Get Richer by avoiding Mental Accounting

The Inquisitive Minds, features guest authors who are interested to contribute to the readers of this blog and the author of this article is Ramalingam Kan MBA (Finance) and Certified Financial PlannerHe is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.  He has been a regular on this blog for a while now. If you would like to contribute something then please let us know on guest [at] melvinpereira.com.

Mental Accounting is one such money mistake even smart people are committing.  Understanding this mistake and avoiding this could make us richer. Behavioral Finance experts say that mental accounting works this way: Let us say you have bought a Rs.200 ticket to a movie. When you show up at the entrance of the theatre and realize you have lost your ticket, do you buy another ticket? If you are like most people, you would probably think twice. You may still drop down the money, but you will now feel that you paid Rs.400 for a Rs.200 movie.

But let’s construct the scenario differently. Let’s say you hadn’t bought the ticket yet, and you show up at the entrance to buy your ticket. Unfortunately, you realized you’ve lost Rs200 in cash since you walked from the parking place. But fortunately, you still have enough in your wallet to cover the cost of the ticket. Do you buy the ticket? Again, if you are like most people, you may feel upset about the lost money, but it probably won’t affect your decision to buy the ticket. Why?

Behavioural Finance experts conducted similar experiments. They found that 46% of those who lost the ticket were willing to buy a replacement ticket. On the other side 88% of those who lost an equivalent amount of cash were willing to buy a ticket.

Both scenarios are a loss of Rs.200. However, in the second scenario you separate the loss of the Rs. 200 from the purchasing of the ticket. In the first you consider the cost of the movie as a total of Rs.400 and suffer at the high cost.

It is because of the psychological phenomenon known as mental accounting. One of the fundamental concepts in Economics says that wealth in general and money in particular, should be fungible. Fungibility, in a nutshell, means that Rs.100 in lottery winning, Rs.100 in salary and Rs.100 tax refund should have the same significance and value to you since each Rs.100 has the same purchasing power at the market. But do you treat them in a similar way?

Mental accounting has enormous consequences in your daily life. It affects how you spend money and how you save. It influences how you deal with losses and windfall gains.

How Does Mental Accounting Affect You?

1)   The source of the money affects how it is spent.

  • You tend to dine lavishly with the “gift meal vouchers” given by your company. But you will be dining consciously if you are paying out of your salary.
  • You are most likely to spend more with credit cards than with cash.
  • You may consider Tax refund as“free money”. In actual terms it is your own money. You will not spend tax refunds, birthday gift money or lottery winnings on essential things like utility bills, school fees, paying off your credit card debt. But you will be more than happy to spend the same money on discretionary items such as vacations or a trendy mobile phone.

2)   Don’t be a victim of ‘Relative cost’.

Assume you are going to a super market to buy a laptop. The price is Rs.40000. But you get to know that there is another branch of the supermarket, a ten minutes walk away, in which the same laptop is sold for Rs.39950. Will you walk down to the other branch? Let us say instead of buying a laptop you have planned to buy a memory card. The price at the supermarket is Rs.100 and at the other branch is Rs.50. Where will you buy the card? Most of us will make a trip to the other branch for the memory card but not for the laptop. Because we think that the Rs.50 saved on a Rs.100 item is better than the same amount saved on a Rs.40000 item. But both the situation is same. You save Rs.50 by making 10 minutes walk to the other branch. Remember that money is money. Rs.50 saved on Rs.40000 laptop is not less money than Rs. 50 saved on Rs.100 memory card.

How to face Mental Accounting and spend consciously?

  • You can use mental accounting to your advantage by spending money out of your salary. Immediately invest the “free money” like Tax refunds, gifted money or any other windfall gains.
  • Imagine that all income is earned income.
  • Use the free meal vouchers and other gift vouchers to buy essential items.
  • Pretend you don’t have a credit card. I am not telling you not to use credit cards. I am saying you should stop and think: would I buy this if I was using cash?

A Successful Practical Strategy:

You can have two bank accounts. One for the purpose of savings and the other one for spending. Every month you need to set aside some amount for expenses as per your budget or previous experience. That amount you need to transfer to your spending account. Balance amount you need to keep it in savings account.  You need to meet all your expenses including your credit card payment from the spending account. You should not spend from your savings account.

In between, if you receive any cash gifts or windfall gains, deposit them in your savings account. If you receive gift vouchers, then transfer the money equivalent of that voucher from your spending account to your saving account. That is your spending limit will not go up by just receiving the gift voucher. So that you will not use it lavishly and use it only on pre-planned things. When it comes to money your mind unconsciously plays this trick of mental accounting. You have understood that today. So hereafter, you can avoid this mistake and you become richer day by day.

Eight Simple Ways to Plan your Taxes.

The Inquisitive Minds, features guest authors who are interested to contribute to the readers of this blog and the author of this article is Ramalingam Kan MBA (Finance) and Certified Financial PlannerHe is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.  He has been a regular on this blog for a while now. If you would like to contribute something then please let us know on guest [at] melvinpereira.com.

You have got only a few more months to complete this financial year. Very soon you will get a call from your company to submit the proofs for tax saving investments. So why don’t you spend some time on organising your tax plan?

1)     Proper Allocation of Annual compensation

Restructuring your salary with some additional components can reduce your tax liability. This restructuring doesn’t require any additional cash outflow. The following components can be efficiently used to reduce your income tax liability.

v  Transport allowance to the extend of Rs.800 is exempt

v  Medical expenses which are reimbursed by the employer are exempt to the tune of Rs.15000

v  Food coupons like sodexo or ticket restaurant are exempt from tax up to Rs.60000

v  Individuals who are all living in a rented accommodation can include House Rent Allowance ( HRA ) as a part of their salary

v  Leave Travel Allowance (LTA) can be part of your salary as this can be claimed twice in a block of 4 years.

2)     Effective Utilization of Tax Exemption

As far as possible utilize the maximum exemptions available under section 80 C, 80 CCF and 80 D. The maximum exemption available under section 80 C is Rs. 100000.

Under this section Rs.100000 investment or contribution can be made in PPF, NSC, Life insurance premium, 5 year FD with banks and Post offices, Mutual Fund ELSS, Principal Repayment of housing loan, and the tuition fees paid for children’s education.

Under Section 80 CCF, you can invest up to Rs.20000 in infrastructure bonds.

Under Sec 80 D, the premium paid towards the mediclaim policies are exempt. The maximum limit of exemption is Rs.15000 and for senior citizens the limit is Rs.20000 and for covering senior citizen parents there is an additional exemption to the extend of Rs.15000.

3)     Properly Structure your Housing Loan

The Principal repayment of a housing loan is eligible for a deduction up to Rs.100000. The interest paid on a housing loan is eligible for a deduction up to Rs.150000. If the housing loan is for a sizeable amount, then it is possible that the principal repayment and interest may exceed the specified tax exemption limit. To utilise the maximum tax benefit, an individual can consider going for a joint home loan with his/her spouse or parent or sibling. This will make sure that both the co-owners can claim tax deductions in the proportion of their holding in the loan.

 4)     Tax Plan in Sync with Overall Financial Plan

You should not do your tax plan in isolation. You need to do it in sync with your overall financial plan. So a tax plan is not only to just save taxes and also it should assist you in achieving your other financial goals like children’s higher education, buying a home or retirement.

5)     Avoid Last Minute Rush

In fact the right time to do the tax plan is the beginning of the financial year. If you postpone your tax planning even now and do it in the last minute, then you will not be able to choose the right investment. In the last minute rush, you will be forced to choose a scheme which gives the proof immediately. Is the investment sound and profitable? Is there any other better options? You will not be able to choose the best scheme and you may settle with a mediocre one.

6)     Invest Some Quality Time

Before investing your money, you need to invest your time. You need to take some quality time to understand the various tax saving options and compare their benefits and limitations.

7)     Check for Future Commitments

Some tax saving options like NSC or ELSS need only onetime investment. Some other tax saving options like PPF, Ulips need periodical investments year after year. You need to be careful in choosing a tax saving scheme where you need to commit for periodical future payments. You need to check on a few things like; do you need such a future commitment? Will you be able to meet the future commitments at ease? The law may change and you may not get any tax exemption for your future payments. Would you consider the scheme irrespective of tax benefit for the future payments?

8)     Changed Your Job; Redo your Tax Plan

Did you switch your job in the middle of the financial year? Then you need to redo your tax plan with consolidating the income from both the companies. It is advisable to inform the new company about the income during the particular financial year from the old company. So that your new company will deduct the right amount of TDS. Otherwise you may need to pay extra tax at the end of the financial year.

Whenever you change your job, you need to have a sitting with your financial planner or tax advisor. So that the required changes in your tax plan can be done proactively. With proper tax planning you can reduce your tax liability; save more; invest better and become wealthier.

Real Estate Investments Made Simple

The Inquisitive Minds, features guest authors who are interested to contribute to the readers of this blog and the author of this article is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.  He has been a regular on this blog for a while now. If you would like to contribute something then please let us know on guest [at] melvinpereira.com.

Gold and Real estate are very traditional investment avenues. Gold has evolved from its traditional investing and found its place in the modern sophisticated investment world via Gold ETFs. Similarly Real estate is also emerging as an investor friendly avenue with less hassle via PMS route or private equity route. Have you ever thought of investing in real estate will one day be as simple as investing in mutual funds? If no please read on….

Real Estate as an Investment:

 Buying a dream house or flat to reside ourselves is basically not a real estate investment. Buying real estate with a view to generate income and capital appreciation is considered as Real Estate investments.  Real Estate investments can be further classified into residential, farm house, commercial, retail, leisure. Leisure is a relaxation place where one can spend their free time or vacation.

Depends upon his/her risk tolerance and time horizon one can invest in real estate at different risk levels. It can be at the time of converting a rural land to urban land, or at the time of building development stage or in already developed city area.

Real Estate and Risk:

Most often investors assume real estate prices will not fall down and they only go up year after year. It is not so.  During the mid 2009 some of the real estate investments were quoting below 30% to 40% from their 2007 prices. Real Estate investments are also prone for price fluctuations.

Real estate Vs Stock market:

Real Estate is a complex and complicated investment when compared to stock market.

Non-transparent: There is no transparency in the price. It is not easy for a buyer or seller of real estate to identify the last transacted price in the same locality. There is no price discovery mechanism.

Illiquid Asset: Selling a real estate is a time consuming process. It is not liquidable easily. There is no organized market for the buyers and sellers to meet.

Impact Cost: Stamp duty and registration charges are really very heavy when compared to the other investment products.

No Regulator: There is no regulator for the real estate participants and intermediaries. Anyone can become a builder. Technical qualification is not mandatory. Also anyone can become a real estate intermediary or advisor. There is no certification or training to be completed before practicing.  As there is no qualification requirement for participants as well as the intermediaries, it is very difficult to see best business practices.

Real Estate hassles:

The other hassles with reference to real estate investment are documentation, maintaining the asset without any encumbrances, and genuineness of the title deed.

There are some practical problems with diversification. Normally an investor invests in a real estate in his own locality. It is very rare to find someone in Chennai investing in the real estate properties located at Mumbai, Delhi or Kolkata.  Affordability also limits diversification. An investor may not be able to diversify his investments across various cities with Rs.25 lacs or 50 lacs.

It may not be possible for an individual investor to buy a land and develop a viable project in that land and sell it in the market. Managing the project development need some kind of expertise.  Even if an individual is able to do it, he will be doing it in his limited ways and means.

Is there a solution for this? Of late yes.

There are some collective investment vehicles. These investment vehicles will be promoted by an investment management company. The investment management companies collect money from investors. Being professionals, they will identify good projects and do joint venture with the project developers. They will be able to diversify across various cities as well as various types of real estate investments such as housing, commercial, hospitality and the like. These investment management companies charge a reasonable management fees.

At times they collect money via PMS route and at times via private equity route.  The minimum investment ranges from 10 lacs to 25 lacs. This amount needs to be invested over a period of 3 years. That is they will collect money from investors in 4 or 5 installments. After 3rd year whenever they exit from a project they will repay the principal employed in the project as well as the profit generated out of that project. End of 6th year or 7th year, the investment management company will exit from all the projects.

The advantages of this collective investment vehicle are

  • One can invest into real estate without any hassles. All the hassles will be managed by the professional investment management companies.
  • One can invest in various real estate projects at a time.
  • One can geographically diversify his investments across India.
  • One will be able to apportion his total investment into small sums in large projects like township development, Technology Park, industrial estate, health city…
  • Cost advantage because of economies of large scale operation

This is really an investor friendly investment vehicle. Apart from the regular stocks, mutual funds and fixed deposit investments investors can consider investing in these real estate products also. This will give better diversification to your overall portfolio. Also Investors need to be careful in choosing such investment options. Background of the investment management company and their transparency levels are more important. Investors can seek the advice of the professional financial planners before investing.

This investment vehicle is in its primitive form only. It still needs to go a long way. As of now there are only a very few companies in India which specializes in promoting collective real estate investment products. But in a few years time these kinds of products will be available from various investment management companies and in different varieties like our present mutual fund schemes.

A step by step guide to first financial plan

A financial help guest post again this week from our regular guest blogger Mr. Ramalingam; The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

If you would like to contribute to ‘Inquisitive Minds’ with your article you can get in touch with us and we will provide you with the relevant guidelines for the same. Please send in your email to me [at] melvinpereira.com.

A step by step guide to first financial plan

Prabu was a college student till yesterday. Today he has got a job. He has changed his costume from T-shirt and jeans to a formal wear with a tie. When he got his first pay cheque, his father advised him to save, his girl friend asked him to take her out on a date, and his friends wanted a party. Prabu was totally confused what to do with his first salary. What are all his actual priorities? Let us help him by laying out a step by step initial financial plan for him.

Get a PAN Card:

PAN Card is an ID card issued by income tax department.  This card is useful in filing your Income Tax returns. Apart from this, the PAN card is very much useful in opening a bank a\c, demat a\c, investing in mutual funds and the like. The required documents for getting a PAN card is a passport size photo, address proof and an identification proof. You need to apply with either UTI or NSDL. They are the two approved agencies by income tax department for issuing PAN card.

Personal Accident and Disability Insurance:

Almost every day you can find a news column about road accident. It may be your colleague, your distant relative, your neighbour, your friend, your classmate. The stories of such incidents give us a reminder that the accidents can happen to anyone. The impact of these accidents on ones working life could be huge. Some accidents could reduce our employability temporarily or permanently. Personal accident and disability insurance policies will cover the financial losses arising out of accident and disability.

You need to decide the coverage amount of this policy based on the estimated loss you may suffer because of accident. That is how much loss you may incur from employment temporarily or permanently because of the accident. This will cost you approximately Rs.1500 p.a for a coverage of Rs.10 lakhs.

Health Insurance:

Most people don’t think about health insurance very often.  But it comes to mind first when a loved one is sick.  Under health insurance, the insurance company pays the medical bills if the insured person becomes sick and hospitalized. Health insurance can protect a family from financial damage in case of severe and serious illness.

If you have a health insurance from your employer, that may not be sufficient. Employer may cover the employee and not his family members. And moreover these policies are not portable and cannot be individualized if you leave the job. Employer provided policies cannot be transferred to another employer in case you switch your job. Also employer provided policies will give you coverage as long as you are employed. Once you retire you may not be having coverage. It is really unfortunate that only after your retirement you need health insurance at the most. If you plan to take a fresh policy after retirement, insurance company will not cover the pre-existing diseases at that point in time. Though your employer provides a health insurance policy it is better for you to take a separate health insurance policy at least with a small amount of coverage.

The coverage amount of the health insurance policy need to be decided based on your health consciousness, your family health history, and the class of hospital you choose for treatments.

Term Insurance:

Generally as a beginner, there will not be any requirement for any life insurance. But if your parents are financially depending on you, then you need to cover yourself with life insurance. As a breadwinner, today you are there for your family to provide a lifestyle. In case of any mishappening to you, your family members should not compromise on their lifestyle. That is why it is advisable to cover yourself with life insurance if you have dependents.

But don’t fall prey for ulips. Go for a pure term insurance policy. These policies give you a high coverage with low premium. The premium for a sum assured of Rs.10 lakhs will cost a 25 year old only Rs.2500 p.a. approximately.

Emergency Reserve:

Once you have completed the above obligations, you need to build an emergency reserve or contingency fund. One aspect of financial planning involves planning for situations where there could be a temporary break in one’s professional income. This could happen, amongst other reasons, due to ill health or could even be self opted. Such planning requires creation of contingency fund. The size of a contingency fund is linked to one’s estimate of what could be the maximum duration of such a break. For instance some people plan for the possibility of a 3 months break, others for 6 months.

This emergency fund gives a psychological security to you. In case you need to quit you r present job and need to search a new one, you can do that comfortably and confidently as you have an emergency fund for the intermediate period. You need not panic. If you have created a contingency fund, in the event of any emergency you need not pre-close your other investments and hence you avoid paying penalty or booking losses.

Tax Planning:

You can save under section 80 C up to Rs.120000. Out of this Rs.20000 need to be invested in the infrastructure bonds and the balance Rs.100000 can be invested in NSC, PPF, insurance premium, and ELSS mutual funds., You can give maximum allocation to ELSS mutual funds, as you are so young and in the beginning of your career.

Other goals:

You may have other goals like buying a laptop, higher studies, and vacation. You need to plan for all these goals. You need to keep in mind two things before deciding an investment. They are your risk tolerance and time horizon. How much risk you are afford to take and psychologically comfortable in taking? When do you need this money back? Based on the answers to these questions you need to choose the right kind of investment plan.

Plan out your work and work out your plan. Normally we don’t plan to fail, but we fail to plan.If you work on your financial plan, when your friends are partying and taking their girlfriends out, you will be definitely going to be retired richer than your friends.

Let us help – NGO Awareness – Part 1

Through the years NGO’s (Non Government Organizations) have come forward to fill the gap which the government in India has been unable to fill in. While talking to Sowmya on her interview (which you can read here) I realized that the number of NGO’s that are trying to work on issues related to India are quite a few, and they talk to research analysts like Sowmya to help them do the right thing. But there are those who have already spent a lot of time in trying to help various segments in India, like the poor, the old or just children. Working with profit or non-profit these people definitely deserve a mention in their role in the society in India.

I am sure there are a lot of actions we can take to help them add to it the rise of  Social Entrepreneurship means that more organizations, individuals and young entrepreneurs are willing to work with the forgotten of society to not only work towards making a profit but doing it though helping a lot of these segments. To be able to do our part we would like to organize a few events (non Profit) to be able to help out someone in need. Along with getting to that part, it is also required that we are all aware of the NGO’s that are available in India where we can help. So I have decided to start of a series where we will introduce a group of NGO’s once or twice a month to be able to provide some help as well.

For the first edition I would like to introduce these three NGO’s

Green Coalition Network

Website |   Twitter |   Facebook |

Activity: Green Coalition Network is an independent non-governmental environmental advocacy organization that was informally founded in the year 2000. Green Coalition is dedicated to improving public health standards, protecting the environment and promoting sustainable development & ethical business. We provide practical eco-friendly solutions that integrate long-term economic prosperity and sound social development, thereby bringing about real positive change. We implement this by influencing public opinion, building constructive partnerships with industry and the government and promoting community and corporate programs focused on youth & public participation.

Support: environmental awareness, environmental education, environmental advocacy, public health, fair trade, sustainable development, Third Sector Consulting

Note: We want more active volunteers and members. You can also have a look at our current requirements at the page below http://www.greencoalition.net/volunteer.html


Rang De

Website | Twitter | Facebook |

Activity: Rang De is a pioneering web-based social initiative with a mission to provide cost-effective microcredit to low income households in India. Through an online platform (www.RangDe.Org), Rang De enables people to participate in microcredit by lending as little as Rs. 100. Rang De has reached out to over 5900 entrepreneurs across 12 states by lending Rs. 31mn. Rang De currently funds business, education, and artisan loans. Rang De is a registered non-profit trust.

Details: You might want to read through our FAQs for a comprehensive understanding of Rang De – http://rangde.org/faq.htm

Support: Microcredit, Peer-to-peer lending, individual social responsibility, online lending, philanthropy

Note: – More Corporates to participate in our corporate connects program (one time donation which will be rotated as social investments).

  • More people to blog about Rang De and on the Rang De blog also.
  • Social media advisors to help us on how to take our social media strategy forward
  • Java/JSP Developers who are interested in working for Rang De full time for at least a year.
  • Funding for our operations.

Help A Child to Study

Website | TwitterFacebook |

Activity: Help A Child to Study sponsors the higher education of meritorious underprivileged students, supporting them to achieve dreams of a better future. We sponsor all formal courses above 10th, including 11th and 12th, diploma courses, degree courses, B.E., M.B.B.S. and Postgrad. Through education our students are able to escape the cycle of poverty through their own talents.

Details: We are very proud of our students – who are the children of labourers, small scale farmers, weavers and other families with low incomes. These students have enormous potential to succeed and only need financial support to do so. We are thrilled that today some of our graduates are placed with large companies such as Mahindra Tech, L&T, and TATA Consultancy Services.

Support: Education, higher education, sponsorship of students.

Note: We are looking for financial donations to support the higher education of our students, most of whom live in rural areas of Maharashtra and Karnataka.


This post is a part of BlogAdda’s Bloggers Social Responsibility (BSR) initiative. I am exercising my BSR. You can too by spreading the news of these NGO’s and Support. Its the least you can do if not donate money.

11 ways to Get out and Stay out of Debt

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

In spite of steady, regular income there are so many individuals who live paycheque to paycheque, carry their credit card outstanding, and fail to save anything for retirement. If you are one of them, now is the right time to take action to come out of debt and stay out of debt. It is not only possible; it is unbelievably achievable.

1. List down all your debts

You need to take stock of all your loans. It could be credit card due, personal loan, car loan, housing loan, education loan, loan from FD, loan from insurance policies, loan from your employer, hand loan and so on. For each and every loan you need to note down how much you owe, the present interest rate, EMI, Number of months to be paid.

2. Negotiate for lower interest rates

If you could negotiate the interest rate and bring it down then you can come out of debt faster. Most of the credit card companies come forward for negotiation if you really show interest in repaying. They need not run after you to collect the debt. It will reduce their expenses. So they will be happy to negotiate. Balance transfer offers from credit cards are also a way to reduce your interest rate.

3. Refinancing and consolidation

Replacing a loan with another is known as Refinancing. By doing a refinance it should reduce your interest rate and it should bring down the time you are in debt. But most often people go for refinance that provide them lower EMI but increasing the time they stay in debt.

4. Categorize your debt

Housing loan can increase your net worth over a period of time. Housing loan gives you tax benefit also. For a business man car loan provides some tax benefit. Based on these factors a debt needs to be categorized. This will help us in comparing different loans.

5. Prioritize your debts

After sorting out various loans, now we can comfortably prioritize the loans. Obviously this will be based on the interest rates and tax benefits. At times paying off a small loan first can give you a lot of motivation to get out of debt.

6. Creating and Executing a Debt payoff plan

You need to create a debt pay off plan with different scenarios. So that you can find out how some more savings or a different repayment order will help you to get out of debt faster. When creating a plan, you need to choose one which is comfortable to your attitude. Otherwise, you may not execute it properly.

7. Refrain yourselves from applying for fresh loans

You need to make a vow that you will not be adding any fresh loans, till you come out of all your debts completely. Think for a moment, how you will feel when you become debt free. This will give you a lot of positive energy to come out and stay out of debt.

8. Postpone buying major assets

Buying a property or any other assets need to be postponed till you get out of debt. With your new ownership comes the new, probably large and unpredictable expense. This can make you deviate from your debt pay off plans and at times the consequences could be uncontrollable.

9. You stop using your credit card

There are two groups. One group of people uses the credit cards responsibly. That is they will repay the credit card dues in full when they receive the bill. The other group will pay the minimum amount due and carry forward the balance amount due. If you belong to the second group, you need to stop using credit cards temporarily. Take out and keep your credit cards in the locker. Once your financial situation and buying habits improve, then you can start using your credit cards again.

10. Change your spending habits.

Being in debt obviously means that you have been living beyond your means. The solution is very simple. Spend less than you earn and you will get out of debt soon. You need to change your spending habits. Then only this simple solution will be achievable. If you buy things you don’t need, you’ll soon sell things you need. Don’t save what is left after spending; spend what is left after saving.

11. Involve all your family members

You need to inform all your family members and dependents about your debt status. Then you will be able to take decisions with much more clarity. Moreover, if your family members know about your debt, they will also change their spending habits and support you in getting out of debt faster.

Consider the postage stamp: Its usefulness consists in the ability to stick to one thing till it gets there. Similarly, you need to stick to your debt pay off plan till you get out of it.

Inquisitive Interviews : Sowmya Suryanarayanan – Research Analyst

After a bit of a break, for this feature Inquisitive Interviews is back. This week we feature one of the most interesting professions yet, Research Analyst, specially someone that will have a bearing on the outcome of the bilateral ties of two countries. Someone in fact that can help definitely make a change. A research analyst would quite literally do the ground work and research and come up with relevant policies that help in the formation of a new agreement in between 2 countries.

Inquisitive Interviews, the feature was born out of the requests by some of the students who read this blog, requesting information regarding careers. And with a view to help them make a better choice, I have started to feature various careers from different people, starting with people I know and hoping to slowly reach many different people. The Inquisitive Interviews feature would not only help the students reading the interview but also the interviewees providing them with some Online PR of sorts, the benefits of which I mentioned in another post earlier.

[Q] Tell us something about yourself- where you live, work, your interests…?

I work with a policy think tank called Strategic Foresight Group, which is based in Mumbai, India.  I write in-depth research reports on various development-related issues in South Asian countries, more specifically on Bangladesh and India.

Interests include reading, trekking, exploring new places and watching cricket.

[Q] What is your average day like at work?

My average day at work consists of reading opinion pieces and news reports on Bangladesh and India. Monitoring and analyzing emerging trends in both the countries. There are no daily deadlines to meet but there are project specific deadlines.

[Q] Is this job what you had pictured to be? If yes, then how long did you take to get here?

Yes, most definitely.

After I completed my Masters, it took me three years of whining, two odd jobs and a dear friend’s nudge to get here.

[Q] What’s the most interesting part of your job? Do you get bored at your workplace?

The most interesting part of my job is to study how similar issues affect poor people across South Asia and to identify different approaches to study a specific problem.

Hmmm..actually, I don’t get bored at my work place. I enjoy doing my job. And I work with a dynamic team and there is constant interaction and discussion taking place.

[Q] What’s the most challenging part of your job?

Not to have bias while analyzing issues.

[Q] Do you report to someone? How much of an impact the person you report to has on your job?

Yes, I do report to the Executive Director of my organization. Her opinion has a direct bearing on my work.

[Q] Do you use skills that you learnt in school /college? Did you take up any specific training or courses?

I have a background in Economics, and that has definitely helped in doing my job better. No, I did not take up any specific courses. I developed my analytical skills on the job.

[Q] Would you advice younger people to join in your industry? As in what you think are the limitations / drawbacks on the industry ?

At the entry level, the salary could be low, especially in India. So you must pursue it only if you are interested in research. And it is a long term commitment.

[Q] What advice would you give to someone trying to get into the industry?

Keep yourself updated with current events. Read editorial and analytical pieces in newspapers to start with. Develop a basic writing skill. A social science degree will definitely increase your prospects of getting a job in the industry. But it is not a must.

[Q] Any online resources you recommend for people taking up this profession?

In terms of ‘job search’, you can check out http://www.devnetjobs.org/

There is no specific online material that you can read to get a job in this sector. However, there are various journal articles available online. You can read them based on your area of interest.

You can get in touch with Sowmya through :

Facebook: facebook.com/sowmya.suryanarayanan

Thank you Soumya for an interesting Interview. I need to note that Sowmya has been really busy with work, and I am thankful that she could really help out with some time of her’s. Thanks again Sowmya.

Be Inquisitive.

10 Things To Do Before You Retire

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in. If you want to write for us please send an email to me [at ] melvinpereira.com or get in touch with us at the contact page.

Don’t put off today what you can’t afford to do tomorrow. In spite of the world wide pension crisis and a growing acceptance that we must plan and save for our retirement, the harsh reality is we are actually not saving enough. Research reports reveal that only 15% of the individuals are saving sufficiently for their retired life. Here are a few tips on things to do before you retire so that your retired life is more comfortable and enjoyable.

Get Rid of All Your Debts

If you are taking a housing loan, personal loan, car loan or any other loan make sure that you will be repaying them on or before your retirement. You need to choose the term of the loan in accordance with your retirement age. You can enjoy your retired life when you have 100% financial freedom, not when you have to repay your loans.

Protect Your Emergency fund

Emergency expenses can happen any time. But the possibility goes up during the old age. So we need to enhance the emergency reserve year on year based on the inflation and change in your expense levels. Emergency fund will give you a sense of security and also you need not touch your other investments during emergency where you need to pay pre-closure penalty. Also don’t forget to refill the emergency fund once you met an expense out of emergency fund.

Establish a Retirement Budget

You need to visualize your retired life well in advance and need to create a budget for your retirement. That is you will not be going to office. So the expenses on transport and clothes may come down. Also you will have more time to spend. You may need to spend more on leisure travel and health care.

 

Examine Your Cash Flow

Take a close look at your cash inflow as well as outflow. Is there going to be any income after retirement? Like rent, royalty…. Would there be any unwanted outflow during retired life? Like paying life insurance, or SIP. At times during your beginning of the career , you could have taken a policy where you need to pay premium up to the age of 60. But now you may plan to retire at 55 itself. So you need to realign your existing policy and other investments in sync with your retirement age.

 

Grow Your Retirement Corpus

Find out how much corpus you need to have when you retire so that you will be having complete financial freedom. A professional financial planner will of great assistance to you in this regard.

 

Develop a withdrawal strategy

How are you planning to withdraw your cash outflow during retirement from the retirement corpus? Monthly, quarterly, half yearly or annually? Through Sytematic Withdrawal plan in mutual funds or by way of dividend or interest. All these will have a great impact on the corpus you need to accumulate. So you need to decide in advance.

 

Minimize taxes

Your retirement corpus and retirement income need to be tax efficient. You need to pay taxes as and when the fixed deposits matures irrespective of that you withdraw interest or reinvest under a cumulative option. But you need to pay interest only when you withdraw from the mutual funds. Careful selection of investment vehicle can reduce your tax during the retired life.

 

Get Sufficient Mediclaim coverage

The moment you retire, your employer will stop covering you under the group mediclaim. So you need to plan for your individual medical cover well in advance. At old age the medical expenses are inevitable. If you have not planned it properly the all your retirement plan will become a mess.

Consider Inflation adjusted annuities

The monthly income you need when you retire is not going to be the same even after 5 years of your retirement. Inflation will increase your retirement expenses year after year. So year after year your retirement income needs to go up.

Oversee estate planning

How your fixed assets and financial assets need to be distributed to your legal heirs? Create a WILL. You can avoid creating relationship problems to your next generation because of your left out wealth.

Inquisitive Interviews : Priya Sethumadhavan – Physiotherapist (Freelance)

To all the folks following Inquisitive Interviews, apologies for the missed post last week. I just got back from my vacation and had a tough time getting the post additionally I have not really been scouting for new interviews. Anyway this week I present somewhat of an interesting profile of Priya, a good friend again but someone who is working as a freelance physiotherapist. Interested to learn more ? Read on.

Inquisitive Interviews, the feature was born out of the requests by some of the students who read this blog, requesting information regarding careers. And with a view to help them make a better choice, I have started to feature various careers from different people, starting with people I know and hoping to slowly reach many different people. The Inquisitive Interviews feature would not only help the students reading the interview but also the interviewees providing them with some Online PR of sorts, the benefits of which I mentioned in another post earlier.

[ Q ] Tell us something about yourself ?

Hi I’m Priya,Indian in every aspect but born and brought in Dubai, I love yapping so thank you Melvin to giving me the opportunity to yap on his blog:) I hope through this interview i would be able to give a clear insight to what physiotherapy is all about.

[ Q ] What do you Do for a living and Where ?

I’m a Physiotherapist, freelancing handling children with special needs.

[ Q ] Is your job what you expected it to be ?

I was a person who always wanted to do everything in a different way.Having taken science in 11th and 12th, I had people branding me as the next doctor and engineer or even dentist, but i wanted to do something different.While I was studying my grandma had a hip fracture and my home town being a small one she had to travel 80 kms to the closest city to get her treatment done, but she would never miss it cause the relief she felt was very nice,so that inspired me why not study physiotherapy and then be of use to people, cause pain is to be gotten rid of and not sustained.Finished college and like all fresh graduates expecting a job to be on a platter,but soon realized your either not qualified enough to get into big hospitals and the rules in this part of the world is very strict when it comes to the medical field.A couple months of frustration down the line I got an opportunity to work for special needs school, I was heart-broken when i got through the interview,coz it definitely wasnt my field of choice. Initially I dint enjoy it, but then my attachment with special needs kids grew and I learnt to appreciate so many trivial things in life thanks to all these kids that today I would proudly say im doing my dream job

[ Q ] Is your salary what you expected it to be ?

I doubt if there would be anyone who would be completely satisfied with their salary and not seek for more :) When I worked in the special needs center the salary was literally peanuts,but ever since I have started freelancing I think I make enough to suffice my needs for daily living.

[ Q ] What is your average day like ?

my average day starts with worshipping God followed by my stomach, then the start of my sessions.The schedules of my sessions are subject to change since I deal with kids.I usually drive about 200 kms in a day going from one point to the other,but since the destination is what I look forward to the drive is enjoyable and the day ends with an awesome time with my friends either having chai or playing badminton!

[ Q ] What’s the most interesting part of your job ?

My kiddies, its amazing to hear their talks its amazing the see how a teeny weeny progress in them gives immense joy to the parents and sense of achievement to oneself. my job teaches me to find joy in the silliest of things and feel blessed everyday.

[ Q ] What’s the most challenging part of your job ?

Handling the emotions, of the parents, the kids i see and myself when u get stuck with the progress and then don’t know what you should be doing next.Emotions need not be the sentimental stuff,even sometimes you need to control your anger when your handling paranoid parents.

[ Q ] What’s the part of the job that you don’t like ?

When the kids take a break from therapy, it could be due to illness, school exams,functions, a break of just 1 weeke is more than enough for them to regress back, so then it irritates.

[ Q ] Do you get bored at your workplace at all ?

NEVER, I have lots of workplaces:) i go to the child’s house and offer therapy in the home surroundings, so in a day i kind of visit 5-6 houses :)

[ Q ] Do you report to someone ? How much of an impact the person you report to has on your job ?

I report to the kids I treat, they are my boss. They have a huge impact on the job, coz if they decide not to cooperate there is nothing much I can do.

[ Q ] Do you use all the skills that you learnt in school / college ? or where did you pick up the skills ?

Physiotherapy treatments for children with special needs evolves everyday. We need to be as creative as possible to achieve our targets.

[ Q ] What’s your Alumni ? Where have you studied ?

Schooling                     : Grammar school Dubai, Our Own English high School,Dubai

Pre University               : Our own English high School,Dubai

Bachelor’s Degree        : Laxmi Memorial College of Physiotherapy,Mangalore

 

[ Q ] Would you advice younger people to join in your industry ?

definitely, you may or may not make much money, but you definitely will feel nice about yourself when you turn out to be a vital part of society.

[ Q ] What advice would you give to someone trying to get into the industry ?

Work hard, have a lot of patience, nothing is easy in this world. But your hard work and sincerity will definitely pay off and the satisfaction achieved is here to stay!

[ Q ] Anything else you want to tell the readers ?

Enjoy life, always take up a career only what you enjoy doing not what you have been forced upon! Once in your lifetime spend a day with a special needs and feel how blessed you are!

[ Q ] Any online resources you recommend for people taking up this profession ?

http://www.nhs.uk/Conditions/Physiotherapy/Pages/Introduction.aspx

http://www.physioguru.com/

You can get in touch with Priya at the link below :

On Facebook : Priya Sethumadhavan

I would like to thank Priya for some very good advice and some interesting insight into being a freelance Physiotherapist. For the time being this is Priya and Me signing off, and as always Be Inquisitive.

Guest Post – Fear and Greed

An experienced long-term investor once told me that when he looked at his face after a share market fall he found despair and fear, while the same face showed enthusiasm and happiness with a share market appreciation. This made him realize that greed and fear were the 2 magnetic forces that caused confusion in investment goals. A balanced and objective approach would help him achieve his long-term financial goals.

Hindrances to positive and objective approach to investment decisions:

My close look at investment behaviour has made me realize that fear and greed is not separate but complimentary emotions in an investor. Greed is merely a mental state born out of fear, with investors feeling the fear to lose money and then being unable to meet their family financial obligations. In addition, social pressures to earn in line with close relatives and friends and provide for benefits like higher education in a prestigious college, a grand marriage for children and a house with all modern amenities and furnishings leads to greed.

It is interesting to observe our brains dwell in the middle of negative emotions like fear, disappointment and greed, and these emotions influence our investment decisions, creating confusion in investment decisions. So we as investors start looking for security and confidence in our investments.

This makes me highlight 2 powerful influences on investor behaviour namely

  1. An investment portfolio based on ones personality
  2. The follow the flock policy

Basing investment portfolios on ones personal likes and dislikes are the first of the powerful influences, it is like investing in cars and fancy gadgets just because you love them. Investing on shares just because you think they are smart or flashy is ambiguous, for they could sink in the long run. It is better instead to invest in profitable ventures that pay in the long run. It is true; our investment fancies make us pay a heavy price.

The follow the flock for fear of being the black sheep policy makes you as an investor to believe in following others in the share markets. You would then be playing a vital role when the going is good and exiting never to return when the share market goes down. The pitfalls of group behaviour lead us to buying high and selling less.

It is also true that follow the flock behaviour leads to unbalanced investment emotions of black or white (wrong or right) with no shades of objectivity and rationality. In addition, group behavior leads to extreme situations of profit or loss and price swings in the share market that is highly undesirable. Buying high and selling low has made many investors suffer heavy losses in the long run.

A look at positive investment behaviour:

Aim at lower returns for market forces play a very vital role in deciding the price. It is good to be investment smart with humility and lower aspirations that makes achievement of financial goals a reality. I have never known of any high return investments that did not have high risks.

Patience over a lifetime and being able to assume stress helps in aiming for long term positive returns and contributes to assuming less financial stress after retirement.

Positive investment behaviour requires balanced moods, one of neither elation nor panic. Neither selling in a panic due to share market positions or adverse world or country conditions is advisable, nor is a reaction of extreme financial prosperity, both can destroy a lifetime of healthy investment. A long-term investor needs to realize that neither despairing nor elation of situations in civilization proves worthy for long term financial portfolios.

Let’s just sum up:

I am sure you would be congratulating yourself with all the knowledge gained and would neither allow emotions, group behaviour nor your personal likes and dislikes to influence your long term financial goals. It is true you would have also realized that patience, humility and appetite for stress could contribute to long-term achievement of your financial goals.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

 

Wordless Thursday – Small things, Large Impact

Back again this week with Wordless Thursday, the feature that posts interesting infographics, which you guys love so much. Introducing this week’s Infographic is a pleasure to me, this is because I know and believe that these small things do really cause a large environmental impact. And with the environmental impact being positive we can hopefully offset some of the harming activities that we all so normally ignore. Like they say every watt saved, is a watt generated. Add to it the financial impact.

Inquisitive Interviews : Adithya Suvarna – Advertising

Inquisitive Interviews, the feature was born out of the requests by some of the students who read this blog, requesting information regarding careers. And with a view to help them make a better choice, I have started to feature various careers from different people, starting with people I know and hoping to slowly reach many different people. The Inquisitive Interviews feature would not only help the students reading the interview but also the interviewee providing them with some Online PR of sorts, the benefits of which I mentioned in another post earlier.

[ Q ] Tell us something about yourself ?

My name is Adhitya Suvarna.  I have been working for over 10 years in the mass communications field, namely TV, Online News, Corporate Documentary Film making and Advertising.

[ Q ] What do you Do for a living and Where ?

I live in Dubai and work in a mid-level advertising agency.

[ Q ] Is your job what you expected it to be ?

Yes and no. Yes in terms of the industry I wanted to be in (media) and no in terms of seniority and responsibility that I currently have. Yes in terms of a wonderful office environment with lots of freedom and comfortable working relationships built over the last 5 years. No in terms of almost reaching a point of stagnation and the dreaded blank wall.

[ Q ] Is your salary what you expected it to be ?

The honest answer is no. But that would be a blinkered vision. I did not get a good start in terms of salary since passing out of my masters programme. I never fought for ensuring i get paid for what I am worth. Now, I earn a decent income but it could have been really comfortable if in the initial years of my career, I had stood my ground and been a little more informed.

[ Q ] What is your average day like ?

Office begins with checking emails that my client would have sent the previous evening as I leave office earlier than they do. Then briefing the creative department for new jobs or designs that the client wanted. I also follow up with artworkers in the studio for jobs undergoing minor revisions and sending the same to the client.  Meanwhile, client’s call up to check on jobs status, discuss new jobs or request media plans or rates and other sundry items. I also sit with my junior to discuss jobs that I have handed over to him to do.

[ Q ] What’s the most interesting part of your job ?

Thinking of new and innovative ways to communicate the same message in a new way to the audience. Also, no day is the same as the other as the adverts, the communications differ each day.

[ Q ] What’s the most challenging part of your job ?

Trying to understand what the client  actually means in their vague emails or telephone conversations. Also to try and coordinate with suppliers to meet with the really tough deadlines for delivery of jobs for the clients.

[ Q ] What’s the part of the job that you don’t like ?

When after days and months of us doing a lot of work to create something, it is dismissed in one email by the client as not required.

[ Q ] Do you get bored at your workplace at all ?

Yes and it is normal for when you are bored, the really rush days look very interesting and exiting.

[ Q ] Do you report to someone ? How much of an impact the person you report to has on your job ?

I report to my Senior Account Director and the Managing Director. Both have direct and tremendous impact on my job since the amount of freedom and trust they place on me helps me do my job better and more professionally.

[ Q ] Do you use all the skills that you learnt in school / college ? or where did you pick up the skills ?

I use some of the skills I picked up in my masters programme. The rest of the skills have been on the job. I did not pick up anything in my college or school that is has helped or is helping in my career in any point of time.

[ Q ] What’s your Alumni ? Where have you studied ?

Schooling                     : Bangalore, Panjim, Cuttack, Patna and Kolkatta

Pre University               : R S Krishnan, Trichy

Bachelor’s Degree        : Canara College

Master’s Degree           :  Manipal Institute of Communication

[ Q ] Would you advice younger people to join in your industry ?

Absolutely. There is no better reward than promoting a brand and making sure people know about it and in the right way. It is also a great field for learning a lot about every other industry without actually having to be in that field.

[ Q ] What advice would you give to someone trying to get into the industry ?

My advice to the young crowd is to join when you are young and not wait for a masters degree. Get the hang of the advertising world and after a couple of years, you will be ready to know whether you want to stick around or continue and if the latter, then you will also know exactly which masters programme to do. This industry requires a lot of passion for what you do, whether creative or servicing clients. The rewards come only after a couple of years, so don’t expect to be greatly rewarded on joining. Also, when joining an ad world, try and join a very reputed one, preferably the top 20 agencies that have tied up in your home country. Make sure when you join, you are working for a known brand. That helps lay the foundation, so even after a few years you get an unknown brand, you will be in a position to take charge and give the best to make that brand know.

[ Q ] Anything else you want to tell the readers ?

Always remember to try and chart where you want to be in 10 years time. It is difficult, but a vague idea really helps. In the first few years of your career, don’t stick to a job that does not make you happy doing it or if it is underpaying you. Once you have a few years as a work experience, then try and stick on in jobs for at least a couple of years before leaving as the older you get the more stable your CV should look. Employers won;t look at CV’s that look like you have been hopping more than a rabbit.

[ Q ] Any online resources you recommend for people taking up this profession ?

www.adsoftheworld.com

www.ihaveanidea.org

www.adage.com

You can get in touch with Adithya at the link below :

On LinkedIn    : http://ae.linkedin.com/pub/adhitya-suvarna/7/87/9a4

On Twitter        : www.twitter.com/adkutz

As always I would like to thank Adithya for some very good advice and some interesting insight into the career of Advertising. So next time you have an innovative idea to implement you might want to run it through someone like Adithya just to make sure its not been over used. For the time being this is Adithya and Me signing off, and as always Be Inquisitive.