How To Use An iPhone 4s Application To Manage Your Finances

The new iPhone 4S, amazing, capable of more than anything before it, and its able to help you manage your finances as well?  I thought coming up with Siri was a major accomplishment, and now Siri can help you manage your finances. Let’s take a look Siri and what it offers in the way of financial management:

Siri is an Intelligent Assistant that just debuted in the newest Apple iPhone, the 4s.  It allows you to give voice commands and receive the information your looking for such as a local restaurant, text, phone call, weather forecast, and so much more.

Pay bills on time:

You can ask Siri to remind you of upcoming payments, including amount and due date.  You can even set an alarm so that you can’t forget a payment is due, and sync her with the newest application RememberTheMilk so you can organize your financial obligations as well as important dates.

Keep track of stock rates:

Even though Siri cannot give you ‘insider’ information, it can certainly let you know what your stock is doing, by answering a simple question, such as ‘How are Coca Cola’ stocks doing?  You can get the latest stock updates on any stock that you choose.

Find closest ATM or Bank:

This is what Siri is best at – finding locations and giving you options.  But if you ask for a specific bank, you can get that address and location as well.

Personal finances:

When you’re out shopping, having lunch or just out spending money, Siri can tell you whether you’re close to your spending limit in your bank account, or if you’re over your budget.  Installing a third party sync to Siri of your bank account through a site such as Mint.com, can help you from overspending.

Moneystrands:

This is an amazing iPhone app that can give you all of your bank and credit card balances, all in one place.  And, offers a pretty up to date budget tool.  I can’t tell you how convenient this is, when we’re used to having to call the credit card companies to get balances before we charge.

This is a free app and can be found at moneystrands.

Pageonce Personal Assistant:

This allows financial monitoring from your iPhone, with access to bank, credit card and brokerage accounts from your phone.  It allows you to access all of your bills, in one simple app, and you can pay them from Pageonce as well.

One of the greatest features of this app is that it is secure, with top security measures taken, you can do your banking, financial monitoring, and bill paying all in the safety of your phone.

Best of all – it’s FREE!  

Pocket Money:

This isn’t a free app, however, its not expensive.  Last check it was $1.99 and will probably go down from there.

This little app does so much, such as tracking accounts, budgeting, keeping track of spending and it actually backs up and exports financial data.  It can handle split transactions and exports data to programs such as Quicken.

Bloomberg:

If you’re an investor, this is the app for you!  The Bloomberg iPhone app offers investment tools and real-time portfolio tracking, all for free.

You can also receive news, according to date and time, and it is available in 12 different languages.

And… it is free here!

PayPal:

You can send money from your iPhone through your account on PayPal.  If that person is on your contact list in your phone, you can send them cash.  And, there are over 190 currencies available, and in 16 different languages.

This is also a free application – PayPal

Shopping Budgeter:

This little app, Gift List Budget Shopper, can actually help you save money by budgeting for gift giving, finding the cheapest price for the product you’re looking for as well as locate it for you, and conduct product searches online.

It integrates with your address book and maps, creates lists that can be exported to the spreadsheet of your choice, and can be backed up.

Gift List Budget Shopper isn’t free, last check, $3.99 and reviews state it is worth every penny!

Currency Converter:

This handy app will help you know exactly what you’re being charged in that bistro in France, or in nearly 200 other countries.

You can convert currency rates in seconds on this ACTCurrency iPhone Currency Converter, and never wonder whether you over paid again.

And, as a bonus, since the rates change regularly, you can get updated exchange rates via wi-fi while you’re travelling.

And, the cost –  .99 cents.

This is yet another Guest Post from one of the readers. Ally is part of the team that manages personal finance guides in Sydney, Australia, which provide tips about Budgeting Planner and Way tso Save Money. Before joining BS & HSTM, she was a Media Planner in McCann Worldgroup Philippines, Inc., with award-winning executions, including the Levi’s 501 “Live Unbuttoned” global campaign. Please get in touch with me using the contact page, if you want to contribute to the blog. 

Are you eligible for debt consolidation with bad credit?

Are you struggling to manage your multiple credit card debts? Maintaining multiple cards all with different fees and varying interest rates can be difficult to manage. You might default on your payment and incur insurmountable amount of debt. Therefore, in this situation debt consolidation can help you consolidate your multiple credit card debts with a single affordable monthly payment. You can consolidate your high interest credit card debts in to a low interest single monthly payment. But if you have poor credit then your consolidation loan application might get disapproved. So here are a few points that will help you get consolidation loan despite your poor credit:

1. Prepare a stringent budget plan so that you can overcome your catastrophic financial situation. You need to accept the fact that will not be easily to come out of debt. Therefore, following a monthly budget can help you pay off the debt in an organized way. Make sure that you keep track of your expenses so that your expenses do not exceed your income.

2. Review your financial situation and decide whether you need help of a credit counseling agency or professional debt arbitrator to manage your current financial situation. Make sure you find a reliable debt relief agency with a Better Business Bureau accreditation to manage your financial owes.

3. You can approach your bank or credit union to apply for new loan to consolidate your debts. If you have an account with the bank then you can apply for a personal or signature loan to consolidate multiple payments. But you might not be able to get a loan if your credit score is low. Traditional lenders and banks will check your credit report before approving your loan application. If you have poor credit score then you can apply for secured consolidation loan. You are required to keep security against the loan amount.

4. If you attend college then you can be eligible for financial aid that can be used for paying off your tuition fees, hostel expenses etc. This grant money can be used for paying off your student loan debt as well as other debts. If you want to acquire more information then you need to contact the school’s Financial Aid Office.

Therefore, if you follow these four points then you can get a consolidation loan despite your poor credit. Once you pay off the debts then you can work on repairing your credit report.

Wordless Thursday – What is a stock ?

The stock market has been on the spot light for the past few years. People who have not been into stocks are also interestingly looking into the stock market and how they can either make  money or just to know how their companies are holding up. But a lot of people don’t understand stocks or even have an idea about stocks. So here is this week’s info graphic attempting to help you learn and know about stocks. The absolute basic of what is a stock is here.

Wordless thursday is this blogs attempt at highlighting and bringing forth new and interesting infographics to light. Enjoy this week’s infographic.

Inquisitive Interviews : Simmy Mathew – Auditor

Hi all we are back this week again with Inquisitive Interviews, yes it’s not been on for a couple of weeks, and I am to blame completely. However, this week we are back with something inquisitive for you guys to look at. The profile that we will cover today is that of an Auditor. Yes Auditors, the very same people that can give a shiver to many. If at all you wondered what they do and why people seem to be scared of them, well here are probably some answers.

For the uninitiated, 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 (Things like Name, how many years you have been working and anything else you would like to add.)

 I am known as ‘Simmy Mathew’.

Lived in Dubai for the last 14 years and counting….

Work has been part of my life since the last 7 years.

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

I work as an auditor for Ernst and Young, Dubai

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

Yes, and maybe a little more…I always wanted to be an auditor and I still remember when I was 16, telling my aunt that I wanted to be an auditor and work in the Big4.So, yes! I am living my dream! 😀

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

Yes, I started off at the junior level and it was what I expected.

[Q] What is your average day like?

Well, being an auditor means you are never in office but at the clients – auditing their books.  So an average day is working in a team and trying to achieve deadlines. It varies – depending on the industry you are working in, the size of the entity you are auditing…They are times that I am at a client for months and they are times I am at the client for one-two weeks…. and no two days are the same.

 I work with different sets of people , which is a challenge in itself .

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

The exposure that I get is high and the learning curve is great. ..But I think the most interesting part of the job is multitasking – applying what you learned in different types of industry and getting your work done, supervising your junior staff work, being proactive and planning ahead.

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

People ….i guess in a country like UAE – you meet different types of people  – different upbringing, different cultures, different nationalities….so working with them…can be a challenge but I love challenges and embrace  them with open arms.

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

Actually nothing……Sometimes it can get monotonous hence maintaining a right mix of work is important.

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

I have to say I don’t have time to get bored……so the answer to that would be no!

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

Yes, I do but that varies…it could be a senior/asst manager/ manager.  Basically they are there to review your work and sort out any issues you have while auditing .

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

well, I have to say what I studied in college as my degree was a bachelors in accounting and Finance definitely helped….Also. ACCA had been an added plus point on the growth path.

 Also, at Ernst & young, if you join as a graduate – they have the graduate development program which ensures you are up-to-date with the Ernst & Young methodology and the latest developments in the accounting world. So there are enough training to develop your career at Ernst & Young.

[Q] What are your Alumni? Where did you study?

School              : Our Own English High School, Dubai

University         : Middlesex University, Dubai campus

Currently pursuing my ACCA

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

Yes, I would. But it requires a little effort and being able to manage a lot of work in time pressure situations.

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

Plan ahead. I f you are an university student and want to try a career, decide where you want to get in and plan how you are going to go about it. Have a roadmap to where  you want to go …and that will help you plan your direction.

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

Love what you do…no matter what industry you are …then work is all fun…otherwise all work and no play will definitely make Jack a dull boy! 😀

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

ACCA website : http://www.accaglobal.com/ 

IAS plus : http://www.iasplus.com/

You can get in touch with Simmy on Facebook at here profile here: http://www.facebook.com/simmy.mathew

If at all you wondered what Auditors do, I hope this would have given you a better idea. Thank you Simmy for an insight into the world of the Auditors, hope you guys the readers are more aware of the work of Auditors. Until next time, Be Inquisitive.

Wordless Thursday – Crafting the perfect Resume

Resume writing is critical throughout your professional life. Resumes open the door to an education, a job, and a lifestyle. While in the past a simple paper resume did the trick, with the messy job market and fast growing technological resources resumes definitely need a sprucing. The slow growth of the job market and the large numbers of graduates makes for a very sticky situation. Of the hundreds of applications, how does an employer choose just one? If your resume doesn’t sparkle, you may just get left in the dust.

Wordless Thursday is this blog’s attempt at bringing interesting infographic to all of you. Hope you have likes them, and like always be Inquisitive.

What is Bit coin and why you should bother ? – an Inquisitive Guide

Unlike most people, I had not really heard about the Bitcoin used at large. However, now that I think about it, I think I might have come across the BITCOIN phrase in passing when looking through the internet for some cracks, yes I did search and no I did not find what I was looking for. Getting back to the whole topic of Bitcoins. A couple of weeks back a friend Megha, posted the information about the BitCoins on facebook, and I have been reading about it from then, to get a good idea about BitCoins. Here is what I have found out, simplified for all.

Like everything on the internet, from the internet itself, this is revolutionary. It is a new form of currency, completely online and something that all of us can use. This post is an indepth guide to the Bit Coin and what you can and cannot do with it. Like everything on the internet, there is a major real difficulty among all people to accept it, there are discussions on the god and the bad of the BitCoin all over the internet at this time. So I will not divulge into that for now.

What is BitCoin ?

BitCoin is a new currency – it wants to shake the entire global economy. And some people think it might! It’s online money—an alternative to dollars and euros. Well what’s that mean? It’s complicated, but I will break it down over the next few posts. Yes, there are some simple infographics that help in making it easier to understand, I will add them here below. I will however tell you there is one part which is not so clear and that is how the coins are generated.

Bitcoin is underwritten not by a government, but by a clever cryptographic scheme. For now, little can be bought with bitcoins, and the new currency is still a long way from competing with the dollar.

Again, BitCoin is Digital ..

BitCoin is not real money. It’s an online “currency”—virtual tokens that can be exchanged for goods and services at places that accept it. The list of which is fast growing.

In 2008, a programmer known as Satoshi Nakamoto posted a paper outlining Bitcoin’s design to a cryptography e-mail list. Then, in early 2009, he (or she) released software that can be used to exchange bitcoins using the scheme. That software is now maintained by a volunteer open-source community coordinated by four core developers. Like real money, It does have a market where its value against some real world currencies are mapped against, check it out here http://www.bitcoinwatch.com/, while writing this post the value of a BitCoin was nearly $14.

The programmer Satoshi wanted people to be able to exchange money electronically securely without the need for a third party, such as a bank or a company like PayPal. He based Bitcoin on cryptographic techniques that allow you to be sure the money you receive is genuine, even if you don’t trust the sender.

If you look at the first video above, its from the four core developers and they are thinking big, they are looking at BirCoin as a way to revolutionalize finance, just as how the internet revolutionized publishing.

How do I start. I.e the Basics

Once you download and run the Bitcoin client software, it connects over the Internet to the decentralized network of all Bitcoin users and also generates a pair of unique, mathematically linked keys, which you’ll need to exchange bitcoins with any other client. One key is private and kept hidden on your computer. The other is public and a version of it dubbed a Bitcoin address is given to other people so they can send you bitcoins.

Crucially, it is practically impossible—even with the most powerful supercomputer—to work out someone’s private key from their public key. This prevents anyone from impersonating you. Your public and private keys are stored in a file that can be transferred to another computer, for example if you upgrade.

A Bitcoin address looks something like this: 1H4NSNzoP7eoYnL69HCvehVTZBPJoyMzK9. You can transfer a donation to me on the attached BitCoin Address. YOu can also go to some online stores where you can use these BitCoins to buy real world goods.

Transactions with BitCoins and how they occur

When you perform a transaction, your Bitcoin software performs a mathematical operation to combine the other party’s public key and your own private key with the amount of bitcoins that you want to transfer. The result of that operation is then sent out across the distributed Bitcoin network so the transaction can be verified by Bitcoin software clients not involved in the transfer. [ This is important as this is the step where the internet and BitCoin software clients perform the function of banks where they confirm the person is you, such that your current value of Bit Coins is calculated and the balance given back to you]

Those clients make two checks on a transaction. One uses the public key to confirm that the true owner of the pair sent the money, by exploiting the mathematical relationship between a person’s public and private keys; the second refers to a public transaction log stored on the computer of every Bitcoin user to confirm that the person has the bitcoins to spend.

When a client verifies a transaction, it forwards the details to others in the network to check for themselves. In this way a transaction quickly reaches and is verified by every Bitcoin client that is online. Some of those clients – “miners” – also try to add the new transfer to the public transaction log, by racing to solve a cryptographic puzzle. Once one of them wins the updated log is passed throughout the Bitcoin network. When your software receives the updated log it knows your payment was successful. It takes a bit longer than banks in this step as the cryptographic puzzle that they solve is also part of the BitCoin universe, more on that later.

The nature of the mathematics ensures that it is computationally easy to verify a transaction but practically impossible to generate fake transactions and spend bitcoins you don’t own. The existence of a public log of all transactions also provides a deterrent to money laundering. The global public transaction register is a register that keeps track of the history of every single Bitcoin through that log, from its creation through every transaction. Yes there is a bit of a problem here.

Identity, since every BitCoin is tracked it would be possible to know how much money each person has in the system and who is performing transactions. I dont really think its a problem, In fact its better. Considering whats happening in India these days with corruption and black money, there will be none. Everyone will have as much money as they are worthy of, so this is really a blessing in disguise. However unlike the real world, it might be an issue to some, as very rich people can be targeted for crimes like kidnapping, extorsion etc. But hey, at least we can keep our blood sucking politicians at bay.

How are these coins created and how can you obtain bitcoins? 

Bitcoins are “mined”. When you set your Bitcoin client to a mode that has it compete to update the public log of transactions. All the clients set to this mode race to solve a cryptographic puzzle by completing the next “block” of the shared transaction log. Winning the race to complete the next block wins you a 50-Bitcoin prize. This feature exists as a way to distribute bitcoins in the currency’s early years. Eventually, new coins will not be issued this way; instead, mining will be rewarded with a small fee taken from some of the value of a verified transaction.

Mining is very computationally intensive, to the point that any computer without a powerful graphics card is unlikely to mine any bitcoins in less than a few years.

Other ways of obtaining BitCoins are exchanges like Mt. Gox, which provide a place for people to trade bitcoins for other types of currency. Some enthusiasts have also started doing work, such as designing websites, in exchange for bitcoins. This jobs board advertises contract work paying in bitcoins.

Money is made to spend right ? So, Where can I spend these coins ?

There aren’t a lot of places right now. Some Bitcoin enthusiasts with their own businesses have made it possible to swap bitcoins for teabooks, or Web design (see a comprehensive list here). But no major retailers accept the new currency yet.

My thoughts

The BitCoin is in its infancy, however it has corrected some of the loopholes that current fixed currencies have. However, at the end of the day this is the first of its kind in this space. However, like most software and services on the Internet (which is what I look at it now) it will evolve, and might come up with a new variation of this concept and that will be the one to look out for.

Current world currencies do not have to be threatened by this new currency. As financial masters and grand masters analyze and dissect this form of the currency they will point out some of its flaws and what will come out of it is a clean workable currency format that all of us can eventually use. For the time being it is a nice to know fact that there is an alternate currency that is not government controlled and neither bank influenced. This might just be the spark for the actual online currency to come into being. Lets hope it does.

Some Resources

BitCoin and What is it: http://weusecoins.com
BitCoin home page: http://www.bitcoin.org
Bitcoin Trade: http://www.bitcoin.org/trade
BitCoin Economy Watch: http://www.bitcoinwatch.com
Bitcoin Exchange: https://www.mtgox.com
Bitcoin escrow service: https://clearcoin.appspot.com
Bitcoin e-commerce platform: https://www.mybitcoin.com
Fun with bitcoin http://witcoin.com – the bitcoin q and a .

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.

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.

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.