3 Reasons to Go Cashless and Start Using Your Credit Card

Do you feel the temptation to go cashless and start swiping your credit cards, but in the back of your mind, you’re also apprehensive that it might backfire? Credit card debt is not an easy problem to resolve, and maybe you don’t want to ever start down that road.

How about making your credit card use a learning experience? There are more advantages to going cashless than just ease and convenience, you know.

Build Your Credit History

One big reason to go cashless is because the proper use of credit cards help build a stellar credit history. Credit cards are basically on-the-go personal loans, you see. When you use a credit card, you’re borrowing from your bank or provider. If you can consistently pay them back without issue – no late payments, never prolonging repayments, etc – then you’ll quickly build your credit history into a gleaming polish.

With better credit history comes improved credit score, and that leads to better interest rates and repayment arrangements for future financial needs.

Learn to Macro and Micro-Manage

When people say they’re afraid to use their credit cards, what they’re really saying is they’re afraid they won’t be able to properly manage their finances when they have that piece of plastic in their hand. It’s a given that when you only swipe cards to pay for your stuff you lose an important facet of spending: you don’t see your money actually leave your pockets.

It’s like losing the speedometer of your car. Sure, you can tell if you’re going too fast, but if you need to keep your car at a certain speed, how can you tell without a speedometer? It isn’t easy to tell how much you’re exactly spending when all it takes is a swipe and a signature or PIN.

That’s exactly why using a credit card can teach you not only to macro-manage your finances, but also micro-manage each expenditure. You’ll have to be on top of every receipt and start counting all the decimals; after all that, it’s not that bad —after all, you end up learning how to really control your financial management.

Take Tactical Advantage of Promos and Special Offers

When I say “tactical” here, I mean in terms of advantageous spending. Let’s take a quick example to be more concrete: Let’s say you were out buying groceries, but you don’t have enough cash budget to complete your shopping. Then, you notice a promo at the store that says if you pay using your credit card, you can get a certain discount, plus you won’t pay interests for a full year. Now, let’s also say that if you avail of the promos, you can pay off the resulting bill within a year.

The obvious choice then would be to use your credit card to extend your cash budget, because:

1. You get a discount

2. You can pay the balance before interest kicks in, making the credit card use effectively free of charge 

That’s what I mean by “tactical.”

All of these reasons bolster one another too. When you get good at leveraging your credit cards for promos and special offers, you become good at micro-managing, and you start to build your credit score through better financial management. 

 So what do you think? Maybe it’s high time to go cashless.

This guest post is written by CompareHero.my, the most comprehensive financial comparison service in Malaysia. Compare credit cards, broadband plan, and others at a competitive price.

Four Reasons to Invest in Gold for Retirement

[This is a guest post from Sharon Freeman. The article has not been modified except for some formatting changes to suit this blog.]

For people nearing retirement, investments may begin to take an even greater significance compared to other time of life. If you’re planning to rely on your investments as your income in your retirement, it’s a good idea to closely evaluate your investment strategy. Your retirement could be a good time to move a greater portion of your portfolio into more risk-averse areas. Many financial advisors would suggest that investing in precious metals is a sensible option for people nearing retirement age.

Physical gold has historically outperformed almost all other investment opportunities over the medium to long-term. Let’s look at some reasons why it is a good idea to include gold investments in your portfolio.

Reason No. 1 - Gold is a stabiliser

Gold helps to stabilise your investment portfolio. In the event that the value of the dollar or currency falls, the price of gold usually increases. Gold itself actually never changes in value but reflects the value of the currency in which it is quoted. This generally means that a drop in the value of the dollar inversely affects the price of gold. 

Reason No. 2 -  Control

Physical gold can be controlled by the investor themselves. Therefore, it  never disappears like money, which has been mistakenly invested in schemes like pyramid schemes.

Reason No. 3 -  A Hedge

Gold has historically been a good hedge against inflation. Again, this happens because its price tends to rise when the cost of living increases. So,  when the value of other investments falls like stocks and bonds, gold can be relied upon. Its value has remained constant over time in terms of the real goods and services it can buy. As well, gold doesn’t rely on a borrower’s promise to pay — as in the case of a bond. This offers some protection from the risk of default.

Reason No. 4 -  Reduction in Production

There has been a reduction in the production of gold since 2000. A decrease in production generally means an increase in price. The price of gold is determined by demand and supply. Since the demand for gold has grown for jewellery, investments, and some industrial uses, there has not been much of an increase in supply and leads to an increase in its value. Another factor in increasing its value is time. It takes many years for gold to be transformed from the state it’s found in mines into bullion bars or coins. Bars and coins contain more concentrated gold and it also induces higher value, which will be likely to be maintained for some time yet. 

Quite simply, gold (and many other precious metals) is an investment unlike many others.  It is hidden underground. It has to undergo extremely difficult and time consuming process. Mining gold and other precious metals from their sources plus the processes involved would mean that there won’t be an oversupply anytime soon.  As an investment, gold would be a good addition. All portfolios should have some diversity in them and gold can provide a great ‘balancing’ investment for almost any investor.  Gold should be an important part of a diversified investment portfolio. Although its price can be volatile in the short term, its long-term benefits like a hedge against inflation and as an asset that does well is clear.

Sharon Freeman is an Australian freelance writer who writes professionally about investment trends and information for companies like www.ausmint.com 

Mutual Fund SIP – plan or plunder

SIP or Systematic Investment Plan has long been touted as a silver bullet for retail investors, especially for those who want to start investing in equities. This investment vehicle is promoted by all the mutual fund houses, distributors and financial planners. It has been marketed as the safest mechanism of equity investment that will outperform the markets and creates wealth over a long term. It is really hard (even for Google) to find articles that talk about problems or disadvantages of SIP.

Almost all the marketing around SIP indicates the following advantages:

Rupee Cost Averaging: The basic idea to make money is to buy at lower level. SIP allows you to buy more units when markets are less, thus reducing your average cost of buying units. But it is never mentioned that this method will work only in specific market conditions where the markets are in median range, then markets goes downwards and ultimately moves up. The intermediate downturns will cause SIP to buy more units and when the markets finally moves up, it gives better returns due to lower average cost of buying. The other market conditions are not favourable for SIP investment and some conditions are even detrimental as well.

Disciplined Investing: The basic idea is that a investor is 'forced' to invest regularly since the SIP amount is automatically debited from the saving account. But I believe that disciplined investment is really a habit rather than an advantage of any investment vehicle. It just forces an automatic deduction of SIP amount from your bank account, which is also true of other simple investments like recurring deposits.

The only one who gets benefit out of MF SIP is the mutual fund house and their distributors, since they get a regular committed revenue stream without spending any time or effort. SIP is just an investment vehicle to put your money into the underlying assets (which could be equities, bonds or gold etc.). So common sense tells us that if the underlying asset is doing badly, there is no way SIP is going to make money. The last 5 years (2007-2012) has not been particularly good for equities and hence it is no surprise that investments made into this asset class (be it via SIP or lump sum) are not doing very well.

It is a myth that SIP can give positive returns during any market condition. SIP will only perform when the timing (start/stop of SIP) and duration is right, as it is true with the underlying asset. A quick chart of SIP Vs. Lump sum investment might provide some insight:

Market State	Systematic Investment Plan	Lump Sum Investment
Rising Markets	As the market rises, your average cost will keep on increasing.	Your investment made is at the lowest price and hence the gain is superior	Lump Sum Wins
Falling Markets	As the market is going down, even if your average cost of purchase is reducing, but so is your final NAV and you are losing money	Your investment is at the highest price and hence the you will suffer losses	You lose in both cases
Markets with intermediate downtrends but ultimately rising	The intermediate downtrends will cause SIP to buy more units and hence reduce average cost of buying. The ultimate NAV will be higher giving handsome gain.	The investment will not use the intermediate downtrends, so any gains will be marginal	SIP Wins
Markets with intermediate uptrends but ultimately falling	The intermediate uptrends will cause SIP to buy less units and hence increase average cost of buying. The ultimate NAV may be higher but gains are less due to rising average cost.	The investment will not be impacted by intermediate uptrends	Lump Sum wins by a slight margin since it did not get affected by higher cost during uptrends

So the returns of a SIP will definitely depend on the

· Timing - Start and Stop of the SIP

· Duration – The duration for which the SIP was operational

As far as the disciplined investment goes, it is useful to note that there are other investment vehicles which can be combined with lump sum equity investments to ensure some discipline. As an example, instead of a SIP, an investor can choose to open a recurring deposit for six months and invest the lump sum received directly into mutual fund at the end of six months. It is also beneficial in terms of cost overheads, here is the comparison:

Case 1:	Case2:	Comments
SIP investment in Mutual Fund of Rs 2000 for six months	Recurring Deposit of Rs 2000 for six months + lump sum investment in same MF after six months
(Rs 30 + Rs 3.71) X 12 = 74.52 Rs commission to mutual fund house (ICICI Direct charges)	(Rs 33.71 - Interest earned on RD @ 6.5% pre-tax) (ICICI Bank Interest**)	So the cost of Mutual Fund SIP is higher due to recurring nature of commission. Also which of the option will give higher returns will depend on timing of the investment.

**Another point to keep in mind is the pre-mature withdrawal penalty on RD (0.5% in ICICI) compared to exit load (1-3% before one year).

So SIP is not a magic wand which can give you positive returns irrespective of market conditions. It is rather a “Systematic Investor Plunder” and benefits the MFs and distributors most of the time. The only sip that will give you pleasure is sipping your tea!

How to Help Yourself Save for the Rainy Days

This is a guest post by Robert McCafferty promoted by Guest Post U. The content and ideas belong to the author and post is only edited for visual aspects

Saving money today is not something that is a luxury. When life throws that little curve ball our way it usually costs money. If you don’t have that rainy day fund available you can risk incurring a lot of debt. Emergency funds are necessary to have as a fall back. They are the cushion you need financially if you get sick and can’t work or if you or your spouse loses a job. It’s a fund for car repairs or an emergency flight out of town. 

You don’t have to make a lot of money to save money. Don’t give up on an emergency fund and if you don’t have one, you need to start one now. There are a lot of ways you can save up some cash and put it somewhere it can grow. 

Below are some great ways to save for those rainy days. 

Long Distance 

If you make long distance phone calls now and again then you should probably drop the long distant carrier and use the minutes on your cell phone or get a prepaid phone card. Long distance phone calls can be very expensive and the carriers of long distance calls can be draining you of money. 

Cash 

Always try to use cash when paying for clothes, food, and other items. Try to not use your credit cards at all. Most people don’t end up paying off credit cards monthly and paying for some food that you ate four months ago leaves a bad taste in the mouth. Cash makes you much more aware of what you’re spending and people tend to spend less this way. 

Cell Phone Plan 

Look at your cell phone calling plan and think about changing your plan if you have added features that are costing you too much. If you use your cell phone for mostly personal calls, you probably could get rid of call waiting, surfing the internet, video, caller ID and other added features. You can save a pretty good bit of money by cutting out added features and lowering your cell phone plan if you are going over your minutes or being charged for things you can change. 

Health Plan 

If you are married and you and your spouse both work, comparing health care plans and going with the lower cost policy may save you lots of money. Compare the out of pocket expenses and what you pay for the benefits monthly. If one employer is cheaper and you’re not with that employer, switch up. 

Library

People spend about $400 a year on renting movies, about $500 on buying books and about $250 buying music CDs per year. Think about how much you can save if you get free books from the library. Most libraries also have movies and CDs that you can borrow as well. It’s a great way to reduce costs and be entertained free!

Saving for a rainy day really can come in handy when you don’t think it will. Having that spare few hundred dollars by cutting back on some small things can mean a big difference to you one day. Use some of the tips above and begin a small savings that can grow day by day. Be ready for your rainy day!

Robert McCafferty writes about parenting, family travel & finding affordable boat insurance quotes.

Top 5 Reasons Why Every Parent Needs To Save

This is a guest post by Taryn Beckham promoted by Guest Post U. The content and ideas belong to the author and post is only edited for visual aspects

Children are a blessing, but what they are certainly not blessing is your bank account. Should you find yourself in a bit of a financial pinch, it can be considerably worse when you have children that are in dire need of specific things. This makes saving your money in the better financial times all that more important. 

Preparation

You cannot always account for everything that you need to spend money on, especially when it comes to having a child. It seems that all the time something new is requiring financial output from you. Whether its new shoes or lunch money, whether it would be new outfits or car insurance. It really just depends on the age of the children and what is going on in your life. Without savings, it can be hard to prepare for all of these inevitable needs. 

Rainy Day

The rainy day fund is something you should also have in the back of your mind. Considering the fact that we've determined children can be financially straining at times, it would be ill advised not to start putting money back in the event that something rather costly comes up. For example, something could happen to the family vehicle that needs to be immediately taken care of. 

Time Off

Whether it is for the birth of your first child, later children that come after the first, or just something that could pull you away from work, it is important to be prepared for the possibility of needing time off. Time away from work is time that is often unpaid. So apart from vacation days that are accrued in some cases, time apart from your job is nothing good financially. However, being able to utilize a bit of your savings until you are ready to head back to the workforce can prove invaluable. 

College

As commercials and better logic of the current financial climate would suggest, it is never too early to start thinking about college for your children. Savings are a great way to start putting aside your money for the day that they decide to leave the nest to pursue higher education and better paying job opportunities. While this can be costly, even with some financial aid from the school's resources, it doesn't have to be if you start saving earlier. 

A Great Example

Taking savings seriously is not something that a lot of families seem to exemplify these days. However, saving can be habitual and influential to your children. If they can model this behavior in their own lives, you can set a precedent of smarter financial decisions and money management for their futures. 

These are several of the reasons why parents should seriously consider saving. While it is just a smarter financial option, allowing yourself to be prepared for what might be coming, it is also a great example for your children and their future. Making these changes in your life right now could help you out of devastating financial hardships that could be on the horizon, and can potentially secure enrollment in a college or university once they have completed high school.

Taryn Beckham writes about finance, parenting & criminal background checks.

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Why You Shouldn’t ‘Invest’ in Life Insurance

A must read article by Deepak Shenoy!! Some snippets

Insurance products are incredibly complex, despite their heavy regulation. Financial products are typically of two types —high-risk, where the returns cannot be predicted in any reasonable manner, and low-risk, where the return is either guaranteed or specified (the risk is in whether the seller will go bust). Equity is a high-risk proposition, while fixed deposit and other debt options are the second. Insurance products provide a mix-and-match,

 

Most people give up before they reach the "real return" calculation — which is why insurers can easily stuff charges into such policies, knowing that if someone is silly enough to invest with a 5% real return, he won't even know that they can take a significant chunk of money as commissions.

Bangalore Birth Certificate

After a week of applying for birth certificate, I finally got it. Here is a snapshot of my baby’s birth certificate

  I really imagined that getting the certificate would be simple task of giving the receipt and getting the signed copy from the ground floor counter at BBMP (Majestic). But it was not so simple!!

It took me close to two hours and following steps to finally get the certificate:

1) At the ground floor, gave my receipt, the person checked into one of the folder, could not find the certificate and asked me to go to second floor.

2) On the second floor, (this is where i submitted my application earlier), the certificate printout were being delivered in separate queue. It was not an organized queue though.

3) Finally after a wait for an hour or so, got the printouts. Interestingly the lady at the counter  asked me the name of the baby (which I had already filled in the form while applying). She said you can fill out any name that you desire!!

4) Once I had the printout, I went to the first floor, stood in another queue and got the signature of the BBMP authority

5) Finally, I reached ground floor with the signed copy and got the BBMP seal stamped on my certificate.

The best part of my experience was that I did not pay bribe at any single desk and the process was totally smooth. Kudos to BBMP!! The only last hiccup was to physically go there and collect the certificate, so an online process [& certificate couriered] would have been awesome!!

Unfortunately I could not find the link (Google, BangaloreOne website did not helped) where I could have applied online for a digital certified copy of birth certificate. I saw one person standing ahead of me got the digital certified copy printed on the second floor [no sign/seal required of-course].

If anyone knows how to apply for digital certified copy of birth certificate, please share.

Birth Certificate in Bangalore

I was recently blessed with a baby in Manipal Hospital Bangalore. It is now more than a month after home-coming and as a first time parents we are going through the highs and lows of nurturing a baby. It is not easy to manage the chaotic life immediately after the birth and hence now with some breather, I thought of going after the birth certificate from BBMP.

It was a real surprise that not much information is available online about getting a birth certificate, expect this post from Amit, that is more than five years old. The post was very useful (including some comments) but few things have changed and I wanted to share that information with everyone.

In the hospital you are going through so much of panic, stress, sometimes mental defeat that any formalities seem like a huge burden. Unfortunately I had no-one except my wife (who was obviously more stressed than me) during this crucial period. The first mistake that I made was to not provide the baby name for hospital certificate. We had all the time in the world during the pregnancy to decide on one name of boy and one name of girl. This would have been really useful later on as you will see. If the name of baby is not provided then in such a case the hospital will issue a birth certificate with “Baby of [Mother Name]”.

The second mistake that I made is not to visit the BBMP office within one month of birth. The hospital, based on the form submitted by you, forwards all the details of the birth to the BBMP office. The good part is that now-a-days all of this is online so in most cases the data reaches the BBMP office within couple of days. It is important to ensure that all details are correct in the hospital records and the certificate you receive from hospital.

When I received the birth certificate from Manipal Hospital (Ground floor behind the inquiry counter they have medical records office), I was given a map of the BBMP office in Kasturi Nagar. This was the same office which was earlier in Domlur and is now shifted to Kasturi Nagar. The map was pretty accurate and I reached the office at 11 AM. I had already downloaded the application for birth certificate form and filled the same. The interesting point to note is that this form has no option to provide the baby’s name. When I reached the Kasturi Nagar BBMP office, first floor (which was pretty small with just three desks) the person told me that I have to go to the Majestic office because it is more than a  month of the birth.

But instead of directly going to Majestic office, I asked few people and got to know that the BBMP office in Mayo Hall is good enough. When I reached the Mayo Hall office, the counters are on the ground floor itself. I could have got the certificate there itself, but for the fact that the hospital records did not had the baby name. So the person at Mayo Hall told me that they can give a birth certificate without the name of the baby. The name can be added later, but since I did not wanted to visit again, I decided to go to the Majestic BBMP office.

There are two BBMP offices in Majestic (near Upar-pet Police Station). The one adjacent shopping complex to the police station has the office that I finally reached. In the office at the ground floor, you can get the form (in case you did not download) and an additional form to enter the baby name in the birth certificate. I filled up both the forms and reached second floor and submitted the form. I paid Rs 140 and got a receipt for the payment. It will take a week for the certificate to be ready, which I need to go and collect from the ground floor. Some points to note:

• As per the lady at the counter, you need to apply for minimum three copies and maximum five copies of the certificate. 
• I did not had to go through any additional process (like going to court etc) even after one month. I think same applies for application within one year of birth.
• One person in front of my queue faced the issue that his details were not available with BBMP, so may need to cross-check with hospital.
• There is no need of going to a middle-man for birth certificate, since the process is simple, except the need to visit the BBMP office.

I was really impressed with the straightforward process of getting the birth certificate and the forms are also very simple. Interestingly, BBMP is in the process of enabling online application of birth certificate and issuing a digital certified copy to the applicant. Although it is not yet started but it is a great initiative. Another effective method is to allow the BangaloreOne centres to issue birth certificates.

You can read this document to know why birth certificate is required and important. The key points on why birth certificate is required are (from document):

• A birth certificate is needed to obtain a passport, a marriage or a driver’s license. It may be required to open a bank account, to apply for and secure formal employment and to inherit property
• A birth certificate may also be needed obtain family allowances, ration card, insurance, and a pension.
• A birth certificate proving identity and age is the gateway to democratic participation in civil society, enabling a person not only to vote in electoral
  processes, but to contest for Public office.
• A streamlined birth registration system, with a unique identifier for each child can pave the way for a sophisticated citizen’s multi-purpose identity card.

I will upload a sample copy once I receive the birth certificate for my daughter. Share your experiences in the comments!!

Update: I got the certificate.
Update2: As requested by anonymous comment, here is the map location of Upparpet Police Station
View Upparpet Police Station in a larger map

13 Awesome Personal Finance Blogs

Personal Finance is no longer an esoteric topic that is confined only to “experts”. This can be seen by the ever increasing number of Indian bloggers in this very important space. Some of the bloggers have a mass-following due their awesome content, and others (like me) are trying to learn from these amazing folks. Here is a review cum list of some India based blogs in personal finance space [Alphabetic Order]:

• http://capitalmind.in/

Mr. Deepak Shenoy mostly writes on trades in Indian markets but sometime publishes gem of posts on personal finance. He is founder of the company MarketVision which offers consulting and training services in finance and technology. His blog might be intimidating for a novice at first, since the posts contains lot of facts, figures and charts. His blogging frequency is amazing (sometimes as high as 4-5 posts in a day). The blog template is simple and easy to navigate with good placement of advertisements. Some of his interesting posts are:

Pay Pre-EMI or Full EMI?

Can you afford to loose job? 

Shenoy’s Investment Funda

• http://www.gettingmoneywise.com/

Mr. Ankit Agarwal writes topics focussed on providing money saving tips and frugal living ways. The ideas posted are good but I think that the blog has too many advertisements (including one before the post) which distracts the reader from the content. The blog also has some toolbar popping up at the top and bottom which is irritating. Also the language is slightly preachy and hence difficult to follow. Some of his interesting posts are:

Advantages & Disadvantages of Internet Banking                                                                                                

 Money Saving Tips for everyone

•  http://www.happymentor.com/blog.html

Mr. Srinivas Raghavan is the CEO of HappyMentor.com and is a CA by profession. The company provides training and consultancy services in the field of financial planning and organizational development. The blog layout is good and easy to navigate. The interesting aspect is the uploaded videos on the site, in which he talks about various aspects of financial life. In the videos he comes out as a happy person sharing his vast knowledge with the world. He also brings philosophical angle to the process of getting rich. But unfortunately he does not seem to update the blog very frequently. Some of his interesting posts are :

Self-occupied house not an asset                                       

Utilize tax planning to be rich                                           

Fall in love with Passive Income

• http://www.knowledgehub.co.in/

Mr. Anshul Dixit aims to spread awareness among people by presenting facts and concepts about many areas, one of which is personal finance. The website name is interesting and the layout is like a collage of various articles written on the blog. I found the front page crowded but surprisingly easy to navigate. Unfortunately 2/3rd of the space for any blog post is taken by side columns and advertisements which makes it difficult to focus on the real content. The writing is simple and informative and he provides simplified explanation of various concepts. The website also provides services like providing articles for other blogs or information for campus placements. Some of his interesting posts are:

Meaning of numbers of Credit Card                                                     

How is Sensex calculated?

• http://www.investmoneybetter.com/

The blogger goes by the name JigVishu, a software engineer by profession but writes about personal finance. The blog layout is simple with very few advertisement and very navigation friendly. The content is good but the blogging frequency is very less. The blogger has a nice way of explaining concepts using tables and examples, which makes it readable. Some of the interesting posts are:

ULIP Fundamentals                                                                   

EPF Contribution                                                  

Tax Saving Infrastructure Bonds

• http://investmoneyinindia.com/

This blog has multiple writers Mr. Tushar Mathur, Ms. Malvika Sampat and Mr. Ziaulla Namani. The blog layout is decent but some of the advertisements (e.g. at the top) are very distracting. The layout has very small fonts. The latest news and other columns on the right does not seem relevant at all. Also despite multiple writers the blogging frequency is very less. Another distraction is the number of tags attached to any post, which are greater than 10 in most cases. The advertisement image at each post is irritating. The content is very diverse and good but the writing style is slightly preachy with less examples making it difficult to read the blog. Some interesting posts are:

7 Insurance Myths Debunked                                                                                                                           

Layman’s guide to reverse mortgage

• http://www.investinternals.com/

Mr. Sherin Dev blogs for http://www.moneywithmoney.net/ as well. The blog layout is really good with some awesome blog content. The frequency of writing is also amazing with more than an average one post per day in 2011. The unique aspect with this blog is the number of guest writers that have written blog posts on it, providing a varied content with diverse thought process.  But I feel that the disadvantage of having so many guest bloggers is that you won’t see a single person’s though process. The articles are written in a simple and easy to understand language. Interestingly Sherin makes his blog “Un-Copyright” status. Another interesting aspect is that most of the blog revenue goes to charity, although I could not see any yearly/monthly statistics on how much goes to charity. Some interesting articles are:

The Entrepreneurial Fad                                               

Investing Life Cycle to wealth                                                       

Money Lessons to kids 

• http://www.jagoinvestor.com/

Mr. Manish Chauhan and his team is behind this most successful blog on personal finance. Manish has now launched some personal finance services as well. The blog name itself is unique and attractive. The blog layout is decent but the front page top image “Warren Buffet Vs Sensex” is really distracting. The pop-up survey that comes up is very irritating as well. But the USP is the quality of content which makes this site simply the best. The articles are in-depth and aims at solving real consumer problems. The impressive aspect is the detail that are put by Manish and his team in each blog article. A simple article such as opening a PPF account comes out with clarity. Another great aspect is the immediate response to any comment or email sent to Manish. Recently Manish launched the personal finance forum, that I believe it is first in India (lot of forums related to stocks and investing but not specific to personal finance). Also despite so much popularity of the blog, the number of advertisements is very minimal. The blog is also enriched by the amount of comments and discussion seen on the posts and forums.

• http://www.pankajbatra.com/

Mr. Pankaj Batra is a software professional and the blog is a personal account of his hobbies. He recently modified his blog layout and this one seems easy on the eye with advertisements blending smoothly in the background. He writes with decent frequency and the quality of his blog posts are good. His site has lot of download material which is great. Some of his interesting articles are:

Direct Tax Code                                                                                                                                    

Is it just your insurance company’s fault?

• http://www.personalmoney.in/

Ms. Shweta Mishra, Mr. Manish Mishra and Mr. Madhur Batra are the authors of this blog. The layout and the name of the blog comes out as very professional. But the content of the blog seems very similar to so many others on the internet and there seems to be a lack of many good quality posts. Although some of the posts are really detailed in nature. Advertisements inside the posts are distracting. The language is easy to follow but the frequency of blogging is not very high given the number of writers. Some of the interesting articles are:

Choose the best childern’s insurance plan                                                                                                                 

Demystifying LTA exemption

• http://ranjanvarma.com/

Mr. Ranjan Verma is also the author of personalfinance201 and developer of a personal finance desktop application called RupeeManager. He has more than a decade of experience in LIC and now he is the founder of RupeeManager. His blog layout is superb and especially the image icon that he has created for his blog is awesome. He also runs RupeeCamp which is a structured program for learning about personal finance. I have been following his blog for very long time and I love it. The way he writes the posts with simplicity and conciseness makes a reader compel to interact/comment on the post. He writes on many other topics including current news. Some of his interesting posts are:

Investing in low-risk mutual funds                                  

How to maximize your income?                             

Top 10 personal finance resource in India

• http://www.smartsingh.com/

Mr. Adheesh Sharma (CFA) is currently pursuing his MBA from Insead. The awesome part of his blog is the funky sardar icon. The blog is filled with many cartoons to explain the concept or show-case some conversation. The layout is very attractive and compels readers to navigate and look around the blog for various articles. The frequency of blogging has been reduced now probably due to his MBA, and he has acknowledged this in his post. The content quality is awesome due to the fact that Adheesh spends a lot of time in simplifying his posts and writing creatively. As an example, check out this post on “Disciplined Saving’ where he indicates that “The money you spend on buying a car today, could fund your child’s way to Harvard”. He very smartly puts his point across with lot of details and conviction in the posts. The blog is very impressive and contains lot of gems. A must read!!

• http://www.vinayahs.com/

Vinaya HS is a product manager by profession and writes on personal finance based on his own experience. The unique aspect of his blog is the give-away he does. He sometimes raises some contest or asks readers to put comments and then gives away some book or coupons to the winner. He shares tips on Tuesdays (calls Tip Tuesdays) and has written articles for techdirt.com. Another interesting aspect is the post he does based on reader questions. He is a big fan of ERE and provides a monthly update on his ERE plan with a nice graph. Some of his posts are thought provoking. Few interesting posts are:

Fallacy of traditional retirement calculation                                       

Withdrawing EPF                               

How to calculate EMI of your home loan

 

Did I miss any other interesting blog? Please share in comments!!

Note: I have intentionally avoided blogs which are either corporate blogs or blogs specific to only stock investments. Although this implies skipping some of the best blogs like valueinvestor, TipBlog or  FundooProfessor. But I wanted to focus on blogs which provides a generic thought process on personal finance for individuals rather than specific investment areas like stocks or mutual funds. This review is my personal opinion and if anyone feels offended, please drop me an email. Appropriate action will be taken.

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?

Is your house really an asset?

If you ask this question to Indians, the answer is an emphatic yes. It is a prevalent notion that buying a house is akin to building an asset. The desire and need to own a home is hard-wired into the Indian psyche. It might be a good idea to pause and think over this question again, Is your house an asset? To answer this question, you need to define what is the meaning of an asset!! But defining asset is not easy since there are numerous definitions - two interesting ones are :

1) An asset is something that you own, where as a liability is something you owe.

2) An asset is something that generates money for you, where as a liability is something that takes away money from you.

The second definition sounds very logical and if you go by this definition, almost anything you own is NOT an asset. This controversial definition was given by Robert Kiyosaki of Rich Dad Poor Dad fame. This definition leads him to conclude that a self-occupied house is not an asset. Watch this interesting video on Youtube :

Robert Kiyosaki explaining that house is a liability!!

I don’t exactly agree with Mr. Kiyosaki even though I am inclined towards not buying a house. I believe that calling house a liability does not change anything apart from turning the traditional thought process on its head. The ultimate goal for buying an house is a) Personal satisfaction of owning a house b) Increase social status.

Indians think of the house purchase as a form of investment, which is incorrect. Let us step back and think about why anyone wants to invest their money? The whole purpose of investment ( be it in stocks, mutual funds, FDs, house or gold etc. ) is to beat the inflation and grow the money. The intention is to increase the financial net-worth so that a person can enjoy life and be mentally peaceful during any emergencies.

So is buying a house an investment? Yes and No. Let me explain this.

You may know of your friends & family who bought a house very cheaply few years back and the current price of the house is quoting much higher. But are they enjoying their current life or are they financially stretched owing to a huge chunk of earning going as EMIs? Is this sacrifice of constraint in present living state worth the investment for future self-owned house? If you are stretched too much today, then your house is definitely a liability.

Another question to ask is, when someone sells a house what happens to the money earned? Assume one of your friend bought a house for 30 Lakhs say five years ago and now it is quoting at 70 Lakhs. If he sells the house today earning a cool profit of 35 Lakhs (minus bank and other miscellaneous expenses). What happens to this 35 Lakhs? The most probable answer is that it is spent on buying another house. Did you know of anyone who sold his house pocketing a huge profit and then spent that money on a foreign trip or paid for medical emergency? In majority of cases once you buy a house, the money invested just remains as a house, you sell this to buy a bigger/better house.

If you think about any other investment, the same does not hold true. Any money earned through stocks or mutual fund immediately goes into some expenses be it for children’s education or buying that big car. But a house remains a house even across generations and the money is locked in that house. So any house bought on a huge loan only turns out to be an asset for the next generation (since they got it for free) and not for the person who bought it. I strongly believe that with nuclear family being the trend and with more globalized world, children will not care about the ancestral house and may not be living in it.

As a fact, most people who buy houses/apartments on huge loans are taking significant risk compared to the returns given by that house during their lifetime. Thus to me it implies that house is a liability.

A rough indication below will indicate that a house bought on loan cost much more than it seems :

• Down payment in cash [the cash gets locked up even before you are living in that house]
• Monthly EMI [Major portion of EMI is interest in initial years]
• Intermediary Fees [if bought through a broker]
• Miscellaneous Fees [e.g. lawyer fees, society fees, loan processing fees for banks]
• Government dues [registration fees, electricity charges, house taxes, VAT/service tax]
• Premium paid for Insurance of house
• Maintenance/upkeep for the house

An important point to note here is that typically the amount of money (interest) you pay during loan tenure to the bank, for taking home loan is approximately same as the principal (~purchase price of house). The worst part is that EMI usually follow the upward trend, as the cost of fund increases for the bank, making the house much more costly to the end-customer.

Hence buying a house may become a liability rather than an asset due to the inability of buyer to identify and understand the risks involved. This is actually true for any investments but for house purchase the stakes are much higher and risks runs much deeper.

Here are some tips to make your house an asset rather than a liability:

• Try to purchase a house which is priced a little less than what you can afford. Keep some buffer rather than stretch your finances.
• Keep a target of 100% ownership in next five years
• Buy a house which is 2-3 years old or new but fully completed. An under-constructed property is certainly more risky & hence inherently costly but it may seem cheaper upfront
• Buy a house when you can afford to pay 30% or more down-payment and plan to pre-pay the loan within 5 years
• Better to buy a house in tier-II city and rent-out the house rather than make it self-occupied in tier-I city. You can save on tax that way and also avail HRA.
• Stay on rent in good locality to enjoy your present life. The rent from your house in Tier-II city should compensate for the expenses incurred on that house.

Some related resources:

Real Estate Bubbles and California's Economic Growth  Part-1, Part-2, Part-3

Buy Vs. Rent calculator Link here

Some old posts from this blog

Link1 : How to buy apartment in Bangalore?

Link2 : Get rich by staying in rented house?

Link3 : Reverse Mortgage doesn’t work in India?

Link4 : Real estate real returns?

Link5 ; Buy Vs. Rent 

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?

Akshay Tritiya & Gold

[Photo by Mr. eNil] So you must have heard that Akshay Tritiya (or Aakha Teez) is falling on 6th May and it is an auspicious day for buying gold jewellery. It is said that buying gold on this day will bring prosperity and increase in wealth. This belief is so rampant that everyone plans and buys (even if token) gold coins/jewellery on that day which increases the demand and pushes the gold prices to exorbitant levels.

But very few really go and check out the true significance of this belief. Here is some history about Akshay Tritiya and why buying gold is not the true essence of this holy day as per Hindu mythology.

If you remember the Mahabharata, where Pandavas had to be exile in the forests. The eldest Yudhishtra was not happy since he was unable to feed the holy sages that he met during his exile in the forest, so he prayed to Lord Surya. The Akshay Patra (inexhaustible vessel) was given to Pandavas by Lord Surya on the day of Akshay Tritiya. The idea is that the vessel will always be filled with food until the Pandava’s wife Draupadi will eat for the day. Another related mythology story is when Rishi Durvasa visited Pandavas and by that time Draupadi had already eaten the food from Akshay Patra and hence no food remained for the great Rishi Durvasa. Hence Draupadi prayed to Lord Krishna, who came and ate the single grain of rice from the Akshay Patra and announced that He is satisfied with the food. This caused the Durvasa Rishi and his disciples to also feel full-stomach.

So this indicated absolutely no connected with the belief that buying gold on the auspicious day of Akshay Tritiya will make you prosperous. The people twisted the mythological story to indicate that anything you acquire on this day will be inexhaustible similar to Akshay Patra and since the most precious thing to buy is gold, which then will remain inexhaustible. It is exactly the turning the table on its head, since as per my understanding the idea of Akshay Patra is to use it to donate the food to the needy and it still does not exhaust (rather than keeping it to yourself). The idea should be that anything you donate on this day will be inexhaustible, but that is now long forgotten.

This twisted interpretation is especially great for people in the gold business since the demand for gold shoots up artificially. The gold prices in India this Akshay Tritiya is expected to shoot up to Rs 25000 per 10 gram. The only people who are going to gain are the people who do business in gold.

There are lot of interesting gimmicks launched by jewellers to attract the customers during this year. As an example their is a “double protection” scheme which allows customers to book jewellery at a desired gold rate and does not impact your cost if the prices go up. In the event of gold prices going down compared to booking rate, the difference will be paid back. This is good for business but not so good for customers. The problem is the confusion created by the various advertisements on such scheme. Can a customer keep the booking rate lower than that day’s price? Will the labour charges be returned back along with cost of gold if the gold prices go down? What if the particular seller where you booked the gold prices, manipulates the gold price on Akshay Tritiya to ensure that it is higher than what most buyers have booked at? Can a customer cancel the booking without loss if some other jeweller is giving gold price much lower than the shop where customer booked the rate?

My advise for everyone is to not go after such schemes without knowing full details and the risks involved. The gold buying should be just one part of your investment portfolio and should be done in staggered manner to meet investment objectives.

Income Tax Payment through ATM

Times of India reported that “aam aadmi” can now pay the income tax through ATM and this is currently available to the UBI debit card holders.

The bank's debit cards holders will register on the lender's website. This site is in turn linked to the National Securities Depositories Ltd which will help validate the permanent account number (PAN) of individuals and the Tax Deduction Account Number (TAN) provided to taxpayers.

After the registration, a customer can go to a Union Bank ATM and can surf the income tax menu which will display his PAN number and ask for the tax amount that is to be paid along with item-wise details of any other amount the assessee may want to include in the tax payment.

On confirmation, the tax amount will be debited from the customer's account and the ATM will generate a receipt with a special number. After 24 hours, customers can log on to the bank's website, submit the special number and print a challan.

This looks great on paper but implementation will be difficult since for most of the salaried class the tax is already deducted at source. The remaining salaried class who typically gets more than two Form-16s would probably require such a service, but there are too many individual cases which the ATM menu may not be able to handle. The main hassle is in identifying and calculating the balance tax amount rather than paying it at the bank branch. Also, it is yet to be seen whether all UBI ATMs across the country can provide such a service. If not, then with this service, I expect a similar queue outside the ATMs as we currently see in the bank branch.

Also the bigger queues are due to the fact that most people will leave it to the end of deadline for submission of Income Tax, which the ATM facility can not solve. It will another hassle to resolve ATM related issues while submitting income tax (think of the cases today where ATM card insertion does not work or the card gets stuck or money is debited fully but cash delivered is less, so on and so forth). It will be more complicated to resolve issues in such a case.

I guess the intention is noble, but it will mainly depend on the execution and should be extended to all bank ATMs.

Visa and MasterCard Killer–Rupay

Photo by roujo

TOI reports that India will soon have it’s own payment processing firm called Rupay competing with Visa and Mastercard payment processing firms.

After almost two years of planning, the National Payments Corporation has at last finalised the proposed unique India Card which once commercially launched would be an domestic alternative to the global real-time payment processing firms like Visa andMasterCard.

"We have finalised name of the proposed card as Rupay at our board meeting here today. We have also finalised the logo for the same," a senior official of the RBI-set up National Payments Corporation of India (NPCI), told PTI this evening. The official sought not to be named.

NPCI is an umbrella institution for all the retail payment systems in India. I could not find any information about Rupay on the NPCI website, but given the statistics of the transactions that it handles is pretty impressive. It also gives a list of Payment systems worldwide, which is interesting to know.

The advantages of Rupay should be really good especially in lowering the transaction charges for using debit/credit card at merchant sites. As of now, all the banks which issue credit or debit cards to the end-user for transactions at various merchants in India or abroad has to tie up with Visa or Mastercard. The transaction is routed through the infrastructure owned by Visa/Mastercard not situated within the country. This implies substantial cost to the banks as well as merchants which are passed on to the end customer. Rupay will eliminate majority of this cost.

The interchange cost for transaction settlement paid by Indian banks to Visa/Mastercard is close to Rs 500 crore in one year and most of these transactions are purely domestic transactions. Rupay would reduce this cost substantially and can still connect to the Visa/Mastercard for international transactions.

The plan is great, but it needs solid execution, since any Rupay based system has to develop the necessary infrastructure to handle the millions of transactions that happen in India. Also security is a big concern and Rupay need to scale up quickly to the level of Visa/Mastercard to ensure transactions in secure manner with less chances of fraud. In case of Visa/Mastercard they push the security solutions based on their standard up-gradation worldwide. So Rupay system need to match that as be as agile in upgrading to latest security infrastructure as happens globally. It is also a challenge to incentivise the already existing merchants to sign up for the Rupay system. Ofcourse cost advantage will help but security will be the key. NCPI has loads of work to do on that front.

The NCPI is also working on utilizing the Aadhaar developed by UIDAI (headed by Nandan Nilekani) and will be developing a proof of concepts through a MicroATM. This is interesting since it brings the lowest strata of society into high-technology banking transactions.