Provident Fund (PF) Account Balance Online

It seems that many of salaried employees think of Provident Fund (PF) as a black hole that sucks up their hard-earned money. Economic Times reported that 4000 Crore Rs is lying with EPFO in its unclaimed deposit accounts with no takers. 

One of the deterrent for claiming the PF account money (withdrawal or transfer) is the complicated process and bureaucracy involved. Also frequent job changes (sometimes 3-4 times a year) by employees also  contributes to unclaimed deposit accounts. On top of that the PF rules are not very customer-friendly.

The introduction of on-line PF Balance inquiry is a positive step in making the process easy. The process involves visiting the following web-site to know your PF balance :

http://www.epfindia.com/MembBal.html   [You will need the PF Account Number]

And thankfully this service is free of charge. The catch is that the data is available only for certain cities and that too up-to certain date only. So for example in case of Bangalore the data is available till 08.11.11 but say for Agra the data is till 06.09.11. The complete list can be found here. Also very few cities are included as of now. As an example in Karnataka, data is available only for the following cities:

In most cases the PF number is something like KN/XXXXX/YYYYYY, so when you visit the webpage you will find that it asks you for Establishment Code (Max 7 digits), Extension (Max 3 characters) and Account Number (Max 7 Digits). In most cases you need to keep the middle box [Extension] empty. So fill the “XXXXX” in the first box, keep second box empty and fill the “YYYYYY” in the last box. You need to fill up the Name, Mobile number and accept before submitting. You will then receive an SMS on your mobile number with you balance.

Note that sometimes if you do this process in non-working hours, you may not receive the SMS immediately, so try during working hours. The SMS contains the details of PF balance as EE and ER amount. The EE = Employee Contribution while the ER = Employer Contribution. The SMS will also indicate the date up to which the balance is shown.

Another good service is the Claim Status. If you have applied for PF Withdrawal or Transfer you can check the application status on this website":

http://www.epfindia.com/ClaimStatus_New.html [You will need the PF Account Number]

But if your company runs its own PF Trust – [my company does], then you may not find this data on the EPFO web-site yet. The current data is mostly for the Regional PF accounts.

I would actually like to see following services on the EPFO website:

• Consolidated Statement for every individual across India
• Service to apply for any correction in details
• Online PF Transfer Application Process [Select Input PF Number, Output PF Number and an identification]
• Online PF Withdrawal Process with money getting credited to bank account

What services you would like to see online for Provident Fund?

Can you afford to loose your job?

This is an interesting question asked by Deepak Shenoy on his blog. I wrote a post on similar lines almost two years back (surviving layoffs), although I could not complete the post. Interestingly cutting expenses is not the advise he wants to give. Here is the quote from his blog

Why aren't you telling me to cut expenses?

I could, and this is advice you will get all over the internet. Cut your expenses, hunker down, don't eat out, sell the car and take public transport, change clothes only every other day and so on. Yes, you can do this. But this is easy preaching. It's not practical because you will do it anyhow, if you have to……

Cutting expenses is temporary and defeating. Sometimes doing so gives you a false sense of security - such as: if I cut this and that, I can survive two years! Yes, but like the joke goes:

Preacher: If you stop drinking, the women, the eating out, sweets, salty and fried things , you'll live to be a hundred!

Patient: But what's the point if I can't do any of them? ("Toh jee ke karunga kya?")

Don't do it unless you absolutely have to.

I dis-agree to some extent. Here are my  comments to his post on this. I know that advise on cutting expenses is spread all over internet. The point is not to cut down everything and live like a sage. It will not be practical, but reducing expenses by certain amount will, not only help financially but also help mentally. I know of folks who go out dinning almost 3-4 times a week, which can be reduced to 1-2 times a week. One of my friend goes out for shopping every weekend. It has become a ritual to him. With a job loss you can skip 1-2 weeks in a month or you can reduce the amount that you used to buy every week. It is all about striking a balance and keeping a certain check on your expenses.

I would rather suggest to act pro-actively instead of re-actively to a job-loss. It is well known that job-loss is going to be very common in coming years. So isn’t it wise to prepare for it pro-actively during the time you have a job rather than to react after a job-loss? Here are some tips to prepare pro-actively while you have a job:

• Keep an emergency fund, but do not dig into it unless it is an emergency.
• Get a  good job-loss insurance if available
• Have a personal family health insurance, since with job-loss your corporate insurance also goes away too
• Do not dig into your PF (question was asked on Deepak’s post), It is necessary to understand the importance of PF, which is for building corpus for post-retirement rather than emptying it for a temporary situation of job-loss
• Continue to develop your professional skills (even if you have 20-30 years of experience)
• Develop some hobby and get deep into it. You will hear numerous examples where hobby gets converted to a business or earn extra income
• Nurture a good network of friends (more specifically in your industry)
• Try to have a work-life balance and spend time on maintaining good health. Illness during job-loss is not going to help you
• Everyone understands the importance of diversifying investments, so for those who are not married it may not be bad idea to think of a similar diversification when you get married. Choose a spouse working in a different industry rather than your own. If you are a software engineer, diversify by marrying a fashion designer or an architect. It will spread the risk of both of you loosing job at the same time.

All of these tips are just common sense. But I will accept that it is easy to preach than to follow them.

Do you have any more suggestions?

India also needs a Plain Writing Act

[Photo by : Casey Cripe]

U.S President Obama made the Plain Writing Act of 2010 as a law on October 13, 2010. India needs a similar law as well. I looked at a random sample of policy wording document [PDF] from Reliance General Insurance for a HealthWise Policy. Here is the “pre-amble” part:

WHEREAS the Insured designated in the Schedule to this Reliance HealthWise Policy having by a proposal and declaration together with any statement, report or other document which shall be the basis of the contract and shall be deemed to be incorporated herein, has applied to Reliance General Insurance Company Limited (hereinafter called “the Company”) for the insurance hereinafter set forth and paid appropriate premium for the period as specified in the Schedule.

NOW THIS POLICY WITNESSETH that subject to the terms, conditions, exclusions and definitions contained herein or endorsed or otherwise expressed hereon the Company, undertakes, that if during the period as specified in the Schedule to this Policy, the Insured/Insured Person shall contract any disease, illness or injury and if such disease, illness or injury shall upon the advice of a duly qualified Medical Practitioner require any such Insured/Insured Person, …blah blah.

It is simply a lot of gobbledygook text making it very difficult for average person to understand, and more so with English not being our primary language. This is prevalent in every government document as well as financial document. The content is not written in the form that an average person would understand. It seems that such language usage is often meant to confuse and divert the reader’s attention.

As an example, the above text can be made much simpler in following manner without loosing any of the context or the meaning:

The insurance contract between insured Mr X and Company is formed based on the proposal and declaration submitted. The insurance contract is based on the appropriate premium paid during the period as mentioned in this document.

The company promises to pay amount Rs Y if the insured person Mr X acquire any disease, illness or injury during the policy period. This amount paid is subject to terms, conditions, exclusion as defined in this document. The company requires that the advice of a duly qualified Medical Practitioner.. blah blah…

Jyoti Sanyal in his book Indlish provides an interesting historical reason behind such officialese language in our official documents. As per him, this type of language originated from babus working for East India Company. Unfortunately Indians adopted this not only in English but also in many regional languages.

The advantages are obvious for having a law for plain writing.  It will

• Make it easy for customers to understand what they are signing
• Bring transparency in the process and deals
• Reduce any mis-selling of products
• Reduce legal actions arising out of confusion between consumers and service providers.

I strongly believe that majority of mis-selling happens due to lack of understanding of the terms and conditions while signing up for any service. Hence such a law will be an important step in protecting consumers from fraudulent service providers. What do you think?

Get Rich by staying in a rented house !

I was reading Ranjan’s post and it got me thinking again about the real returns of real estate and the arguments against owning a house. I have been not in favour of buying a house and my opinion is still the same.

The problem with real-estate investment is that there are multitude of factors like notional gains, emotional trauma, significant risk exposure and various hidden costs that clouds the real picture, causing the confusion about returns. One of the points that I liked from Ranjan’s post is

If you calculate the IRR for an investment in property, you also need to factor in the maintenance costs and the rent you receive. Often a 3 times increase turns out to be a 6% return on investments.

This is significant to note since most of the times, the friends and family that boast of exceptional earnings on investing in real-estate, is just notional.

In the current scenario, I feel that real-estate is definitely not a good investment and a person can become more rich if he stays in a rented house.

• A person buys a house depending upon the level of his income. A person earning higher amount tends to buy a higher priced house and vice versa. Hence there is some correlation between the increase in income levels and the increase in house prices. This also implies that house prices are definitely not going to increase all the time, since incomes are not going to increase all the time. But there are various reasons that house prices can go down even when demand is high. Also there are articles which provide an indication that real-estate prices can drop. If we look at rental prices, they have not gone up proportional to the house prices and hence owning a house is getting costlier every year but not renting the house.
• When one considers the ratio of EMI/Rent for a similar house, it is very clear that  the minimum ration could be still 4:1 while in some cases it could be as high as 100:1 depending on the location and the built up of the house. This implies that EMIs are always significantly higher than rents. If the remaining amount (EMI-rent) that is saved on EMI (by renting the house) is put into conservative bonds/stocks/gold, they can give significant returns compared to owning the house. So renting could make you richer if the surplus amount is invested in other asset classes which have given better returns than real estate over long period.
• When renting a house a low maintenance charges needs to be given to the house owner apart from rent, but when you own a house, a person’s outgo is not only EMI but other expenses like taxes, insurance, maintenance etc and if this can also be invested in other asset class, wealth can be grown many fold over longer durations.
• When the interest rates rises or real estate prices come down, the EMI seldom comes down (it rather increases) but rents will definitely come down. If you own a house, the outgo remains high in all real-estate cycles. Also the EMI pinches the most since majority of the portion is towards the payment of interest component of home loan, whereas a person living on rent can again invest the additional surplus if the rent decreases.
• A home loan increases the risk appetite of a person tremendously and hence restricts the person to pursue options to increase his income. I know of many friends who could not move to another city, take up another job or start their business simply because of the home-loan EMI. But a person living in rented house can simply move to a better job in another city or move to a smaller rented house before starting a business.
• If a person buys a house, the choice of house/neighbourhood will depend on his income level, but when a person rents a house, at a much lower outgo, he/she can stay in a much better house with better quality of life. This is especially true in metro locations where better locality commands a huge price of house but the rents are still affordable. For example, in Bangalore if your EMI is around 20K per month [house ~ 25L], the only house you could buy is in a lower-middle class locality (or far away places from city), whereas with a rent of 20K you can take up a house in the really posh locality. 
• There are other factors which are never accounted like emotional trauma in purchasing a house (most of the builders are not keeping their promises). The house possession is being delayed, the quality of construction is not up to the mark and in certain cases their is a straight cheating by builders who simply run-away taking the money. A person on rent simply changes the house if he/she doesn't like the current place.

Although government is doing its bit by planning to have a real-estate regulator but I do not think that it can change the real-estate landscape significantly in coming years. It is important to invest in real-estate as a means to diversifying your risk but don’t follow the herd. It is very important to set out priorities and understand your risk appetite. It is a myth that if you don’t buy today, you will miss out on the game and hence don’t fall for it. Only buy when you really need it and buy only, what you can afford without compromising your lifestyle or other priorities in life. I have not invested in real-estate and do not intend to do in next ten years.

Read out this interesting blog post by Manish as well.

Beware of Equity SIPs

SIP or Systematic Investment Plan is very well known for mutual fund investment. The advantages of investing through SIP mode that typically proclaimed are :

• Rupee cost averaging
• Disciplined mode of investment
• SIP methods works irrespective of the current market level

These are great advantages, especially for retail investors. So some brokerage companies have started providing facility to invest in the SIP route for individual stocks. This is “Equity SIP” which is the new buzzword. There are two types of SIP investment allowed:

• Amount based: Fix the amount to be invested at regular intervals
• Quantity based: Fix the quantity of shares to be invested at regular intervals.

This sounds like a great way of investment on the face of it, but is it really that good? Let us try to analyse whether a retail investor will get the same benefit of SIP investment as mutual funds:

1. Rupee cost averaging: The key advantage that is mentioned for SIP investment is that even in volatile markets this is a great tool due to rupee cost averaging. The key to cost averaging is that if market is down, you will get more units and if the market is up, you get a higher portfolio value. This sounds great and it definitely seem to work for individual stocks as well, but the rupee cost averaging can only average out a less volatile stock (which is mostly true for mutual fund due to inherent diversification). If a stock (& for that matter mutual fund) is extremely volatile, then this method may not be able to average out your losses. In essence you need to find a good stock with high growth potential and less volatility to use rupee cost averaging.
2. Disciplined mode of investment: Yes, this method definitely forces investors to shell out money at regular intervals, but it is useful only if over a long period you are increasing your wealth. If you invest regularly in a stock which is sliding down over a long period then definitely it is not a great investment even if you are putting money at regular intervals. In essence you need to find a good stock with high growth potential and less volatility to make disciplined mode of investment.
3. SIP works irrespective of market level: This is true because at lower levels you will get more units and the rupee cost averaging kicks in for mutual funds. This does not apply for individual shares though. Will it really makes sense to invest when you know that the particular share has just tanked to the bottom. Some of the stocks never recover and so will your SIP investments.

If I look carefully, Equity SIPs does not sound as attractive as it is made out to be by the brokerage houses. The brokerage charges for Equity SIPs are same as those for investing directly into shares and hence it does not offer any advantages. So does it mean that retail investor should never look at Equity SIPs? Well not actually, since I feel these are great tool of investment if :

• You invest in exchange traded funds (ETFs) which are passively managed and hence less volatile
• You invest in quality stocks which are strong in fundamentals and currently undervalued
• Brokerage houses start giving additional benefits like lower charges for this disciplined investing

I am using Equity SIPs for Gold ETFs as a long term investment.

Superman syndrome

I came across an interesting term called “Superman Syndrome”. [Picture Courtesy: frazer4eos] If you try to google the term, you will be surprised by the lack of single concrete definition. You may find many books with title containing this word, but not a single definition. But each definition essentially contains a similar idea which imply:

“the concept of a supernatural ability, desire, drive to outdo and to overcome.”

It is not a positive term but rather connotes a negative meaning implying the exhibitionist attitude of a person busy in showing off and satisfying other people’s desires eventually working so hard that the person looses important things in life.

 "Life is what happens while you are busy making other plans." --John Lennon

I looked back and realized that many times in the past I have done one of the following:

1) Insisted on paying entire bill for friends at coffee shops

2) Bought cloths just because others think they look good on me

3) Purchased those expensive high-end cellphones when I went with friends, just to show-off

4) Purchases lot of junk items just ahead of  guests coming, since this may impress them

These are all behaviors of “Superman Syndrome", which essentially made me do things that are not based on prudent and realistic decisions but an attempt to satisfy other people's expectations and desires. But I was still fortunate that I did not spent large amount of money on buying house or that expensive four-wheeler just because I can impress friends, but  many do.

If you have done any of these or are still doing it, then you need to be extra careful and really need to think about why you are spending money on satisfying what other's value?

I have heard of many people complaining about busy lives, late night conference calls, 24X7 email/phone connectivity and hard life with this new information age. The entire idea is that "control of you life will come from within you",  so getting out of superman syndrome is most important task you will do for yourself and your family.

Robert Kamm writes in his book "The Superman Syndrome: Why the Information Age Threatens Your Future and What You Can Do About It,"

"the Superman Syndrome is a dangerous workplace success formula that forces men and women to leap tall buildings and outrun speeding bullets -- at the expense of personal lives, families, children and even business productivity. This represents a major hypocrisy implicit in nearly every boardroom in America: The belief that we should be accountable to work but not to our families."

Whether you spend money or your personal time or energy to satisfy what other people value most is surely a suicidal tendency towards life. If you are trapped in superman syndrome, take some concrete steps and hard actions to come out:

Actions to save your precious time which can be spent with family

1) Keep in mind that you do not need to answer that every email 

2) 24X7 connectivity does not imply getting addicted to emails and social networking

3) Work in an "interrupt mode" rather than "polling mode" with information high-way.

4) Keep aside minimum non-negotiable 4-5 hours of quality time everyday with your family, friends and kids

5) Celebrate a "no-gadget" day every week or at-least every two weeks.

Actions to save your hard-earned money

1) Keep in mind that you do not need to pay the bill every time you go out with friends

2) Limit yourself to spending not more than say 1000 Rs for impressing others, rest all purchases should be your value based.

3) Promise yourself to take that shopping list before going out for shopping and sticking to it.

4) Find other activities with friends that leads to least buying (e.g. jogging in park, going to library etc)

5) If your friends expect you to buy things for you, get new friends

6) Share "Superman Syndrome" and its effects with friends and family, spread the word and awareness

You will get, what you genuinely want. It is never too late or too early to ask for good life.

Buy Vs Rent

Tarak asked me

Don’t you think that staying in a rented house for long run (say 5 yrs) means waste of a huge amount. If you take 10k INR per month as rent for 5 yrs, then you are spending (5*12*10000) 6 lacks INR for nothing. Please share your view in this regard.

I think this is purely a quantitatively defined advantages of buying a house. This comment was prompted by my earlier posts on Why I think we should not buy a house? A quantitative study is important since it can help us provide valuable inputs before taking any significant decision, but should not be the only input. Consider this graphics (calculator is here).

You can do all sorts of calculations and try to predict which option, buying or renting a house, is better. But I think this is an absolutely wrong method of taking this important decision. There can not be one pill for all diseases and hence just thinking quantitatively can not be a solution for everyone to consider buying a house.

The Rent Vs Buy decision is far from just a simple financial calculation that most people get into, and it should be just one aspect of a well qualified decision.

A qualitative decision needs to keep every aspect of your life-style, both now and in future, with different priorities for each person. Here are some of the

1) Stress : Buying a house is never easy (building your own is much worse). As a tenant you can choose to end your tenancy at any point in time, but when you have issues in your house, either you have to keep adjusting or you need to go through the pain of selling the house and buying another house. If you are on a home-loan, the pain is tripled.

2) Freedom: As a tenant you are free of responsibilities, but as a owner you are not only financially but psychologically occupied. The psychological factor is extremely subjective and may vary from person to person.

3) Financial Imprisonment: It is said that you should not put more than 40% of your income into home-loans EMIs. In the world of uncertainties, job-losses and un-steady income it is a big investment and long term commitment which will certainly robe you of financial freedom. The money spent on home-loan EMI is tied up and it is not easy to access that money in case of emergency. As a tenant, you have more access to your own money and can be saved and spent with more financial freedom. It is a personal choice to become a grumpy old man with a large mansion who lived all life in financial constraints versus a happy man currently living in a small flat but who enjoyed all life with whatever money he earned. Also I am not disillusioned person who thinks my kids will be staying with me, when they grow up, in this house that I own when I be old.

4) Career Ambitions: I have heard of lot of folks, who entered executive MBA programs after 10-15 years of job. They use it as a springboard to boost their careers and ambitions. I also know lot of folks, who could not follow such career choices simply because they are tied up with their home-loans. Same goes with taking up another job in a different city or even in the same city (think of travel in cities like Bangalore and Mumbai), and people want to take up a job near their locality. If you have a house, you are definitely living in some constraints.

As I mentioned in my older posts as well that do not buy a house just because everyone is buying or it quantitatively it makes sense, think of other qualitative factors that can impact your life. Also buying a house taking home-loan is NOT an investment. An investment typically means, you want to grow your surplus money and not restricting your freedom to gain a white elephant. Here are the conclusions I wrote in my earlier post

Conclusion:

• Buy a house for living it in you old age.




• Don’t expect your children to stay with you (unless you keep them dependent on you)




• Don’t just buy because everyone is buying, think long term, where you want to settle in your old age. Timing and location are extremely important.




• Buy a house which you can maintain. In old age, it is difficult to spend huge money on maintaining big house. Security is also a concern.




• There are so many investment avenues other than house, think about that. In old age, big house won’t help, but surely the life long memories of your world travel can help. Spend money to enjoy life, and not to get imprisoned by the enormous house loan burden. Strike a balance.




• Keep accumulating small portion of money and buy a house when you are in your forties. At that age, your will be at the peak of your responsibilities, you can have your priorities clearly laid down.




• If you have loads of surplus money, then only buying a house makes sense as investment.

Why can’t we handle Personal Finance properly?

I came across this post from Ranjan asking “why can’t we handle Personal Finance properly”? The reasons he mentioned sounded very superficial to me; they are just shallow in my opinion (with all due respect to Ranjan).

As per my understanding, “Personal Finance” implies detailed analysis of financial flow of an individual at various point in time. Please carefully note that Personal Finance is not synonymous to having knowledge about stocks quotes, mutual funds, insurance or pension policies.

The single biggest reason why we can not handle personal finance properly, is because from childhood we are never taught to think about money in that fashion, making us believe that it is a materialistic entity that is just a means to satisfies our immediate material needs. 

How many people remember their first lesson in personal finance or handling money given to them during childhood? I remember, the first time I was given money (it was 10 paisa), which I could independently spend, I rushed to the near-by kirana store to buy that juicy candy bar. When was the last time your parents tutored you on personal finance and importance of setting financial goals? (I am not talking about parent pestering for buying property etc). Also whatever limited parental advise that most youngsters receive regarding personal finance is based on their personal experience at burning their hands with specific financial tools.

In India, at the least, I’ve never heard about creating personal financial goals from my parents and I have not met anyone whose parents told them about it. In effect, people start accumulating their debts and then the financial situation blows out of proportion. I guess, they themselves never heard about it from their parents and did not find it important enough to be delivered to their off springs.

The biggest confusion among most people regarding financial planning stems from the fact that:

• They fail to understand their financial dreams
• They fail to prioritize and reach their dream financial goals
• They fail to learn and make the strategies either individually or using some professional advisor to achieve their goals.
• They lack the persistence to transform their dream goals into reality by executing and re-aligning their strategies.

And this confusion is carried over from them to their next generations and generations. Unless people realize that managing personal finance involve setting goals, creating strategies to achieve those goals and sticking to it, Personal Finance will remain an arcane and unmanageable subject.

Legal Guide For Indian Bloggers

I came across an astonishingly detailed guide for US bloggers on the legal issues that a blogger can face due to various acts. It clearly mentions that the guide is exclusively for US bloggers since there is strong constitutional protection for speech. I tried to search a similar guide for India and failed to find anything useful. With the advent of social networking, blogs have become an extremely viral media, so apart from the financial risks of social networking, there are definitely legal issues for any public dissemination of information including blogging.

(Picture courtesy Over the Top of NY)

India has been typically laggard with respect to cyber laws, not only in implementation but unambiguously defining it as well. One of the biggest reason I would assume would be that law makers themselves may not be able to keep pace with the fast changing technology. The first indian IT law was introduced in 2000 called the IT Act 2000 [Summary Slides from IIT-M - PDF]. This act was further modified in 2008 The Information Technology Act 2008.

The pertinent question is “Why blogging cause legal issues?”. The problem is the extremely viral nature of blogging, since it has now become more ubiquitous with millions of people getting influenced by what they read on blogs.

I would provide you a real world analogy. Let us say you bought a product from Company X, unfortunately it turned out to be a junk and useless product with not keeping up to the promise that was given before you purchased. You go to the customer care or their office and nothing happens, no-body listens to your complaints. But instead of “chalta-hai” attitude you decided to tell it to few of your close friends and let them be warned about it. It is still fine with the company, but now imagine you called up a public meeting and started talking about your rough experience with the product. Initially there might be just few of your friends but slowly hundreds and thousands of folks joined your meeting and started getting warned about the junk product and the pathetic customer service from Company X. That is illegal, you just de-famed the Company X.

This is exactly what happens when you blog. You are disseminating information for public consumption which can have significant influence on people either in their behavior or opinions about something. The first indian blogging controversy happened for exactly same reason.

It is so difficult to read through the mumbo-jumbo of legal laws, as Mark Twain rightly said

Only one thing is impossible for God: To find any sense in any law on the planet.

So how do bloggers (just about anyone with internet connection can become a blogger) keep themselves safe from the legal wrangle? Here are some simple DO’s and DON’Ts that will help any blogger to avoid cyber law (typically applicable to Indian bloggers):

• When in doubt about any post violating any legal law, just don’t publish it. It is better to be safe than to be sorry.


• Do not write “hate messages” against popular personalities especially political people, you might get caught by police like Nitin Sajja from Hyderabad or Rahul Krishnakumar Vaid from Gurgaon.


• Do not write “derogatory remarks” against organizations which Ajith D learned the hard way. A similar tamasha was done by Shiv Sena for anti-Shivaji Community on orkut (TOI 1, TOI 2, Rediff 1, Rediff 2, NDTV, Financial Express). Some of the interesting articles that criticize these are by Amit Verma and Sevanti.

The ultimate expression of a government’s lust for power lies in a term coined by Orwell in 1984: thoughtcrime. Thoughtcrimes are thoughts that have been criminalized, and if the technology to detect emotions existed, It is not unlikely that the Indian government would ban hatred. Or, at least, hatred of things that it deems should not be hated.

• Do not write negative comments about any religious personality, deity or organization.


• Do not criticize any company’s products or services. You may not like the product or services but publicly criticizing it for spreading the word is not the right way. If you absolutely have to do it like a review of a book or movie or mobile phone, please put a disclaimer mentioning these are your own personal thoughts with no legal liability on you. Defamation is extremely complicated subject in the books of law, and so is proving your innocense.


• Do not post pornographic material including anything slightly sexually explicit (especially pictures or videos). It may be just a fun video or fun pictures for you, but it can hurt someone’s sentiments and hence an absolute NO NO.


• Do not publish any confidential information from within your company. I would suggest do not post anything related to what you do within your company (unless you own the company and want to promote it through blog). Any information on what you are currently working on or what are the future releases or any inside information say company want to layoff people or planning to acquire any organization, absolutely everything is confidential. This information is typically governed by trade secrets which are complicated.


• Do not plagiarize. If you copy paste the text from another website or you copy that beautiful picture or video without the consent from the original author and publishing it without providing the link to original source, then you are plagiarizing. One of the biggest and innocuous way of plagiarizing is to search that image you need from Google Images or Flickr and put it in your post without bothering about copywrite issues. You should only use legal pictures from flickr or any other website for your blog posts. Also it is illegal to edit the pictures or videos (removing watermarks or just any editing action like cropping) that you downloaded without permissions and then publishing it. Note that small actions can lead to copywrite violations.


• Do not publish any data, numbers, figures, charts that you do not own. Always reference to original source from where you found the data. If you do not have the original source, stop and do not publish it.



• Do not share private information about anyone you know without his/her permission. So you went with your girl friend on that famous beach and posted those pictures without asking her, think again. You just gave your friends contact details or wrote that caustic remark providing private details of the person you hate, beware you are surely violating privacy laws. I would advise not to even post edited pictures of film celebrities.



• But if fate decides to screw you, it can not be avoided similar to when it caught Lakshamana Kailash and what he got is 50 days with 200 under-trials at Yerawada Jail, finally ending with a “sorry” from Police and Airtel.

Read some more interesting posts like “Bloggers and Defamation” and “Restricting Freedom with Excuses of Responsibility” on this issue. Here is an interesting video on this subject.

Please note that this list is not exhaustive (and definitely not legally scanned and is not a substitute for legal advise) in nature but just the common sense approach to avoid any legal issues. Just to be on safe side, here is the disclaimer, that this list does not guarantee avoidance of law-suite due to material published by you, so I would not be liable for any damages :-)

Credit Card Visual History

Source: The Big Money

The first credit card was created, as you would guess, due to an embarrassing situation faced by Frank McNamara, while eating out at a restaurant. When the check arrived, he realized, he did not brought his wallet. This gave birth to Diner’s Credit Card.

Then came the BankAmericard from Bank of America. The earlier versions were flimsier and hence American Express came up with first real plastic credit cards.

 

Then came the credit cards with all its variants since various players saw a great business opportunity.

Check out the The Big Money for the entire pictorial history of credit card.

Another interesting video that presents how the American credit card industry became so pervasive, so lucrative, and so powerful.

This is a video from Frontline - “Secret History of the Credit Card (2004)”.

I could not find the history of credit cards in India, but it looks like that Central Bank of India, launched the first credit card in India called “Centralcard” in the year 1980.

It would be interesting to know if we can get hold of the picture of the first credit card that was launched in India. Anyone?

Super Tips to increase your debt

Yep! you read the title correctly. So you want to live your life King Size, in a royal fashion with the meager amount of salary that you earn (peanuts huh..). Here are some of mind-blowing tips to spend you money faster than you can blink your eyes:

• Never read money saving posts or weblogs which may contaminate your mind towards efficiently managing your personal finance. These are evil!!
• Spend more than you earn. This is not the “common sense” approach, but who needs any sense, common or uncommon. And if you are struggling to meet your ends every month, then you are just about learning this art. Keep it up.
• Never pay your bills on time. Would a royal king in older times, bother himself engaging in such mundane tasks, like paying those insignificant telephone or electricity bills on time? It is for those mere mortals, who would setup email reminders or use those large desk/wall calendars with sufficient space to write notes and remind themselves of paying up these irritating bills, month after month, on time, thereby saving those tiny-miny amount on late fees. Such money-saving tips are a kill-joy for living life royally.
• Never worry about emergency fund. What is the use of the money lying idle when it should be running around with you in shopping malls. Some crack-pot websites urge people to keep six months of expenses as emergency funds Why should you worry about keeping such a huge amount, since you will never get hit with any emergency. Those nasty accidents, job-loss (Job loss insurance, OMG) or sudden illness happens only to others and not to you. So why bother about emergency funds?

• Never pay-off your credit card debt. You should keep a poster of John Biggins of the Flatbush National Bank of Brooklyn, New York and make him your GOD, since he invented credit cards. This is the greatest invention of man ever (forget fire, wheel etc). I bet that humans would still love credit cards even if it would have been invented during the stone age. Why credit cards are so addictive: 

• You do not need to think, how much your bank balance is, just think how much credit card balance exists on credit card. It makes it so easy to remember, even if you never done any math subject in your life.
• Also credit card companies are know to be generous enough to increase your credit card limit over the period of time sometimes without intimation. But isn’t it a pleasant surprise to suddenly find, during an impulse buying that your credit card just worked when you thought the limit has been crossed.
• You can have as many credit cards as you want with so many flavors and banks. Just look at in India and you have so many choices of type of cards.
• RBI has so many regulatory rules for credit card issuing banks that you are very safe. It has been seen on so many occasions that credit card companies flout these rules and also charge exorbitantly, but these are just small blemishes spread by the enemies of credit card industry.   Here is an example on how credit card companies make money.
• Buy on credit card and pay a meager amount monthly. This is called revolving credit and it is a revolution. Some people try to scare you with revolving credit maths, like this, but you can safely ignore such realities.

  Let us take a simple example. If you are spending Rs 30,000 every month and repaying half of it, you end up spending Rs 3.6 lakhs in 12 months. You pay back Rs 1.8 lakhs and owe the bank Rs 1.8 lakhs. But what the bank wants back is 40,000 rupees more than what you've spent...and keep this going for another year…this will become a runaway figure...On the same amount of Rs 30,000 spend, if you take it really easy and pay back only the minimum due, that is Rs 1500 a month, you will owe the bank Rs 2.3 lakhs. The bank will demand back, Rs 3.5 lakhs back from you and that’s Rs 1.2 lakhs more than what you've spent. Keep compounding this and you can fairly figure out where this could go.

• Credit card can get you cash from ATM if needed, what if they charge so much extra on cash withdrawals, think of the flexibility.
• Credit cards also offer rewards to customers (see here and here), although very few people diligently and consistently try to re-deem those reward points. But isn’t it so nice of credit card companies to offer rewards, which we do not redeem even when it can lead to significant saving, but that is just a small niggle. It is a supreme gesture from credit card companies.

• Impulse buying is the name of the game. We are talking about folks who are obviously above “roti-kapada-makan”, the basic necessities of life. So what good your money would be if you can not spend it when you feel like buying something. It is separate matter whether the thing you buy has any real value in your life but why worry about it? If you got it, flaunt it and if you haven’t got it, credit card will help you flaunting it. 

• Planning your money is insane. Why waste time and energy into something which is inherently unmanageable. If big companies like Satyam or Dubai World can not manage it, how would you? As you must have heard that “Money is the root of all evil”, they why keep the evil with you or try to manage the evil, get rid of it as fast as you can and you will be happy. So turn deaf when you heard words like tax-planning, investment, saving, retirement planning etc. You obviously want to turn religious during old age in post-retirement life  (to repent all your life’s sin) rather than having crores of evil roots with you.

So if you follow this advise, this is a sure-shot way to leading a luxurious life. The one lifetime you have, live it King Size.

PS: This post was written in humorous jest, so if you seriously follow the advise, you would not have enough money even to sue me for wrong advise. So get real and serious about your money!!

Is peer pressure leading you to debt?

 

[ Source ]

Your friends and peers influence your life. Wikipedia explains that

Peer pressure refers to the influence exerted by a peer group in encouraging a person to change his or her attitudes, values, or behavior in order to conform to group norms.

Peer pressure often starts at very early stage in life and it never stops. The term “peer pressure” has come to connote a very negative thing (as the cartoon above indicates), but it can be a significant positive force also. (example1, example2)

There is no doubt that everyone needs a peer group to act share one’s emotions and feelings. But, the problem begins when one starts changing their behavior or act according to peer group, just to remain “fit” in the group. This is also a very common complaint from parents, when confronted with un-acceptable behavior from their children.

The most vivid memory that I have of dealing with peer pressure is during my college days. I come from a poor family and it can be easily seen from my cloths or my bi-cycle wherein my classmates used to come dressed up impressively or in their two-wheelers/four-wheelers. I felt extreme pressure to match up but never had the money, and so I could never “fit” or got accepted into the peer group.

I recently shifted to a new apartment (just few months back) and started interacting with my neighbors, and I realized that there are many folks who have a habit of “showing-off”, making them prone to financial debts. So their wives will sport an iPhone, spend Rs 2500 on window-shopping randomly every week, esp on apparels (and despite that they dress shabbily), keeping a full-time servant, chauffeur (without any real-need) or commuting daily by cabs (wouldn’t it be cheap to own a car) or spending evenings in lavish restaurants (I know for sure that these are not their company paid facilities).

The motivation for these actions is not any real need but peer pressure to fit in the group. If we are surrounded by people who are rich (or showing-off that they are rich), then we would also feel the need to upgrade our cars, cloths or throw lavish parties. The whole problem with why we succumb to peer pressure is because we feel the need for acceptance.

Peer pressure can lead to significant waste of money and it's not just ourselves who we have to worry about. If you have a partner or children you'll also suffer financially whenever they come under peer pressure. So at one end you may want to reduce your monthly expenses but on the other hand you may be forced to spend unnecessarily on useless things just to satiate your family’s emotional needs, so they be part of some crappy peer group.

It is extremely difficult to fight peer pressure, since it can come in from variety of ways:

• Keeping up with others in terms of buying big cars or expensive plasma TVs or mobiles
• Impressing your girl-friend/wife/in-laws in terms of expensive gifts to justify your love or caring not only to the concerned person but also to everyone in your peer group.
• One of the biggest pressure for newly married folks comes in the form of this question, “So where are you going to honeymoon?”. Most folks will burn-out their entire saving just to mention that they went to Singapore/Bangkok (crowded place) rather than an idyllic Kerala/Darjeeling.
• Buying bigger houses just because everyone in their peer group has bought a house. This is especially true in Bangalore, since most people coming here are in some kind of strange hurry to own a house. It is termed as “biggest investment of your life”, even if it turns out to be crappy decision. I totally oppose it.
• Sending their kids to expensive schools (I was aghast when I got to know that my neighbor’s one year kid goes to a school whose fees is 15 lakhs a year) or throwing a totally unnecessary lavish party as a show-off. How can a one year kid distinguish whether his birthday was celebrated in a high end restaurant or their own house? The consolation given by parents – I want to give my kid the best I can afford. Duh.

So how to handle peer pressure and how to stop yourself from bleeding financially? How to stop accumulating debt by resisting peer pressure? Here are some pointers

• Stop worrying about what “others think about me”. Others are probably busy thinking the same thing and don’t have time to think about you.
• Trust your own instincts rather than following the herd. If you are convinced about your choices and reasoning behind them, then stick to it. You can only decide what is best for you. You should have the confidence in what you believe and the boldness to stand for it.
• Recognize peer pressure. If you are trying to spend money on something, ask yourself critically, as to why you are buying it. If you really need it, then only go ahead with the purchase.
• Be absolutely clear about your monetary priorities and be honest discussing it with friends. Remember that everyone’s priorities will be different, so there is no “one fit for all” solutions in financial world.
• If some friends are just putting pressure despite your resistance, then ignore them and find new friends. A friend who does not care about your opinions is not worth friendship.

Remember that if you don’t want to get under any peer pressure influence, try not to put anyone (especially your friends) into it as well.

Job Loss Insurance

Job loss always hurts, but people find ways to make money out of other’s misery. I knew about job-loss insurance being available in other countries, but recently it got introduced in India. So insurance companies are now willing to pay EMIs in case of job loss.

Under the cover extended by ICICI, customers will get their three EMIs paid in case of a job loss due to retrenchment or layoffs. Moreover the job loss due to the closure of a division because of poor financial condition or action taken by any public authority resulting in the closure will also be covered by the insurer.

Can a job-loss insurance give you a piece of mind after a job loss? I have my doubts!!

Dilbert – Financial Markets Explained

This is absolutely hilarious. Scott Adams writes on his blog:

Think of financial theory as a stool. The stool is supported by three legs, or truisms.

• History always repeats.
• Past performance is no indication of future returns.
• Asshats are trying to steal your money.

These three truisms can explain any financial phenomenon. For example, if your financial advisor suggests that you invest in a market bubble that is about to burst, he will explain that the past is no indication of future results. Just because a Price/Earnings ratio of 45 has never been sustainable in the past doesn't mean it won't be perfectly safe in the future.
And when the bubble bursts and you lose half of your money, your advisor will explain it's because history always repeats. In other words, he's an asshat trying to steal your money.
This stool also explains the housing situation. Financial experts knew that making loans to hobos had never been a good idea in the past. On the other hand, past performance is no indication of future returns. Maybe this time would be different. Then history repeated and asshats stole your money. As a bonus, they even stole each other's money this time. You have to admire their thoroughness.
One last thing you need to know: People who say it is a good time to invest are called bulls. The bulls are at the center of all financial problems.
In summary, if you want to understand financial markets find a bull and look at his stool.

Terrorism Insurance

Mumbai was attacked by terrorists like never before and it is being considered as the biggest terror attacks on Mumbai.

 

No one has yet estimated the amount of damage suffered by the Taj and Oberoi Hotels. I saw the picture of Harbour Bar at the Taj Hotel in the Times Of India, it left me speechless, here it is :

                   

Any terrorist attack can cause significant damage to the property. Insurers typically have a risk analysis for any events before they provide cover for it, but I do not think there was any risk analysis ever done for terrorist attacks. The same applied to the 9/11 attack on US. The insurance companies in US post 9/11 stopped giving insurance against terrorist activities.

After September 11, 2001, many businesses were no longer able to purchase insurance protecting against property losses that might occur in future terrorist attacks.Addressing this problem, Congress enacted the Terrorism Risk Insurance Act of 20021 (TRIA) to create a temporary program to share future insured terrorism losses with the property-casualty insurance industry and policyholders. The act  requires insurers to offer terrorism insurance to their commercial policyholders, preserves state regulation of this type of insurance, and directs the Secretary of the Treasury to administer a program for sharing terrorism losses. The three-year program that TRIA created backs up commercial property and casualty insurance, covering up to $100 billion each year after set insurer deductibles. The government pays 90% of insured losses over the deductible, with the insurer paying 10%.

A similar thing might happen with insurance companies in India, with so many terrorist attacks happening frequently. So before buying any insurance, it needs to be ensure that the policy covers damages due to terrorist activities. This is more true for the businesses. So few months back, TOI reported increase in adding terrorism insurance by people in India. It is a sensible move and should be done by everyone.

Money Saving Tips

Over the period I have realised that there are lot of places in our daily life where we can save money. I am not advocating being a miser, but avoiding carelessness, does have its own benefit. There are lot of times, when we just spend money because we enjoy, for example, going to flashy restaurant once in a month or purchasing that sexy negliee to impress your wife :) or buying that expensive cellphone.
To me personally, these are definitely NOT wastage of money. It is always a good buy because it gives you happiness or satisfaction. Even though any of these are not assets building but it gives immense pleasure which is why they are worth doing it.
I am not going to talk about stopping such impulsive buying or focussing on building your assets or making your money work. Most of us get into this because of either peer pressure or guilt. For example, in Bangalore everyone is buying a house, despite the fact that they are forking out as high as 50% of their salaries and with increasing interest rates, it is pinching harder. I have realised that the main reason a young couple in 30s want to buy a house is simply peer pressure, since everyone in their circle is buying a house. A house of your own is important but not at the expense of enjoying your life.

Here are some of my money saving tips:

• Keep a box and put whatever change(1-2 Rs, coins etc) lying around into it. It not only helps to save money but also very useful when needed
• Save electricity and water usage. Make this a habit and inculcate in your children. Unless you get that habit, your children wont. It not only saves your money but the environment too.
• Experiment with brands and defy the marketing gurus. Dont be shy to experiment with brands, sometimes the rival brand has a good product and cheap too.
• Buy daily usage items from near-by stores, even if bit costly. The saving of fuel and time of going to large supermarkets will be worth it. Also everyone tends to buy more in super markets than near-by shops.
• Repair your motorcyle/cycles and start using it rather than using car for every small distance you go. It will also save your time during traffic hours.
  
• You dont have to pay exhorbitant money for 1Mbps internet connection, instead opt for 128Kbps/256Kbps, these are also good speeds.
  
• Turn veggie and non-alcoholic for one or two weeks in a month. It is good way to stay healthy too. Boozing/Partying every weekend is not compulsory.
  
• Start exercising daily and brush your teeth twice a day. How does it saves money? It will avoid your medical expenses over long term. It also saves money on life insurance.
  
• Share/Borrow with your friends the DVDs & books, instead of buying/renting. It is a win-win for all and you save money too
• Dont buy softwares unless necessary, spend time in searching for some alternative freeware software.
  
• Be aware of reward points earning on your credit cards. Most people dont bother about it. Some few months back I purchased a full flight tickets just using the accumulated reward points.
• If you can refinance your loan, even if getting a 1% reduction in interest, do it. It will really worth, on cumulative basis.
• If your office provides Sodhexo coupons, use them and dont feel shy to ask even in large restaurants/shopping malls, whether they accept them. It is as good as your currency and its tax free.
• You can save substantial amount simply by paying entire credit card bill before due date. Only use the interest-free period (30days - 45 days) rather than revolving credit. When you make a credit card purchase make sure you can pay it withint 30 days.

How crude oil affect daily life?

Everyone including people who are apolitical are blaming the UPA government for the spiraling inflation caused mainly due to soaring crude oil prices. For common man the question is "How the prices of crude oil affect his/her daily life?. The first answer that comes up is that prices of petrol will go up. But to really understand the impact of crude oil, there is a need to go little deeper.

Crude oil is the product found by digging into the earth. This is not oil which can be directly used, hence lot of big refineries across the world, refine the crude oil into various products which can be consumed by average person.

This is how refining of crude oil is done. If you look carefully on the right hand side of the picture, all these are the products output from a refinary (one example of refinary is the Reliance's refinary in Jaamnagar near Mumbai).

Crude oil price becomes important since this is the input to refinary and it has to be bought from countries which have the natural resources. This is the main reason the Arabian countries are rich, they entire region have naturally large concentration of crude oil.

Now realize that how these product output of crude oil post refining is used

• Petroleum gas - used for heating, cooking, making plastics
• Naphtha or Ligroin - intermediate that will be further processed to make gasoline
• Gasoline - motor fuel
• Kerosene - fuel for jet engines and tractors; starting material for making other products
• Gas oil or Diesel distillate - used for diesel fuel and heating oil; starting material for making other products
• Lubricating oil - used for motor oil, grease, other lubricants
• Heavy gas or Fuel oil - used for industrial fuel; starting material for making other products
• Residuals - coke, asphalt, tar, waxes; starting material for making other

If this is the case, crude oil price will instantly make the following costly:

1) Cooking gas
2) Petrol/Diesel
3) Plastic
4) Kerosene
5) Industrial Fuel
6) Aviation Fuel
7) Other lubricants

All these will further cause an increase in food products, transportation (for all industries causing significant increase in every single product we use). Consider how this directly increases the cost of most manufactured goods in terms of the plastics used in everything from plastic bags to computer keyboards to dental fillings to the cost of clothing. (Acrlyic and polyester are petroleum products).

Hence essentially crude oil price will directly or indirectly will cause increase in cost of almost everything causing infaltion (that is in talks now a days). No government anywhere can stop the increase of prices in such a scenario. With demand continuously growing, there is no short term solution unless everyone

1) Start reducing their individual usage of energy
2) Start using alternate means of enery (e.g sunlight, bio-waste fuel)

This inflation seriously can erode your earnings & investments in long term.

Active Vs Passive Investing

There is a very interesting discussion happening on Prem's blog. The moot point is that how much difference in returns one can make between passively investing (not your main livelihood) and actively investing. So if the difference is really huge, does it make sense to switch to active investment leaving your other income streams.

As per my thinking, all the number talk doesn't make sense unless you define "active investment". Do you consider job of a mutual fund manager an active investment? I would say no since he is getting a salary for making all the investment decisions and he is not directly affected by those decisions (of course his reputation will get a toss but he still will get the salary at the month end).

The moot question here is where it is good doing something as a part-time business or full-time business. A full-time business will require

a) Capital
b) Love for the business (termed as passion)
c) Risk-taking ability.

So the ups & downs of business will apply even to "active investing", and there will always be a learning curve. Nothing comes free (as in free beer).

Back to Blogging

Life was bit busy for me in recent times and that is why I was away from blogging. The biggest motivation for blogging (any blogger would vouch) is the encouragement given by the readers. It not necessarily be praise all the time even brickbats are welcome. I was especially elated to see Gautam Satpathy putting up some comment here. I have been regular reader of his blog and it is sheer pleasure to read him. Hope I continue blogging and try to improve upon it.

How to become Wealthy?

One of the best articles (by Clayton Cramer) I have ever came across. Go ahead read it and learn !!