Credit cards have turned into an integral part of modern living as they facilitating making purchases and paying bills without carrying cash. They make life easy and help maintain a record of our expenses and help us dispute charges for undelivered and defective things. In addition they enable us to earn reward points. However credit cards could make you overspend and get into debt. There are 9 ways that could help you to be credit card smart.

One can be very smart in playing a game only when he knows the rules of the game very well and follows the same diligently. Similarly to be smart with your credit card you need to know the rules of the credit card usage. Let me unbundle the same for you.

9 ways to be credit card smart:


1) Do not have many credit cards:

It is true that credit cards definitely help in emergencies and facilitate payments. But having too many credit cards could tempt us to overspend and get into credit card debt that could be difficult to recover from. In addition it is best to avail of reward points on one credit card, so that you could encash the points more quickly.

2) Cultivate and maintain an emergency fund:

Most of us believe that credit cards can definitely help in medical and unexpected emergencies, but it is unwise to consider it as a general rule. A much better alternative would be regular setting aside money as an emergency fund for such unexpected emergencies. This will prevent getting into credit card debt.

3) Repayment capacity should determine credit card spending:

It is right that using credit cards in place of cash helps. But this applies to purchases that we can afford only and also repay immediately. Spending more than what you can repay is highly undesirable and could get you into credit card debt.

4) Avoid cash advance withdrawals:

It is best to live within your means and avoid making cash advance withdrawals even in emergencies. This is the worst thing you can do with a credit card. Having a smart spending plan will help you in not falling this trap

5) Avoid bank transfers without valid reasons:

Being credit card smart requires avoiding making balance transfers from one credit card to the other. This will avoid payment of balance transfer fees and getting into further credit card debt that could turn vicious. However transfer of bank transfers like taking advantage of lower interest rates could prove fruitful.

6) Make full payments in time:

Being credit card smart requires you arranging for payment within a month or next billing date. Delay in repayment and minimum payment could affect your credit standing and make you also liable to pay high rates of interest that you could not afford. Not carrying any balance forward would relieve you of stress of getting into credit card debt.

7) Understand the credit card agreement fully:

Being credit card smart requires understanding fully the agreement and other terms and conditions for use of the credit card. This includes understanding transaction fees levied, interest rates, and when increased rates for credit would be charged. This would help take precautions to avoid getting into increased debt on credit cards.

8) Recognize the signs of credit card debt:

Many consider a credit card a boon and fail to realize that they are getting into credit card debt. It is best to understand and recognize signs like skipping a credit bill to pay another, avoiding credit card payment statements, and charging more than your repayment capacity by purchasing luxuries. Failing to cultivate and maintain an emergency fund could also be a cause. Once you recognize these signs you can turn credit card smart.

9) Never lend your credit card:

Being credit smart requires not trusting others with your credit card even if they promise to pay back in time. It is unwise because you will be responsible for the debt and charges. It is quite possible that credit card companies did not allot them a credit card because of certain adverse circumstances.

The last word:

I am sure you will agree that credit cards can be a boon only when you are credit card smart.


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

CRITERIA FOR “VALUE INVESTING”

OR

NORMS FOR HUNTING “VALUE” STOCKS & SHARES.

The following points to be bourn in mind while screening the entire gamut of listed Stocks & Shares. These can give superior returns in the fairly long time horizon of 3-5+ years (subject to reassessment, from time to time say, once a year)

{Not necessarily in the order of preference}

Bases on Annual Audited Accounts.

[1] Market cap is less than or equal to two-third of the net Current Assets.

[2] P/E (Price-to-earnings) ratio should be less than 15 and should also lower as compared to the sector average. Further the P/E is below its own past P/E.

[3] Current Ratio should be more than 1.34:1 preferably say1.50:1

[4] Quick Ratio should be more than 1

[5] P/B (Price-to- book) ratio should be less than 1 and should also lower compare to sector average.

[6] The gross Current Assets should be more than the net Current Assets + Long Term Debt.

[7] Consistently high dividend yield during last 5 years.

[8] Low Market – Cap to Sales as compared to peers (Sector average)

[9] PEG less than 1

[10] Debt- to- Equity ratio is less than 1 and in any case less than the sector average.

[11] Sales (net of excise & returns excluding other \ extraordinary income) rising every year – during last 3/5 years.

[12] EPS should have grown by at least 33% + during last 5 years.

[13] RoE (Returns- on- Equity) is more than the Sector average.

[14] Company should be generating sufficiently enough cash.

[15] Always look for ‘Margin of Safety’ hence buy at CMP if it is about two-third of the ‘Intrinsic Value’.

Thanks & Regards!

Prakash P. Joshi.

ppj_2001@yahoo.com

How to become better at managing money? The best way to start is to avoid making costly mistakes that will be pulling you down and taking months or even years to recover. Many financial blunders are easy enough to avoid once you know what to watch out for.

1.Decision Paralysis:

Today there are so many choices, so many financial products and so many offers. It all bundled with financial jargons. It becomes really difficult for one to understand. Also there is plenty of information available on the web, on the media and on the neighbourhood. This makes decision making much more complex. All these things coupled with the fear of making a wrong financial decision lead us to the DECISION PARALYSIS. We don’t take any decision and start postponing it.

2.Ignoring Personal Finance:

Most of us think that we need to work hard to make money and build wealth. I agree that you need to work hard but that is not enough. You work hard for money. How the hard earned money can be left idle? If you could focus on your personal finance, your money will start generating passive income with which you can achieve your financial goals with comparatively less effort.

3.Peer Pressure:

Peer pressure plays a notorious role in taking wrong investment decision. One feels very safe when he takes the decision, which everyone around him/her has taken. But a product suitable for your colleague or your cousin need not be suitable for you.

4.Too early to plan retirement:

You may be saying ‘who me? I am too young to be thinking about retirement”. It is not so! Rethink. You should have started thinking about it yesterday. Because time flies quickly. If you were smart, and planned for retirement when you are young, your retirement years will be really those “Golden years”. If not you need to compromise and you need to work longer and retire later than others.

5.Trying to make quick buck:

Risk-Return Tradeoff Principle is a very basic and profound investment principle. Low level of risk is associated with low potential returns, whereas high level of risk is associated with high potential returns. So as to generate high returns one need to tolerate high risks. If you are comfortable only with low risks, you can expect only low returns.

No one can defy this basic principle. A scheme cannot deliver high returns with low risk. There were no such schemes in the past. There are no such schemes in the present. There will not be such schemes in the future too.

Finance company deposits which assured high interest rates have defaulted. One of the latest examples would be the ponzi scheme by Madoff.

Whenever you hear about such schemes with low risks and high returns, you understand it is an illusion. It is better to ask more questions and get it clarified, instead of making assumptions.

6.Investing in things you don’t understand:

If you are choosing to invest in a scheme which you don’t understand then you will also not understand what type of returns to expect. Do you understand the Highest NAV Guaranteed Schemes? Who gives the guarantee and what is guaranteed? Do you understand Futures and options completely? Ultimately from where does money come if you are profiting and where does the money go if you lose?

7.Investing in what is hot:

If you are investing in what is hot, then you are following the crowd. If you follow the crowd, you will get what others are getting. You will not get anything more. You need to be fearful when others are greedy and you need to be greedy when others are fearful. So don’t go by the market trend or the hot pick of the month. Think like a contrarian and follow value investing.

8.Too many cooks:

If you have different agents or advisors for different investment products (insurance, mutual funds, stocks…….), then none of them will know your complete picture. Their advice will be very limited and biased towards their products only. Too many cooks spoil the soup.

How to fix these financial blunders?


1. Give priority to your personal finance and spend some quality time on that. We all work for money. So we need to efficiently manage our money to secure our future.

2. Set your financial goals like kid’s higher education, buying a home or retirement with more details. Work out a personalised comprehensive financial plan to achieve the goals. Then create an action plan for the year in sync with the comprehensive financial plan. Be committed to your financial plan.

3. Obtain assistance from a professional financial planner who has knowledge and access to all financial products in the market. Ask the right questions and understand the plan and products before proceeding on the same.
These tips will refrain yourself from making those financial blunders and managing your money better.

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

Know about the Best Growing Companies in India

India is a fastest growing economy in the world. And there are several industries situated in India. The following are the best and fastest growing companies of India.

1) Zydus Wellness

2) Technofeb Engineering

3) Hawkins Cookers

4) VST Tillers Tractors

5) TATA Sponge Iron

6) Tanla Solutions Ltd

7) Enzen Global Solutions Private Limited

8) Bliss GVS Pharma

9) Man Infra

10) Latentview Analytics Private Limited

These are just the top 10 fastest growing companies in India. The list is of more than 100 companies. This shows that India is really growing like anything.

And many Indians are now preferring to start their own business rather than doing a 9 to 5 job. The new generation in India is preferring to do their own business rather than working hard for someone else.

This is really inspirational.

Some Facts about Inflation in India

Rising Inflation has been the cause of concern for various emerging economies like India & China & other Asian peers. Sparing no segement of the economy & Indian society, it has badly hit the

· Spending power of Indians

· Investment Scenario in India

· Saving Culture in India

What is Inflation???

In simple words, Inflation is the general rise in the price level of goods & services in the economy. To put it in layman’s language, Inflation reduces the real value of money.

For Example - Ram had a monthly income of Rs 25000 & his monthly expenditure is Rs 15000 & he is use to save & invest Rs 1000o per month out of his monthly salary. Now, when we go into the market & buy food & vegatables for his family. He found the price level of food articles to be more than 10% than the previous year. Now considering no increase in his monthly income salary his monthly Expenditure increases by Rs 1500 i.e Rs 16500 & the left over money of Rs 8500 remains available to him in the form of Investments & savings as against Rs 10000 earlier.

How to measure Inflation

Inflation is normally measured by WPI data taking into consideration a given set of 435 commodities from agriculture to industrial commodities. The another way to measure Inflation is Consumer Price Index (CPI) whih is followed by other developed economies of the world. So when you read 7% Inflation rate in newspaper, it is actually referring to WPI

What Causes Inflation

Some major causes of Inflation are

· Loose Monetary Policy by reducing CRR (Cash Reserve Ratio)

· Increase in Production costs because of high input prices

· Decrease in Exchange Rates

· High prices of crude oil at the International level

How to beat Inflation

· During the times of high inflation rates, the savings returns turn negative as the real value of Rs 100 today would be Rs 70 after 5 to 7 years considering 5-7% inflation rates. So, I would suggest you to invest somewhere may be in balanced funds if you are conservative investor or invest in equity funds if you are a young & aggressive investor

· During the times of high inflation rates like 10-12% during the recession times of 2008, it becomes very important to time the market as the equity market always try to over react to the inflation concerns in any economy that may be developed or developing.

· You may wait for interest rates to go up & lock your investments at high interest rates

This article is written by Mayank Gupta, Founder at Wealth Bazaar Financial Managers http://www.wealthbazaar.in/., a wealth management company. He is MBA (Finance) & can be reached at info@wealthbazaar.in

Would you like to know the financial secret behind moving from where you are and where you want to be? Try to answer this question. “Where will you be financially five years from now? 10 years from now…? 20 years from now…?”

You may get answers like “I will be financially stronger”, “I want to be financially better”. Are these answers specific? If you don’t know where you want to go exactly, there is no focus. When there is no focus; there will be lot of distraction. Distraction either leads to mediocrity or destruction.

How to refrain yourself heading towards mediocrity or destruction? You need to set Specific, Measurable, Achievable, Realistic and Time bound Financial Goals. That is S.M.A.R.T. Financial goals.

Let me take you through step by step to set SMART Financial goals.

1) List down Financial Goals:

Write down all your financial goals like buying a house, kid’s education, Vacation, Retirement and so on. You may wonder why this mechanical act of writing financial goals is so important. You can be thinking something without actually realizing what that something is. It is intangible and so it is not clearly defined in your mind.

When you start putting that thought into words and you try expressing it, an amazing thing begins to happen. By creating it in words, that abstract thought now takes on body, shape, form, substance. It is no longer just a thought. It becomes something which motivates you, or creates a gut feeling inside.

Your dream becomes a goal the moment you write it down. Say one of your dreams is to buy a house. You dream about it a lot. But the moment you started writing it down, your mind will ask yourself “when, where, how many square feet, how many bedrooms?” This writing gives clarity to your goal and it forces your mind to find out the ways and means to achieve the goal.

2) Categorize and Prioritize:

You need to categorise your financial goals based on the timeframe. Generally the financial goals less than 3 years are short term financial goals. The goals to be achieved in the next 4 to 7 years are medium term goals and the financial goals to be achieved after 7 years are long term goals. This categorization will help you in building a roadmap to achieve your goals and also in selecting the right investment products.

Your daughter’s wedding would be more important to you than the international vacation. Buying a house is more important than buying a farm house. This prioritization will help you in creating a better financial plan. Suppose if you are in deficit, you know which financial goal need to be compromised and which are all the financial goals you want o achieve irrespective of the deficit.

3) Fixing a target date:

Fixing a target date for your financial goals may look like a dump idea. How do I know in advance the date of buying my house, the date of my daughter’s wedding? But if you are not fixing it, then you will not be financially prepared for that. If you are financially prepared and the goal event is not taking place at that time and getting postponed for some reasons, you will not have any financial worries. You will be financially ready from thereafter with on enough money to meet that goal.

Fixing a target date will psychologically influence your thought process to work on that goal. Also the moment you fix the target date your mind starts running a countdown. Only when you know that after how many years from now you want to achieve the goal, you will be able to make a financial plan.

4) Estimating the cost:

First you need to estimate the cost as of today. If you are planning to save for your daughter’s wedding which is expected to take place after 10 years, first you need to calculate the cost of the wedding in today’s prices. Then you need to adjust it for inflation of 10 years. Now you will have the future value of your target.


5) How much to save?

Once you have found out the future value of the goal, you can easily decide on how much you need to invest in order to reach the targeted future value. Initially you may only be able to contribute less. But year after year you can increase this contribution based on your increment/promotion/income growth.

So you need to take into account the expected growth rate on your salary or business/professional income in calculating how much to save towards each and every financial goal.

6) Budget the savings:

As you know by now exactly how much to save towards each and every goal, you need to accommodate these savings in your budget. If you do this year after year, then you can see all your financial goals becoming reality.

The difference between a goal and a dream is the written word. I am confident that you will come to find that financial goal setting works and that it will soon become a way of life for you.

Start setting your financial goals today.

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

In most of the Indian families, the personal finance is something which is not managed by the couples together. It is only one person who manages the personal finance and money management of the whole family. In most of the cases the male partners and in a very few cases the female partners mange personal finance. Only very rarely both of the partners together manage their personal finance aspects.

What would be the outcome in an organisation where the purchase department works totally independent and without any understanding with the finance department of the organisation? Purchase dept may overspend; finance dept will lose control; misunderstanding and conflicts between both the depts; the result is the organization’s growth gets destroyed.

Similarly, if the personal finance is handled by only one partner, then there could be a lot of mismatch between you and your partner in saving and spending pattern. This will lead to misunderstanding and marital stress. Instead of having independent saving and spending plan, having an interdependent plan will help you in managing your money effectively and achieving your financial goals.

You go out for dinner together. You go to the movie together. Why don’t you manage your personal finance together? This will build money compatibility for you and your spouse. Both of you can have a better relationship and understanding with each other.

Why it is so important?

You may wonder why personal finance should be managed by both of the partners. Here are some points to ponder over;


1) In case of Emergency:


Suppose the partner, who is managing personal finance, met with an accident and need to be hospitalized for one month or so, then how does the spouse will run the show?

During the accident, if the partner has missed his wallet which had all the credit cards and debit cards then how does the spouse block those cards before it is misused? Where does she or he find that information?

In case of emergency, nothing will help except the practice of managing the personal finance together.


2) Real Workable Budget:


When you alone prepare the budget for your family, then you can’t expect your spouse to spend according to the budget. If you prepare the budget along with your spouse, he or she will come forward to help you in saving more.

You just try this. Involve your spouse in budgeting and monitoring the spending. You will see the spending coming down day by day and both of you will start spending consciously.


3) Combined Financial Goals:


It is better to identify the goals of your spouse as well as yours and check that is there any goal which is contradictory to the goal of your spouse.

You may want to retire and settle in the same work city. But your spouse may want to settle in the native place.

You may plan to buy a farm house to spend your leisure. But your spouse may be interested in spending her/his leisure at different places like hill stations and other tourism places. For this goal a time share slot with a resort provider may be suitable.

So identifying and settling your difference of opinion regarding the financial goals at the blueprint level is much easier and cheaper, instead of doing it at the execution level.


Overcoming the barriers:


There are some barriers or objections in involving their spouse in managing personal finance. How to overcome that?


1) No Time:

My spouse is not having enough time to look at these things. ‘No time’ is a false excuse. If it is one of your priorities, then definitely it will somehow find its time. Only thing is you have not realized it as one of your priority. Personal finance is definitely a priority item for each and every family because it is going to secure your future.


2) Not interested:

My spouse is not interested in personal finance. Everyone is interested in their own future and their kid’s future. So logically everyone needs to be interested in personal finance. You need to motivate them and make them understand, how this personal finance management is important in achieving their life goals.


3) Doesn’t know:

My spouse doesn’t know about personal finance. No one has born in this world with the skills of money management. We all learned it here. So why don’t you educate him/her on personal finance. Money management is an important life skill. Everyone should know. You want your kids to manage the money better and wiser. Why don’t we educate our spouse first?

Overcoming the barriers in getting your spouse involved in personal finance management and getting them involved will be a life transforming exercise. Don’t miss it. Together you will be able to achieve your life goals easier and sooner.

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

On a beautiful late spring afternoon, twenty five years ago, two young men graduated from the college. They were very much alike, these two young men. Both had been better than average students, both were smart and both were filled with ambitious dreams for the future. Recently, these men returned to their college for their 25th reunion. They were still very much alike. Both were happily married. Both had a kid. And both had gone to work for the same industry and held similar positions in different companies.

But there was a difference. One of the men’s kid has completed M.S from a reputed university in USA and the other kid has completed a graduation from a local university. What made the difference?

Have you ever wondered, as I have, what makes this kind of difference in our kid’s career? It is a carefully thought out long-term planning for kid’s future.

As a responsible parent, you would not like to compromise on your child’s career, regardless of rising cost of education. You need a well developed investment plan that will allow you to meet all expenses for your child’s future.


Provision of Medical Expenses

Health care for mother and child will be a potentially handsome expense for new parents. New babies require regular checkups and immunizations even though if your child is in good health. So you need to make provision for these expenses well in advance even before the arrival of the baby.


Adding the newborn to your Mediclaim Policy

If you have an individual mediclaim policy, add the newborn as a member in that policy and get coverage. Do you have an employer provided mediclaim policy? Then, check if the terms and conditions allow you to add the newborn for coverage. If it allows, then add the newborn to that policy. If it doesn’t allow then take an individual mediclaim policy for your kid.

Increasing your Term insurance coverage

You need to check whether the existing insurance coverage is sufficient to support your child’s future or not in case of any mishappening to you. If it is not sufficient then take term insurance policy for the gap.

Ongoing educational expenses

The educational expenses are skyrocketing year on year. What your father has spent for your college education, is now you need to spend for your kid’s primary school education. So adequate provision in your monthly budget and a projection for cash flow with reference to school education expenses will be an important exercise for you

Financial Planning for Higher Education

It is going to be a biggest financial shock for you, if you have not properly planned for your kid’s higher education. Don’t delay this plan, start this plan as soon as the arrival of the newborn. Then you will have time on your side.

Assume your kid has completed today his/her schooling. Imagine how much you may need to spend for higher education at today’s costs. This cost is going to go up year on year because of inflation. So project this cost with inflation rate for the future. Now you will know how much exactly you may need for higher education in future when you kid is actually completed its schooling.


Other dreams for your child

Apart from the higher education, you may have some other dreams like buying a home for your kid, corpus setup for your kid’s future profession or business or corpus creation for wedding expenses. You need to follow the similar steps as mentioned in ‘Financial Planning for Higher education’ for these dreams also.

In case you don’t have time or knowledge to do this financial planning you can seek assistance from professional financial planners. They will save your time and make sure that you are achieving these financial goals for your kid.

Savings account for your child

You can open a savings account in the name of the minor. Whatever gifts, the kid receives by way of cheque or cash on the occasions like birthday can be saved there. Also this account can be used to motivate the kid to save from its pocket money.

The other investments which you make for your children’s future like mutual funds or shares need not be invested in the kid’s name. Banks, generally, will not give loans against shares or mutual funds held in the name of a minor. So, it can be invested in your name. As and when required it can be encashed to meet the necessary expenses for the kid. Banks, generally, will not give loans against shares or mutual funds held in the name of a minor.

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