , which gives 10% annual interest, compounded monthly, can give you about Rs.78000 in 5 yrs, Rs. 2,06,000 in 10 yrs, Rs, 4,17,000 in 15 yrs. So, the long the duration of your investment, the better the returns are. Start early.

  Basic Rule # 3 will be published on Monday, 25^th Oct, 2010..Keep reading.

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Basics of Financial Planning - Part 1

Basic Rule #1

                          ….is always to know what kind of income you are working for.

There are 3 kinds of income.

1.Earned Income

2.Portfolio Income

3.Passive Income

  Earned income is income generally derived from a job or some kind of labor. It is the income from the paycheck. You get your earned income from your job or business, or both. You need to have specific skills to generate the earned income. Most of the times, it is regular income and predictable. Most of people start creating their portfolio with the help of earned income. When you subtract your expanses from earned income, whatever surplus you get, can be used to generate Portfolio Income as well as Passive income.(discussed later in this blog)

  Portfolio income is generally derived from paper assets such as stocks, bonds, mutual fund. Mostly, people make this part of portfolio from earned income except some lucky one get it as inheritance. Interest generated from bond is predictable and regular. Dividend/bonus generated from shares/ mutual funds are not so regular and predictable. Portfolio Income should  not be used to supplement your earned income for day-to-day use. Rather, it should be used to build your wealth.

  Passive income generally derived from real estate. Same as Portfolio Income, people make this part of portfolio from earned income except some get it as inheritance. It is a great source of stable regular income along with regular appreciation. The house/ shop you are letting on rent will not only put regular money in your pocket , but as the time passed, the value of the house/shop will keep increasing. The only problem with this part of portfolio is, it needs constant care  and maintenance. It is also prone to depreciation. So, you can supplement your earned income as well as build wealth with this part of your portfolio.

Basic Rule # 1 is over. We will see Rule # 2 in next blog. Keep reading...

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