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Sunday, 29 October 2017

Is saving too hard to Start?

Hi friends, today I start discussion with a simple question as “Is saving too hard to start?” Most of the time, the hardest thing about saving money is just getting started. And once you start I bet you that you will not stop it, provided if you choose the right financial vehicle for it to grow. Money saving is just a habit to achieve some financial goals. Financial goal may be short term as well as long term. Here are some examples of short- and long-term goals:

Short-term (1–3 years)
  • Buying electronic gadgets.
  • Vacation
  • Down payment for a car or Home


Long-term (4+ years)
  • Own Retirement
  • Child’s education and marriage






Step 1: Track all your expenses: Tracking the expenses is the first and the most important step. We must track all our expenses. All means all. For this you may either use your bank/Credit card statements or any third party mobile app or even do it manually. Once you have your data, organize the numbers by categories, such as gas, groceries and mortgage, and total each amount. Try to outline the over or unnecessary expanding. Try to do this activity at least for 3 months.

Step 2: Make a budget: Now you have an idea of your spending. Now create budgets for each category of expenses. Try to cut the budget for unnecessary items. Please keep budget for items as entertainment and dining out. If you find difficult to budget for all items outlined in step 1 then it might be time to cut back.  

 Step 3: Plan on saving money: Create a Budget for savings also it if not outlined in step 1. Allocate at least 10 to 15 % of you income. 30% is good enough. But if you don’t see this much in savings category then start to trim down the budget form all other categories which have some unnecessary items.

Step 4: Set Your Goals and priorities: Setting the goal and priorities also a very important step. Without this you can’t get the conviction to save for longer term. Can you imagine a football match without a goal post? The goals might be short term or long term as we discussed above. Please consider the future cost for any goal because value of money will fall due to inflation.

Step 5: Choose right financial vehicle to invest: Now you have your fund in your hand to achieve a goal. But money sitting ideal in a bank account losses its value so we need to invest this money to protect its value by appreciation. You should not invest your money with a locking period say 5 years for a goal targeted in 3 years. For short term goal capital protection should be the aim and for longer term goal we should go for capital appreciation.


As I said earlier that Money saving is just a habit so investment must be automated as much as possible. Automated transfers are a great way to save money since you don’t have to think about it and it generally reduces the temptation to spend the money instead. It brings the discipline in our financial life.

OLD Formula:
INCOME – EXPENSE = SAVINGS

NEW Formula
INCOME – SAVINGS = EXPENSE

Nothing big difference in term of numbers but there is huge difference in real life.

Sunday, 8 October 2017

Update Contact Details on Income Tax Site

Now it is essential to update contact details as address, mobile number and email address by taxpayers on Income tax e-filing web site. This will enable the income tax department  to serve the notice if any to us in a timely manner. Whenever you change your mobile number or email address you need to update on Income tax website. To do this you need to login to https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html .On login it will prompt you for address, mobile number, and email address.



Once you update the information click on Continue button.The ITR system will generate OTPs and send to your email and your mobile number.
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On successful validation, the system will display success message on screen. You will also receive an email with confirmation detail by income tax department.





If your profile is already updated system will not prompt anything on login. In that case, you can Go to Profile Setting and select My Profile tab and see your profile details. Apart from profile detail, you can also see Aadhaar detail and PAN details in My Profile section.







Saturday, 7 October 2017

SEBI notification : Categorization and Rationalization of Mutual Fund Schemes

As per SEBI notification a mutual fund company can have only one fund in each of categories like Equity, balanced, hybrid, debt and Solution oriented schemes etc. Mutual fund need to wind up the schemes or merge.

Currently there are 42 Mutual Fund houses and about 2000 Mutual Fund schemes and each have several variants (Regular, Direct, Growth, Dividend Payout, Dividend Reinvest etc). The SEBI circular aims to reduce the number of primary schemes and that too only open-ended Mutual Fund schemes which are about 830 in number.

SEBI has defined the following groups and categories of MF schemes:
  1. Equity Schemes - 10 categories
  2. Debt Schemes - 16 categories
  3. Hybrid Schemes - 6 categories
  4. Solution oriented schemes - 2 categories
    • Retirement planning
    • Children’s future
  5. Other schemes
    • Category for each index funds/exchange-traded funds (ETF)
    • Fund of funds (FOF)


The above circular SEBI also lays the definition of large cap, mid-cap and small-cap companies.


  1. Large Cap: 1st-100th company in terms of full market capitalization.
  2. Mid Cap: 101st-250th company in terms of full market capitalization.
  3. Small Cap: 251st company onwards in terms of full market capitalization.


All existing open ended schemes of all Mutual Funds need to follow the rules. Mutual Fund companies have been given 2 months to review all their Mutual Funds and come with a plan to align their various schemes according to the said categorisation. Mutual fund companies need to wind up their open ended schemes or merge them. It will also help us to align our goals with a MF scheme. As an investor we also have reduced list of funds to choose for investment.

Monday, 2 October 2017

Don’t get caught in the monkey trap

The Indian monkey trap is an age old method for catching live monkeys. Here the monkey catcher just used monkey’s curiosity against them. A narrow necked ceramic/clay bottle with a bulbous bottom, similar to a Carafe, is tethered to a stake in the ground or a small tree using a vine or rope fastened around the narrow neck. Various items such as nuts or firm fruit are put inside the bottle or vessel and left in locations where monkeys are known to inhabit. The monkey’s curiosity is aroused by the vessel and will put his hand into the jar to find what is contained, will grasp the bait and will attempt to remove them within their clenched fist. They are trapped by curiosity, and are unwilling to release the contents within their clenched fist. We might consider the monkey foolish, since to escape the trap, all they need to do is to release the bait! 



It seems so obvious to us...just let go of the food, release the bait and run away. It is so simple. 

We as a human think better than monkeys. Do we? 

Look at your financial life, you could easily find the places where you had your hand in the  narrow necked ceramic/clay bottle. The financial traps are

  • Home/Car Loan: most us just take loan for home/car which is may not required at all. for a loan 20 years we have to pay 2 to 3 times. I am not say we should not have your own house but we move far ahead and took second home for rental income. here is the trap.
  • Endowment Policies: There are many people consider the insurance products specially Endowment or money back policy as an investment. Which should not be the case. In such policies we can only earn 5 to 6 per anum which is actually a - ve return if you take inflation in the calculation. A term plan is the best product if you are thinking to insure yourself.
  • Bank FD/RD : Investments in bank FD of banks are widely considered as the wise and the safest option. But the real return after adjusting for inflation and tax applicable is really negative. We feel very safe with the FD but share of same safe bank become very risky for investment.
  • Day Trading : Many times we are trying to get some quick money which may not be worth taking risk. You  may make money in trading but not always.Warren Buffet says “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”. 
  • Blindly Following Big Investor : We are just looking for Multi bagger and trapped in a script following a well known Investor. All we witnessed the movement in JPAssociate. It just jumped to 30 from 15 and again came to 16.


Image Source : Google Image

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