OneIndia Spending

How to Deal with Debt Recovery Agents

Yogi — Mon, 27 Jun 2011 05:22:34 GMT

InvestmentYogi: Timely financial planning prevents you from falling into credit card or any other debt. If you are already in debt then deal with the recovery agent as per the suggestions given below and take control of your finances by going for planning.

Let’s get something straight…any kind of loan agreement whether involving the purchase of an asset or not, is first and foremost a civil contract. Therefore any failure on part of the borrower in respect of repaying the borrowed amount in part or full can be remedied only through legal procedure i.e. civil remedy through court.

So very simply, a bank or financier does not have the right to use force on defaulters and deploy musclemen for the recovery of loans.

But there are numerous instances when they do exactly that, and sometimes to grave and often fatal consequences leading to suicides by the defaulters. Banks have internal debt recovery cells or departments and also use third party agents for recovery of loans. The Debt Recovery Agents often work on a commission linked to recovery amounts and therefore they are highly motivated to show results by use of any kind of means – threats on phone and in person, public humiliation, and other ways of intimidation – verbal and sometimes also physical.

In the bank or financier’s defence the legal and judicial system is indeed very slow and any case that they may file against the defaulting borrower will take a long time to settle, however this does not justify use of force or illegal means and a consumer needs to be aware of this and not get intimidated.

RBI Guidelines

The Reserve Bank of India in order to protect the interests of both the borrower and the creditor in the debt recovery process, has issued certain guidelines that a recovery agent and the bank that employs him have to honour.

The borrower has the right to decide a place to meet and a time to be contacted by the recovery agents. He can also choose the time and place to receive calls from the agent.
He can ask to see the agent’s ID and letter of authorization from the bank.
The recovery agent has to deal with the borrower with decency and proper decorum.
The borrower has a right to privacy and the agent should not discuss his debt situation with a third person.
The borrower can seek assistance to resolve the dispute or differences regarding dues.
During bereavement in the family or calamity, the borrowers can tell the agent to not visit or call.

The borrower can complain to the RBI on non compliance with the above or any other kind of harassment by the bank. Further, failure to incorporate the RBI’s guidelines could lead to the central bank invoking a ban on engaging recovery agents by the bank in a particular area, either jurisdictional or functional, for a limited period. In case of persistent breach of its guidelines, the RBI may extend the period of the ban or the area of ban.

How to deal with the situation

The borrower on should remember the following

to not get intimidated
to not react aggressively, use harsh language or retaliate physically even when provoked by the recovery agent.
to not avoid the recovery agent or the truth that you have an obligation to pay
to not sidestep close questioning in as much as it relates to his ability to pay.
to not make false promises to either buy more time or to put off the agent for some time.

The borrower should as far as possible be calm, reasonable and

Confirm the identity of the recovery agent and ascertain if he in an employee of the bank or a third party.
Take detailed notes of all communication, written and verbal and if possible even record calls and of course keep copies of documentation.
Express to the recovery agent, his willingness to pay his dues.
Inform the agent that he would file a complaint with the RBI and the Bank if he gets abusive or issues threats of any manner.
Approach the bank for direct negotiations if he doesn’t want to deal with the recovery agent.
Complain to the RBI if things get out of hand.

All things said and done, the best thing that the borrower can do to avoid this situation is of course, borrow only to the extent required and to the extent that it is within his means to repay so that he never defaults on the loan in the first place. After all, the debt recovery agent would have come into this situation, only because the borrower has defaulted on his obligation to pay!

Source: InvestmentYogi

How the Rich in India Spend, Save and Invest Their Money

Yogi — Tue, 21 Jun 2011 00:18:00 GMT

The Major Segments

Kotak has just published a report on High Net Worth Individuals in India, dividing up the growing group into 3 segments: The Inheritor, the Self-made and the Professional. The report acknowledges there are 2 distinct groups which are “Old Money” and “New Money” but that the 3 segments divide it up even more specifically. The Inheritor has been “Born with a Silver Spoon in his Mouth” and quite simply inherited the money, though he/she may work very hard to maintain or increase it. The Self-made may have been middle class or even very disadvantaged in youth, but somehow made great wealth.

What does an HNI look like?

One major recent change in High Net Worth individuals (HNI) is that the class is much more heterogeneous in India now. An HNI could well be someone who inherited wealth but could also be a professional who’s made money in Technology or a farmer’s son turned industrialist. Whatever it be, HNIs in India tend to spend heavily on quality homes, food, clothing, and the luxuries of life in terms of entertainment, education, travel and family vacations. They invest conservatively and are increasingly interested in giving to charity and making a mark on the world through other means than the private consumption of their wealth. Passing the bounty on to successors is an important shared trait in this group.

Spending: Brand names and More

There are interesting differences in how the various groups like to spend and save their money. For example, the Inheritors seek out name brands less and are as comfortable wearing a Titan Watch as a low-end one their daughter might have given them using her pocket money.

The Self-made prefer to focus on name brands and hold them in high esteem. They are highly receptive to product innovation and are a goldmine for marketers of luxury products and services. The Self-made typically tend to use brands as a means to fulfil their aspirations. They are, therefore, plum targets for products based on cutting-edge technology or products tailored to their needs. They tend to purchase products from retail outlets in India, being short on time, whereas Inheritors often like to shop abroad, even for the same products.

Professionals make choices wisely and spend on brand names when they feel it makes sense, not purely for the brand. They often are passionate about hobbies and interests and tend to spend lavishly in these areas rather than for prestige or glamour.

Seeking Help and Support in Wealth Management, Accounting, Estate Planning

The Professionals use the most wealth management services, and are willing to pay for them, preferring to spend their time on family, hobbies and vacations. Self-made HNIs feel more comfortable with people than organizations so they favour developing personal relationships with specific chartered accountants, wealth managers, and private financial advisors. Friends and family often seek their advice on critical matters. Inheritors generally have an established network of advisors and professionals who guide their finances for them.

Investment Styles

Investment styles differ in that Inheritors like to invest in more conservative asset classes whereas the Self made are comfortable taking on more risk in their investments. Professionals have a greater proportion of their total income available for spending and investing than other ultra HNIs. As most of them do not run a business, a lesser portion of their total income is marked for business investments. Professionals, therefore, spend and invest a greater proportion of their income, placing about three-fourths of their investments into financial assets, primarily equity and debt. They like to give to charity more than other ultra HNIs and prefer to give through charitable institutions rather than at an individual level.

The Self-made take calculated risks with their investments. For instance, they are likely to have the highest proportion of investments, among the ultra wealthy, on alternate assets such as private equity. They also favour FDs and insurance policies, however, and tend to invest only in assets they understand. They are likely to own a mix of real estate assets such as holiday homes, commercial buildings and agricultural land and plantations, apart from apartments and villas.

Inheritors are the most risk averse in the group, preferring ample real estate investments (approximately 40%) along with a highly diversified portfolio of equity, in about the 30% range. They have established systems for the succession of wealth, but these are changing with time, especially when a child does not want to take on the family business and a professional is brought in.

Whatever the sub category, the Ultra HNIs are a class apart, and a growing class in India. For more information, check out the study at this link.

Source: InvestmentYogi

6 ways to the Perfect Vacation

Yogi — Mon, 06 Jun 2011 05:33:27 GMT

Most of us look forward to our dream vacation. Some prefer exotic destinations like Bahamas, Miami, Maldives, others frequent their favourite hill station or beaches, while some of us just stay home, chill out and relax. An increasing trend is to take a packaged trip to Europe or an expensive cruise in Southeast Asia. Regardless of where you want to go, you can make it the holiday you want it to be – without burning a hole in your pocket – by paying attention to the following simple tips:

Plan in advance:

Keep a little money aside every month rather than tapping into your savings to pay for the whole vacation at once. Start building your vacation fund about 4-6 months in advance. Availability of these funds makes your life easier by softening the financial blow. Planning in advance also means you are more likely to find bargains on hotels and travel and at the same times it’s much easier to get the vacation time sanctioned by your boss.

Setup a budget

Calculate how much money you need to cover all of your basic expenses like food, accommodation, and transportation and then allocate some extra cash for souvenirs and unexpected expenses. It's worthwhile to do some research about the cost of vacationing at a place.

Sticking to your budget is much more important than creating one. Once you get to your destination, you have to stay focused as you come across numerous temptations to splurge.

Credit card: Your friend in need

Let’s face it, credit cards are the biggest culprits when it comes to overspending but at the same time they are great saviours in times of need. They can be your best friends and also the worst foes.

Don’t take your cards with the intention of using. If possible avoid keeping it in your wallet, keep it secure in the hotel room or safe. It serves two purpose: First, you won't be tempted to buy more gifts and souvenirs to take home with you; and second, it ensures that you'll have backup funds in the event of a real emergency – such as if your wallet gets stolen.

Internet: Your Best Friend

Searching the web goes a long way in grabbing great deals on hotels and transportations or even packaged tours. Use the internet to look for recommendations and feedback from other travellers. There are numerous websites which offer ratings and reviews for destinations, hotels and sightseeing. You will be less fearful of trying something new and be better prepared. You can also contact the person and get more details about your dream destination. For example, a friend of mine called a hotel directly and received a 20% discount based on a user’s experience posted on a hotel review site. For Air travel, compare prices to find the best deal. Booking 3-4 weeks in advance can save you up to 40% in some cases.

Keep it simple

The best way to be in control of your expenditure is to pay in advance. Pay your hotel and travel bill in advance rather than paying in cash when you get there. If you are using the services of a tour operator, read the fine print and see what exactly you have paid for. It will help you decide how much money to carry for extra expenses.

Vacation on a shoestring budget

If you want to have a vacation on a shoestring budget and still have a ball, camping is the way to go for the adventurous types. It eliminates 2 of your biggest expenses viz. hotels and travel. Look out for a forest/national park in your state or close to your city and find out more about it. Most of these destinations offer budget cottages. It can be cost effective and lots of fun especially if you are with a bunch of like-minded friends.

By following these simple yet effective tips you can get the most out of your vacation and not be bogged down by financial worries. Go out and enjoy!

Source: InvestmentYogi

Money Management Tips For Working Women

Yogi — Thu, 19 May 2011 03:36:46 GMT

Ever wondered why there are numerous articles written about women and money management. The reason is working women find themselves in unique situations – home maker, mother, caring for the elderly. Working women experience greater disruption in earnings in their life as they take career breaks for different reasons – relocation due to marriage, to raise children, tend to their elders or accommodate family contingencies et al. Statistically it is found that women generally spend seven years out of the work force to have and raise children. In the long term however, such disruptions hurt the family's wealth creation and though a woman and a man may have started their careers at the same time, she ends up earning far less when they both retire.

Also, studies across the globe show that periodic income disruptions make women risk-averse. This means that they invest in lower-risk and fixed-income investment options such as fixed deposits and bonds for fear of losing money due to factors such as stock market fluctuations. The outcome of the preference for fixed-income assets is obvious. The woman's savings will not suffice in her old age, and she'll have to depend on the retirement funds of her husband, or other sources. And then there is the reality of a divorce which can be even more painful for dependent spouses. Regardless of how modern the majority claim to be, studies indicate that they lag significantly behind in one area compared to their male counterparts - that area is financial planning. Most women leave the management of their finances to their fathers/husbands. Failure of marriage, unequal inheritance of wealth, non avoidance of old age, etc all the more necessitates us to be self reliant.

However, taking into consideration the above factors, women need to have a holistic financial plan, that too from a very early age in order to make good the time lost in such career breaks . In the current scenario, personal empowerment and financial independence are the need of the hour. After all financial independence is true empowerment. You know you are empowered when you do not need anyone to tell you how to live your life or spend your money. Also, whether or not a woman has her own income, she still needs to know how her family’s money is invested. Therefore, all women need to step up and learn how to play with the boys. There is no longer a justification for you to not participate in the financial planning that will lend itself to your future.

The following are money management tips (though not exhaustive) which will help women mange their finances better:

Begin Early: One should take managing their finances early on. There is some magic to be found in “compound interest”. The earlier you start the smaller amounts you can invest for a higher gain. Also, when you start early (and continue to invest) you can take greater risks (like investing in equities, equity mutual funds). But remember that compound interest can only work its magic if you give it time. So, start saving now, if you have not started yet! Inflation and interest rate risk eat into the purchasing power of your money if you parked your money in lower risk investment instruments. So investing early in growth assets like equities and equity funds is imperative. Don't limit yourself to conservative investments such as money market accounts and CDs. Use asset allocation to diversify your portfolio.Build an emergency fund. Ideally 6 months’ monthly expenses could be put in a liquid fund. Without one, losing your job or incurring a large unexpected bill could force you to take on heavy credit card debt, and could put you into a financial hole that will be difficult if not impossible to dig your way out of.

Cut down Expenses: Cutting down on impulsive expenses and spending money prudently and training the same to children goes a long way in sensibly managing your money.

Invest in Insurance: Insurance is a must investment to protect yours and your family’s health costs and your physical assets. Also to provide financial security to your dependants in your absence. Insurance helps transfer the financial risk from one party to another, i.e., from you to your insurer.

When together, plan your finances together: Invest jointly with your spouse. Share expenses. Ensure expenses are covered by one income, try maximum to avoid loans to help you quit your job if needed. Ideally all money matters should be discussed by couples. Be prepared for the worst; even if you don’t want to take complete charge of your financial future, try and understand where the money is coming and where it is going.

Educate yourself: Personal financial planning and management is not complex. All you need to do is to understand your life goals and plan as per your requirement. You could read some useful books to educate yourself about the subject. Then even if you hire a financial consultant due to lack of time to self manage, you would understand what he/she is doing with your money.

Become aware of benefits given to women under different laws: The following are the benefits given to women under different laws:

Income Tax Act, 1961 – Total income of up to Rs 190000 per year is exempted for woman assesses (below 65 years of age).

Married Women’s Property Act, 1874: Under MWP the spouse can assign his life insurance policy in the name of the trust created for the benefit of his wife and/or children. The money set aside in this form is free from creditors, court or tax attachments (even in case of insolvency) forever, provided that the trust under MWP has not been effected to defraud the creditors. The MWP Act, 1874 creates a ring fence protecting the interests of the beneficiaries and safeguards the family against uncertainty of future and possible adverse financial conditions.

Alimony: The purpose of alimony is to avoid any unfair economic consequences of a divorce, even after property is divided and child support, if any, is awarded. For example, a Muslim woman would be entitled to maintenance from her divorced husband as long as she doesn't remarry.

Estate planning (Wealth Transfer): An effective estate plan can be made by the couple jointly. As the surviving spouse (generally the wife) is likely to end up being the executor of her husband’s estate plan, so ignorance cannot be afforded. It is useful to keep a record of inventory of assets and their beneficiaries for smooth transition of assets to the intended beneficiaries.

These are some important things to consider in your financial planning that are not very different from how a man may approach the same subject. The key is to start early and continue being invested. As a woman, you have a longer life expectancy than a man does. Therefore, your financial planning must encompass the fact that you have more years to fund. Having your finances in order is just one way that you can move toward your ideal lifestyle. Maybe your goal is purchasing the home of your dreams, or going into business for yourself. An active and independent retirement is also a goal. Many people no longer feel confident that they will be able to rely on pensions or social security checks after they have retired. Most goals take more planning than just a savings account and good intentions. Financial Planning involves long term strategic involvement … but it is worth it.

By sticking to your financial plan you can avoid excessive spending and unmanageable debts. You will have a sense of freedom from financial worries that comes with lack of planning, so that you can use your spare time in activities you desire to do but don’t have the time for.As quoted by Diane Ackerman, an American poet, “I don’t want to get to the end of my life and find that I lived just the length of it. I want to have lived it the width of it as well.”

You can take the help of a good financial planner to manage your money. To streamline the paperwork and administrative work of financial planning, many of today's best advisors turn to technology. InvestmentYogi provides you with a personal financial software that aggregates all of your financial investments, savings, accounts, etc. onto one easy-to-use web page - giving you 24/7 access to all of your financial information in just a few clicks of a mouse. Check it everyday, check it once a month, check it once a quarter, it's up to you. The point is that it is there, organized and at your fingertips, when you need it.

Courtesy: InvestmentYogi

How to Get out of Credit Card Debt

Yogi — Fri, 13 May 2011 04:15:07 GMT

How it begins

You graduate out of a college, get a decent job and join a company with stars in your eyes. You have newly found confidence and a willingness to try out new things and spend. Very soon the credit card companies start calling you with lifetime free offers and sales agents stalk you with the “Best cash back offer!” Some even tell you “sir it’s free anyways. If you take it I will get my sales commission” and you think what’s wrong in keeping the free card. Thus, you accumulate a few lifetime free cards...silver, gold, platinum and the co-branded ones.

You go out with friends and use the new credit card for buying some cool merchandise and why not? It’s the SALE time of the year! Your credit card empowers you, no doubt. It’s convenient, hassle free and an excellent tool to impress friends and family. Some friends even envy the number of credit cards you carry in your wallet. Many people get carried away and don’t notice this overindulgence until they receive their credit card statement and realize they don’t have a sufficient balance to pay the dues.

The card company comes to your rescue and assures you can pay only minimum balance and they will take care of the rest. After all you are their esteemed customer.

Right here, your journey towards the debt trap begins!

Ignorance is not bliss

One needs to understand how credit card debt works. Ignorance can be fatal to your fiscal health. Facts you should know:

1) Credit card offers free money only for first 40-50 days

2) After that, at approximately 3.5% per month, it works out to be roughly 40% per annum –most expensive credit

3) Even if you pay 90% of the outstanding before due date, the company charges you interest on the whole amount!

4) Suppose the outstanding on your card is Rs 25,000 and you paid Rs 23,000 by the due date, the card company will first charge you interest on Rs 25,000 for a month and then on the unpaid Rs 2,000. So, you pay on Rs 27,000.

5) Minimum payment saves you only the late payment fine but slaps you with high interest later on. You must understand that credit card companies don’t allow you to pay the minimum 5% out of kindness. It is a way of making sure that you end up paying high interest for many months or years to come. It creates a false impression in your mind that “All is well” after you have paid the minimum monthly amount.

6) Cash advances made on credit card attract similar interest rates of 30-40% which is almost double of what you would pay on personal loans.

How to get out of the situation

Are you covered up in a credit card debt blanket? Not to worry. It is possible to get out of the debt trap provided you analyse the situation with a cool mind.

Below are some of the rules which will assist you in getting out of debt and stay debt free-

Rule 1: Do a reality check – Create a list of all expenditure you have done in the past 3-6 months (You can refer to the credit card statements, ATM withdrawals and bank statements). Try to see where and how you have overspent. Promise yourself not to repeat this mistake again. Work on savings target for next few months which might include painful cut downs in entertainment and luxury expenses. Get a monthly budget done. This way you can keep track of monthly expense outflows and curtail unnecessary expenditure. Use InvestmentYogi’s online budget to help you set up and maintain your monthly budget.

Rule 2: Prioritize if you have debt on many cards as shown in the table. Arrange your debt in decreasing order of interest charged. Paying off card 1 should be your priority and then card 2 and so on.

Card Name: Card 1

Balance: X

Interest Charged: 40%

Card Name: Card 2

Balance: Y

Interest Charged: 36%

Card Name: Card 3

Balance: Z

Interest Charged: 32%

Rule 3: Many credit card companies offer balance transfer facility. Transfer the debt from one card to another so that you get some breathing space.

Rule 4: Don’t make just the minimum payment. The minimum payment goes towards the interest part of the outstanding amount and your principal remains the same. In this way you will never be able to clear your full dues. Pay the whole amount. Use your savings to pay off the debt. It makes no sense to earn 3% on your savings and pay 36% on a credit card. Borrowing from friends and family could be last but one option to clear off your credit card dues.

Rule 5: The last option could be to take a personal loan to clear off your dues as the interest charged on a personal loan is relatively cheaper than loan on credit card.

Rule 6: Don’t own too many credit cards; they may boost your net worth in the short term but can get fussy and entangle you into the debt trap if not monitored regularly. It is wiser to keep the one with most benefits and trash the rest. This is a healthier way to keep track of your finances too).

Credit card can be a great friend in need but also the worst enemy if not used responsibly.

Courtesy: InvestmentYogi

Card Protection Plan : Your Help at Hand in an Emergency!

Yogi — Tue, 26 Apr 2011 04:34:54 GMT

We belong to a “Plastic” generation, where we may forget to take pocket change but life without that credit card is unimaginable! With the prolific use and the lurking fraudsters, security has become the prime concern amongst both issuers and users.

To the rescue is a Card protection plan. It is a 24 hour card protection service for use in the event of card loss, theft and related fraud. Most banks and card issuers in India have launched this Card Protection Plan in partnership with CPP Assistance Services Pvt. Ltd. (CPP), a global leader in assistance services marketing.

It is a worldwide cover, and what makes this plan extremely convenient and unique is that it protects the cardholder’s entire wallet of cards, credit and debit, and even non-financial ones such as store, loyalty and membership cards. Further, the cardholder is protected from any fraudulent use that may have occurred seven days prior to discovery and within 24 hours of notification of card loss.

Also the convenience lies in the fact that you don’t need to scurry around for that list of helpline numbers, from various card issuers to make those frantic phone calls to block your card in case of a loss. This Card Protection Plan offers you a single number to call to cancel all lost cards. If you are unfortunate enough to lose your wallet, all it takes is one call to CPP 24 hour helpline to report card loss. CPP will call all your issuers and ask them to cancel the cards you reported as lost and will assist you to get them replaced. The plan offers fraud protection from 7 days prior to your loss report to CPP until your membership is valid.

For travellers, the biggest benefit apart from fraud protection is the emergency travel assistance. In case your mishap happens while you are travelling, CPP will facilitate through its authorized dealer an advance direct to your hotel to cover your hotel bill and also arrange travel tickets for a safe return home.

You can also register with CPP, details of important and valuable documents like passport, driving license, insurance policies, etc for easy access, should you ever need these when the originals are not around or lost. CPP also helps you with getting a lost passport notified, when travelling abroad.

The benefits offered and the premium charge will vary depending on the various banks that have signed up for the program and what they are offering to their customers.

There are 2 tiers offered in most programs for Indian card members, Classic and Premium. A brief description of the benefits and the premium charges offered by Indian Card Issuers in partnership with CPP are listed in the table below.

Classic Plan

-24 Hour toll free number

-Worldwide cover

-Tele registration

Emergency Travel and Hotel Assistance

-Hotel Assistance (overseas) – Rs. 80,000

-Hotel Assistance (In) – Rs. 40,000

-Replacement Travel Tickets (overseas) Rs. 80,000

-Replacement Travel Tickets (in India) – Rs. 40,000

-Cash (In) – NIL

Fraud Protection

-Pre-notification* – Rs. 50,000

-Post Notification – Rs. 15,00,000

-Maximum Limit per Card* – Rs. 20,000

Other Benefits

-Reminder Stickers

-Card Ordering Service

-Valuable Document Registration

-CPP Key Fob and Retrieval Service

Membership Fee

-Single - Rs. 955 p.a.

-Joint – Rs. 1,495 p.a.

Premium Plan

-24 Hour toll free number

-Worldwide cover

-Tele registration

Emergency Travel and Hotel Assistance

-Hotel Assistance (overseas) – Rs. 1,20,000

-Hotel Assistance (In) – Rs. 60,000

-Replacement Travel Tickets (overseas) Rs. 1,20,000

-Replacement Travel Tickets (in India) – Rs. 60,000

-Cash (In) – Rs. 20,000

Fraud Protection

-Pre-notification* – Rs. 1,00,000

-Post Notification – Rs. 20,00,000

-Maximum Limit per Card* – Rs. 40,000

Other Benefits

-Reminder Stickers

-Card Ordering Service

-Valuable Document Registration

-CPP Key Fob and Retrieval Service

Membership Fee

-Single - Rs. 1,295 p.a.

-Joint – Rs. 1,945 p.a.

*Pre-Notification cover begins 7-days prior notification

Source : www.hsbc.co.in

In addition to the membership fee, some card issuers may charge an issuance/administration fee. Please go through the relevant terms and conditions of the agreement with your card issuance company.

With the Card Protection Plan, help is always at hand in an emergency!

Courtesy: InvestmentYogi

10 Mistakes to Avoid While Taking Personal Loans

Yogi — Tue, 19 Apr 2011 11:44:00 GMT

InvestmentYogi: Complete Analysis and a set of guidelines to be followed while opting for personal loans. Learn the Pros and Cons and make a smarter decision.

Pitfalls of Personal Loan- How to Avoid Them

Personal loans could well be the answer to many immediate financial needs. Whether it’s a home renovation, education expenses or medical emergency, a personal loan could be the ideal solution. However, with the myriad of loans available in the market, each claiming its competency, how do you ensure you do not end up in a bad debt or a huge loan liability? InvestmentYogi brings out the pitfalls one must avoid in a personal loan to ensure that the burden of the loan doesn’t burn one’s pocket.

Taking a Personal Loan?

A personal loan is generally borrowed for personal unforeseen cash requirements and is granted on the basis of the borrower’s credit records, ability to repay and his integrity. Most loans offered are ‘unsecure’ meaning that there’s no requirement of any collateral. This is one of the reasons why most personal loans quote high interest rates between 12% p.a. to maybe even 30% p.a. However, almost all lending institutions seek a guarantor for the loan. Most financial planners, thus, advice against personal loans in one’s balance sheet.

If you are deciding on a personal loan, it pays to ask yourself the following questions.

- How essential is the expense, or could it be avoided?
- Is the expense an urgent one, or could it be postponed?
- Do I really need a loan for the expense or can I manage with my cash flows?
- Are there alternatives such as borrowing from friends, relatives, or other means? Is a personal loan absolutely necessary?

If after these questions, you still must go in for a personal loan, keep in mind the following points.

Mistakes to Avoid – What should be and should not be done

1) Do not borrow beyond your repayment capacity - Many borrowers overstretch their finances by borrowing beyond their affordability. The outcome could be a financial crisis. Borrowers could find it difficult to meet important daily expenses. It could even lead to default in payments resulting in a bad credit record, and eventually even a debt trap. Thus, be wise and accept a loan only if you could afford to repay the regular EMIs and also manage your monthly expenses.

2) Past Credit Record - Almost all lenders grant personal loans on the basis of borrower’s credit record. Be aware of your credit worthiness, and maintain a good record of all liabilities. Be honest about your past credit records. Any missed payments in the past should not be hidden from lenders. Banks take false information incidents very seriously.

3) Disclosing existing loan details - Existing loan EMI’s or other financial obligations should be disclosed to the lender. It is on the basis of your overall financial condition that the loan is being sanctioned. By hiding information, you may end up with a higher personal loan, but there could be a probability that you may not afford the loan, considering your commitments to other existing liabilities.

4) Do a market survey - Before you decide on a lender, it pays to do a bit of study on what other lenders have to offer. Do a comparison of charges, prepayment clauses and interest rates. Do negotiate on the charges for application processing and documentation.

5) Avoid taking multiple personal loans - If you aren’t getting the loan amount you desire from the lender, avoid seeking any further amount from a second lender. Eventually it is your loan liability which is collectively increasing. Of course, by doing this your immediate cash requirement is fulfilled, but such a large liability would only make you overstretch beyond your capacity to repay. With two or three EMIs, and rising cost of living, a large collective loan liability is nothing but a burden.

6) Do not sign blank documents - Many a times, banks send executives to help borrowers through the documentation process. Do not leave a blank signed application for the executive to fill up. Fill up the application by yourself, and familiarize yourself with what is being asked from you and what you would be offered.

7) Reading the fine print - Read the loan agreement thoroughly. Be aware of the interest rate being charged, the processing fee and other hidden charges. Be very clear about, the loan pre closure clauses. Banks generally do not encourage a loan prepayment in the first six months and the penalty charged could be an exorbitant amount.

8) Choosing the EMI and loan tenure - Choose an EMI that could be managed comfortably each month. As a matter of fact, in the long run, a higher EMI with a shorter tenure works more cost effective than a lower EMI with a longer tenure. However in this process ensure that your monthly budget is not strained.

9) Choosing your banker - Approach your regular banker for the loan, who would already be familiar with your credit worthiness. It would enable quick processing and easy disbursement of the loan. It would probably also be easier for you to negotiate on the charges.

10) Maintain statements and accurate records - It is very important to safely maintain all records of loan disbursed and payments made. All details of negotiated interest, processing fees, waivers etc. need to be on record, as banks sometimes charge a fee for additional statements and agreement copies.

Points to Ponder

A personal loan addresses immediate cash flow needs, with a flexibility to use the money for personal household requirements. Having said this, one must keep in mind that due to the high rate of interest quoted by lenders on such loans, it is best to take them only if the expenditure is urgent and cannot be postponed. Also, in the present day scenario, one should consider various other alternatives to a personal loan such as loan against fixed deposit, gold, shares etc. It pays to weigh one’s requirement with the alternatives available and the effective cost of the loan before making a decision.

Courtesy: InvestmentYogi

5 Hazards of Online Shopping

Yogi — Thu, 07 Apr 2011 23:44:08 GMT

Like most everyone I know, I am happy with online shopping and the convenience that it provides. I like the wide variety of choice that internet companies can offer me, the cheaper prices and the ease of comparison shopping. The fact that I can get all this shopping done in my most comfy pants, while sitting on my couch, is not so bad. Some of my favourite purchases have been internet purchases using the ‘couch potato’ method. Yet, as the old saying goes, “all that glitters is not gold”.

While shopping online has many advantages, it can also come with some hazards that customers need to be aware of. Here are five categories for you to watch out for.

1. Item Issues

One of the biggest item issues you may face while online shopping is inaccurate sizes. Keep in mind that different countries have different ideas of the perfect fit. Before you order that amazing New Year’s Dress, check to see the comments of what other customers have said about their experiences regarding sizing.

Other issues you may face while shopping online is receiving items that have been used, are in poor condition, or the item has been damaged in shipping. To make the most of your shopping experience and avoid these problems, research the return policy. Are returns free or is there a cost? If you need to, can you return the item to a brick and mortar location?

2. Hidden Cost

Occasionally, while shopping online you get hit with unexpected delivery charges for shipping and handling. Make sure you understand the shipping cost. Is each item shipped separately, therefore, increasing your overall expenditure? It that is the case, you may want to reconsider your small purchase items.

Watch out for discounts and coupons. Some sites make it look like you will get big savings for buying more. Make sure you read the Terms and Conditions (T&C) of the offer. Most items are very specific and you may find it hard to match your needs with the coupon/discounts requirements. Know the return policy, once you hit the order button, you may not be able to exchange, return or cancel your order. Don’t get in a hurry. If you are too quick on the order button, it may take awhile for the site to process your purchases. By hitting the order button again, you may be billed twice. Patience is a key factor in online ordering.

Note - You can usually find all site and return policies, postage and shipping cost, etc., on the back page.

3. Payment/Currency Issues

Before you give your payment information, make sure you understand how the payment page works. Most sites will usually allow a final review of your payment page before you buy. Take the time to review this page before you hit submit. If the site does not allow you this option, consider using a different site for your purchases.

Be clear on the type of currency/rate of exchange that is being charged. The internet is far reaching and prices appear in all kinds of currencies. You can find currency convertors on the internet that are updated regularly. While exchanging currencies find out if there are any charges made for the conversion.

Note - Most companies will use a higher conversion rate.

4. Timely Delivery

Given the vastness of the internet, you can order from around the world. Find out if the site you are using has a guarantee on their delivery time. If you need the item in a specific time frame, give yourself plenty of time in advance for unexpected surprises (i.e. delayed or lost packages, damaged/return times, etc.).

If you do have any questions regarding the items, is there a link for a contact person/department? If you are making a large purchase, try sending an email before your purchase. If you don’t get a response, try another site.

5. Frauds

Unfortunately, the most common type of fraud from online shopping is credit card fraud. Use only secured sites to avoid this happening to you. Look for the following to make sure the site you are using is secure.

1) A small lock icon in the lower left hand side of the page.
2) Urls starting with https instead of http.

Every time you use your credit card online, you run the risk of credit card theft. A few tips are to NEVER, give your credit card information in an email or any other personal information for that matter. There are a lot of scams that will ask you to update an account such as PayPal; this is a way to find out if your account is active. These emails are fraudulent.

The second kind of fraud you may run into is vendor fraud. The product being displayed could be completely false or defective. The vendor may take your payment and not send the product. The best idea is to use only trusted sites. Look at the vendor rating and consumer reviews to discover the reputation of the vendor.

In Conclusion

Using the internet for shopping can be a fun and rewarding experience. Be smart and protect yourself by using only trusted sites, know the site policies and review payment forms before submitting.

Courtesy: InvestmentYogi

Mental Money and Mental Accounting

Yogi — Mon, 28 Mar 2011 17:18:41 GMT

At one point in time or another, we have all had a ‘windfall of cash’ come into our lives. What I mean by that is you have gotten unexpected money, such as a bonus, inheritance, gift, etc. What you might not know is that how you relate to this money is different than how you relate to money you get from a paycheque. Let’s take a closer look at ‘Mental Accounting’ and why you think like you do.

What is Mental Accounting?

Mental accounting is the equivalent of financial accounting, said Richard Thaler, an economist at the University of Chicago who was the first to describe the concept of Mental Accounting/Spending and how it works. Basically, we all have tendencies to separate accounts based on the source that the money came from and what we intend to use it for. According to Thaler’s theory, individuals assign different functions to each account and different values (i.e. Rs 1,000 from a cash gift is easily spent, compared to Rs 1,000 from a job related source). The effect is usually irrational and detrimental on purchasing decisions and other behaviours.

Here is a simple example of how people determine the importance of each account and the negative affect it can have on their bottom line. You bought a TV and the price was Rs 20,000. The amount you had planned on spending was Rs 25,000. Thrilled with saving Rs 5,000 do you a) put it in a savings/mutual fund to earn you even more or b) you celebrate your extra Rs 5,000 with a new pair of fancy name brand shoes and a nice dinner for you and your friends? According to studies you will be dancing your way to a fancy restaurant with your friends.

The Down Side of Mental Accounting

As shown in the example above, the down side of mental accounting is that you categorize items without fully thinking things through. People relate to extra savings or cash gifts as ‘free money’ and use it ‘freely’ while still carrying around credit card debt. When a billionaire was asked what he would do with a Rs 4,600,000 windfall, he said he would pay off any outstanding debt and invest the rest into savings.

I am not saying you should not/cannot treat yourself to something special or nice. Mental Accounting does not have to have a negative impact on you. If you train yourself in thinking logically about your money and treat each dollar as hard-earned money, you will soon find that your ‘free money’ is making you a lot more ‘free money’.

Re-categorizing Mental Money

A great way to re-categorize your thinking or re-train your brain is to start asking yourself simple questions. For example, if you are getting a bonus, you can calculate the hours that you had to work in order to get that bonus, any overtime you had to put in, weekends worked, etc. It will get you in touch with the fact you have ‘earned’ this money, it was not just given to you. Make a spending plan for it. How much are you going to save and how much are you going to reward yourself with? Use InvestmentYogi’s Financial Planner to help you in defining your goals.

Thaler said, the alternative to having mental accounts is to ‘consciously’ ask yourself what every purchase is worth, than compare it with every other purchase.

Keeping the End Rupee in Mind

Regardless of the source of your money, keep in mind that money, is money, is money, is money. Get the picture! Money is money, regardless of the source. The value of it does not change. Being smart and sensible with ‘every’ rupee that ‘falls’ into your lap, you can steadily increase the ‘windfall’ that comes to you by investing and saving all aspects of income (gifts, lottery wins, and bonuses), which will add up to HUGE ‘winnings’ in the end.

Courtesy: InvestmentYogi

How to Be a Smart Shopper

Yogi — Fri, 18 Mar 2011 04:03:57 GMT

As an avid shopper, I love to get a great deal on anything I buy. Be it a book, electronics or a personal service, such as a haircut or massage. I often find I don’t have the time to hunt around or drive from store to store to find the best deal that can save me the most money. So, let me ask you this – “With a busy life, rising inflation and increasing shopping options, how do you get the most bang for your buck?”

Shopping smartly can save a person a lot of money. One of the most convenient ways of shopping today is online by using group buying sites, discount coupons or deals. The freedom and time saved by shopping the many offers and discounts on the internet will free up your time to spend with family and friends. Not to mention, the many extra advantages/savings by using online coupons. Let me share with you how.

The very nature of the online company’s business is to save their customers/users money. They do this by providing exclusive discount coupons or group deals on leading brands, air travel, restaurants, etc. The basic idea is that the online discount company has the power to buy in bulk. This makes it possible to sale at a lower or discounted price.

InvestmentYogi gives you a brief overview of some of India’s leading online discount stores and how to effectively use them.

Dealivore:

Company Overview:

What does Dealivore mean? A person who hunts good deals and grabs them before they can run out. The company’s motto is “Herbivores love vegetarian, Carnivores can't do without meat and Dealivores love deals. The best deal for every rupee they spend”.

How they get the deals:

Dealivore ‘hunts in packs’ and because of this they can guarantee the merchant the minimum amount of business and customers. If the merchant agrees to the terms, they get exclusive publicity and customers. At that point, they transfer the deal to you. You can enjoy “fun outings, hangout at cozy places, staying healthy and beautiful on your terms or gift your family or friends”.

How to use Dealivore:

Follow these simple steps to receive the deal of the day:

1. Browse the deal - Go to http://www.dealivore.com and click the city of your choice and browse the deals. The deal detail contains all the finer points about the deal.

2. Purchase online - To purchase you can click on Buy and purchase online using your credit card, debit card or net banking account.

3. Get the voucher - After purchasing online the voucher will be sent to you by email.

4. Redeem and enjoy - When you want to redeem the voucher- take the voucher and a photo ID card to the merchant. You have to redeem the voucher in a single visit.

They also provide instructions to purchase over the phone. You can go to the above Dealivore site for all the numbers and relevant information.

What to watch for:

These deals are limited in quantity so need to be purchased and used before the stock finishes and the offer expires. You can use the voucher anytime before it expires, which is typically three months. In some deals like movie tickets, they are time bound.

Dealivore sometimes has only one deal per day or week per city. They do this because focus is important and getting the right deal takes time. They want to be able to give their merchants and you “the maximum mileage for the deep discounts they are offering”.

Be sure to sign up for the Daily Alerts to get the best deals first!

Khojguru: Helping you Save Money

Company Overview:

Khojguru provides exclusive discount coupons from over 200 leading brands and retailers from various categories such as, air tickets, books, electronics, gifts, flowers, and even marriage. Their partners include Ebay, Yatra, Shaadi, Ferns n Petals, etc. They are not limited to online coupons; you will find coupons for physical outlets like Dominos, VLCC, Croma and many local restaurants too.

How they get the deals:

Very simply, Khojguru makes it a win-win for both customer and merchant by “providing a coupon that gives certain special privileges to the coupon holder, making the coupon holder feel special”. How this works for the retailer is it provides branding and promotion, a “footfall” at the actual premises or website and most importantly, “makes the sale happen”. The coupons are exclusive of any other sales, promotions or deals offered in the store or website.

How to use Khojguru:

Go to http://www.khojguru.com. There are three ways to use the coupons and Khojguru has provided simple instructions to help users find the method that works best for them. Below are the three processes:

SMS Coupon

1. Enter your mobile number and download the coupon as a SMS coupon on to your phone.

2. Show this coupon at the retailer to redeem it. The retailer may delete the SMS from your phone.

Print Coupon

1. Take a print out of the coupon.

2. Show this print out to the retailer to redeem it. The retailer may keep the printout with them.

Online Coupon

1. Click on the “Get Coupon” Button.

2. Follow instructions given on the right hand panel.

For all three processes, don’t forget to read the terms and conditions of the coupon. For SMS and Print Coupons, once downloaded the coupons are valid for 5 days only. If you miss this time period you will need to download/print coupon again. In case of any issues, Khojguru will provide a number in the sms or printout for you to call.

What to watch for:

With all coupons you need to read and understand the Terms and Conditions (T&C). The basic T&C with most coupons are, they cannot be used with other offers, there might be a specific offer, brand, menu item, etc. that the coupon is good for and the coupon needs to be presented BEFORE the bill is made. By not following the above you can put both yourself and the retailer “in a tight spot”. Also, keep in mind the 5 day expiration period.

For extra savings, make sure to keep an eye out at the bottom of the home page. You will find featured coupons, spotlights and deals of the day.

Upto75: Never Miss a Sale

Company Overview:

UPto75.com is a deal site. This means they offer deals, sales coupons, discounts and special offers that are currently on offer to retail buyers. The information is listed by product categories, brands, stores and localities. Users can easily pick the best deals in their neighbourhood. Shoppers are able to experience choices, avail unbelievable deals and most importantly, save money! “UPto75.com means discounts UP TO 75%”. Some of the deals available on UPto75.com include restaurants, health and fitness, clothing, computers, travel, airfare, electronics, furniture, etc.

How they get the deals:

UPto75.com gets it deals by working with other retailers, both online and local offline stores and posting information on their sales, offers, discounts, deals, promotions or stock clearances on their site. Basically, they do the leg work to find you all the information on various discount sale offers from popular retailers. UPto75.com does not sell any products or services. In order to use the desired offer you need to visit the store or make the purchase on the online site of the retailer. The information comes directly from the retailers in your neighbourhood, no third parties are used. How UPto75.com makes its money is through advertisements and listings on their site.

How to use UPto75:

Using UPto75.com is an easy process and requires little time. Go to http://www.upto75.com and choose the service/product you are interested in purchasing. You can search products by the Shop Name, Category or Brand. UPto75.com has also provided a detailed list of categories to choose from. After you have chosen your product/service follow these simple steps:

SMS Coupons

1. Click on the “Download Mobile Coupon” button.

2. Type in your mobile number and enter the code that is given.

3. You’ll receive your SMS Coupon in 5-10 minute.

Print Coupons

1. Click on the logo of the company.

2. Read the offer description and any notes that may be relevant to the Terms and Conditions.

3. Press the “Print” button and ENJOY!

What to watch for:

As with all coupons and deals, you need to read and understand the Terms and Conditions of the coupon. Make sure you use the coupon before the expiration date and always present the coupon BEFORE the bill is made.

Make sure you sign up for the Weekly Deal Alerts to help you get the most of this site.

Taggle: The Power of Group Buying

Company Overview:

Taggle can be quoted as saying they are “here to make life a little more fun and a lot more affordable”. They do this by Group Buying, which means they bring like-minded consumers together on one offer or deal. Taggle is a “new hot platform” that gives it users a unique buying opportunity on products and services ranging from wellness, travels, and fine dining.

How they get the deals:

By pulling together the minimum number of buyers they are able to create volume for the merchants and in return, the prices get slashed. In order for the special price to get activated, Taggle seeks a minimum number of buyers. Once they reach that number the deal “Goes Live”.

How to use Taggle:

Taggle works in 6 simple steps:

1. See – Go to http://www.taggle.com. Search their site for the offer or deal that you are interested in.

2. Buy – Once you find an offer, click “Buy”.

3. Share – Remember this is Group Buying, the more people buy, and the sooner the offer goes live.

4. Celebrate – Number is met, the offer goes Live, you’ve been informed - you now have the right to redeem the offer.

5. Enjoy - Taggle will send you a voucher to enjoy the offer or deal.

6. Come Back – Group buying works by volume of consumers. By being a consistent buyer, the better deals Taggle can offer.

What to watch for:

Once you buy – no cancellations are possible. Offers are valid for a period of 2-3 months. And in the rare case that the minimum number of buyers is not met, the offer is cancelled. For cancelled offers, you won’t be charged. Any money paid will be promptly refunded to you.

A Little Goes a Long Way

When you shop online you save money and that increases your shopping power by adding rupees to your wallet. Most online sites have added bonus points or rewards when you register on their site. Again, adding more “bang to your buck”. Some sites will have daily deals for extra % off on already low prices, so be sure to browse and familiarize yourself with each site you are buying from.

In Conclusion

As a shopper, I love the power and freedom online shopping provides. I often find products and services at a fraction of the price that I would normally buy them for. By using online discounts and coupons, I have been introduced to new restaurants and shops in my local area that are now my favourites. The deals, coupons and offers are changing consistently, giving me a wide variety to choose from. So, the next time you need a new DVD player, are planning a vacation or are looking for the latest local sales, try one of the above mentioned sites or the numerous other online sites that are available to you and put the extra rupees in your pocket or better yet in your tax saving mutual funds!!!

(Above mentioned websites were used to source information in article.)

Courtesy: InvestmentYogi

Make your credit card work for you

Yogi — Thu, 10 Mar 2011 04:45:06 GMT

For common people like you and me, the word “Credit” is something we do not want to be associated with and to add to this fear the daily headlines flashing “Credit Crisis” across some part of the world almost every other day makes “Credit” a taboo for us.

If used wisely, “Credit “actually can work for you. The credit card user profile assumed in this article is that of a “Transactor” (in the card business lingo), which means, you spend on your card during the month and use it to fund all your purchases, use the free credit period which is 17-55 days from the date of purchase and then on the payment due date pay up the “Entire Amount Due” (read not the “Minimum amount due”). Please ensure that you DONOT pay any interest charges, late fee charges, financing charges or any other fine print charges.

How to make your credit card work for you:

Step 1: Know Your Card

1. Scan the cards in your wallet

2. Check if you possess a master card or visa card and whether your card comes under the Silver/Gold /Titanium/Platinum bracket

3. Check the rewards earning structure for each of them. Which means, for every Rs. 100 you spend how many points the card company is awarding you? Also check for any specialty stores/purchases where bonus points are awarded.

4. Are there any additional features such as surcharge waivers on fuel, discounts on dining, flying etc?

5. The next step is to check the rewards redemption structure offered by your card. Do you have a cash back structure, redemption against fuel, air miles, and gifts/gift vouchers? Scan the lot to understand what interests you in the gamut of redemption options.

Although this seems like a lot of information to seek, it won’t take you more than a glance on the card company’s website or a single call to their customer service. Once you have done this preliminary scanning you would have a fair idea how many reward points each card in your wallet will earn for you and the items/options you want to redeem it.

Step 2: Maximize Your Reward Earnings

We do not advocate higher spending and thereby earning more reward points. This is a common pitfall for a credit crisis in our personal lives. The BIG assumption here is the expenditure stated below was earlier funded by you in cash or through net banking/debit card transactions.

Utility Bills

Why pay cash for your utility bills when your credit card company is willing to offer you a 17 – 55 day credit period. These include your Telephone, Electricity, Mobile phones bills etc. Set up a standing instruction with your card company and get these payments funded through your credit card. In simple words these utility bills will ensure you earn your quota of reward points without going on a gross spending spree.

Please note: Most of the card companies offer Utility Bill payments for free. But it is wiser to check once for any hidden charges associated.

Insurance Premiums

Most of us have some or the other form of Insurance Liability for which premiums have to be paid in a financial year and all Insurance Companies are generous enough to allow you to pay your premiums through your card. So take this opportunity and pay by card (if your card credit limit permits it). This allows your actual cash resources to earn an interest from the bank during the 17-55 day credit free period, as well as reward points on your card.

Electronic/Expensive Purchases

This is applicable only in those stores which do not charge you that 1-2.5% extra (esp. electronics stores) for paying through a credit card. Many big shopping stores don’t charge you, but it is wiser to ask before you decide to fund this purchase through your Credit Card.

Step 3: Making money out of Credit

To put a little bit of mathematics into the argument, assume you have a credit card which earns you 1 reward point for every Rs. 100 you spend and you have the following purchases lined up:

Purchases Total: Utility bills, Insurance, Electronics Items

Amount Total: Rs 81,000

Reward Points: 810

Interest Earned (17 days): 132

Interest Earned (55 days): 426

If your rewards redemption rate is Re. 1 for every point earned then you have Rs. 810 earned on your Credit Card. And in addition by using your card to fund these expenditures you would have earned an interest amount ranging from Rs. 132 to Rs. 426 in your savings account.

*17-55 days is free credit period provided by the card company (assumed). Interest is calculated as per the savings bank account rate of 3.5% p.a. calculated on the daily balance.

Other Benefits:

Most Credit Cards come with fuel surcharge waivers, discounts at select merchant outlets, ticketing fare discounts. Also, Master and Visa keep running a lot of offers from time to time, ranging from fine dining, and entertainment to free airport lounge access. It is good to know what the privilege you enjoy is!

And Lastly, The Ground Rules…

While you get ready to spend wisely and earn more through your credit card, there are a few things to keep in mind

1. Remember your Credit Card due date, pay on time and pay your complete outstanding.

2. Never exceed your credit limit. You may end up paying more in terms of Overdraft charges.

3. Keep the basic safety features of transacting with a card in mind.

4. Do not throw away the card transaction slips until the monthly statement has arrived and you have verified it. In case of online transactions make sure you save the transaction reference no. or take screenshots and keep a record of it.

5. Spend as much as you can pay. Avoid paying any interest, financing or late payment charges on your credit card at all costs.

Courtesy: InvestmentYogi

Vacation Planning

Yogi — Thu, 03 Mar 2011 05:50:51 GMT

Summer holidays are fast approaching and for a lot of working people this is just the right time to escape the routine life and go for a perfect vacation with family and friends. But a vacation in these times of high inflation can be taxing on the pocket.

Here are some tips and tricks which can help you plan smartly and save more.

1. Plan your vacation in advance - Before you start making phone calls to your travel agent, first chalk out the vacation plan. The idea is to plan in advance. Following are the steps involved in planning your vacation right:

-Step 1: Start with where you would like to go. Or look at what is being offered and choose one; Vacation ideas are everywhere on the internet.

-Step 2: Then set your date to travel.

-Step 3: You may book your trip yourself or book with a travel agency to save time and also money.

In case you are booking a vacation yourself - You may check the popular travel web sites on the Internet which offer special deals on hotel rates and transport. These websites bid with major airlines for cancelled seats at a discount for you.

You can also search the internet for tips from people who have already visited the place(s) where you wish to travel, to get a detailed idea of tourist attractions, restaurants, hotels and kid-friendly activities. You may also use e-Books on budget travel in regards to your place(s) of interest.

In case you are booking a vacation through a travel agency - If out-of-the-way travel is involved, it may be wiser to use the services of a travel agency. That's because a seasoned travel agent can give you tips and suggestions when travel brings you to new and unknown places. Research the travel itinerary, additional fees, if any. Ask about a refund policy and charges if you may need to change your plans in the future. Ensure you understand all terms and conditions. Make sure the travel agent is a company of repute.

Step 4 – Figure out the cost of purchase of the trip and what your monthly payment would be in order to build a corpus for your vacation. Alternatively, finalising the date for vacation would also depend upon the amount you would like to set aside each month in order to purchase the trip.

If, for some reason the prices or budget is not working out during the peak season you should try the off peak seasons. Off-season days not only are probably the best days for catching bargains, but your vacation would also be quieter and more relaxing without the crowds.

Step 5 - Start packing your travel bags at least a week in advance. Travellers in their last-minute hurry forget to pack basic things. It is unusual a plan goes all as planned, so anticipate hitches!

If you plan your vacation in advance, the savings are big. Delay in finalising the trip would end up costing you more in the form of highly-priced airline tickets and lodging expenses being uneconomical. However, booking too early also comes with pitfalls. On few occasions, there are chances of the trip getting postponed or cancelled.

Ensure you spare yourself an extra day or two if you're supposed to re-join your job or have an important business commitment.

2. Start Saving! – Planning in advance would give you enough time to layout a roadmap for your much-deserved/much-needed holiday. But committing funds at one time is a problem for most of us. One of the ways to overcome this hurdle is through SIP (systematic investment plan). Depending upon the date of vacation, you can start an investment (or open a separate account) where you can transfer a fixed sum on a regular basis. For example, if the tenure is 6-12 months, you can open a bank recurring deposit, or even try mutual funds depending upon your risk appetite and date of vacation. You can start-off by using any idle money lying in your savings account for this purpose.

Note: Whatever budget you allocate, it's always a clever practice to set aside an additional 10-15% to meet up with uncertain contingencies. It always comes handy. Ensure you also have a health/mediclaim/accident insurance policy or get one before your expedition.

3. Cut down on expenses – There are many ways in which you can cut down unnecessary expenses during both pre-vacation period and also while vacationing –

(a) Before you go on a vacation think about cutting down on excessive expenditure – such as eating out daily, watching movies at home instead of at a theatre etc. Such savings will be worthwhile for shopping at your travel destination. You may also consider inviting your children to start contributing to the vacation fund. This way, they too would learn a thing or two about money management.

(b) While on vacation, one of the easiest ways to cut costs is on transportation. For example, in case of a tight budget, save your money and take a road trip. Travelling by road instead of flight to a nearby destination can save you huge money on fuel and at the same time, gives you an opportunity to experience country life. You can even consider travelling in a group/with friends – a group can travel much cheaper than a couple. You can save even more if one person in your group is blessed with culinary skills!

Some of these tips sound intuitive but most travellers fail to plan in advance and pay much higher prices consequently. Keep these in mind and start planning right away. Have a great vacation!

Courtesy: InvestmentYogi

Track that Buck!

Yogi — Thu, 24 Feb 2011 03:27:15 GMT

Having bid adieu to 2010 and looking forward to 2011, one thing I would like to do better is “Fiscal prudence”. Be it in learning inflation management wiping off the tears chopping onions (getting dear at Rs. 50) or reading about the disaster management in the Euro zone.

And with it come my must-dos for 2011

Track those expenses - Microsoft Excel Rocks!

The credit card is a marvellous evil. Where 10 years back I used to tag along with my Mom dutifully ticking off the grocery list as one by one our bags were filled by the grocer and should the billing exceed the amount in hand, some items had to be simply done away with.

Today, all I do is stroll along with my super-sized cart and fill it with the vaguest of items which in some corner of my shopaholic mind, I feel I need and after I see them lying in dust for months, I think I could well have survived without those! Such is the recklessness brought in by the credit card and to fend against it is a challenge, not completely insurmountable though.

All you need is a tracker. Take 5 minutes off and scan all credit card monthly statements, make rows of expenses clubbed into categories with each column dedicated to a month and this will give you a picture where you are overspending. Although this is post facto but if you keep tracking those expenses zealously, the next time you visit the shopping market you will think twice before picking that bottle of unwanted sauce.

What this will also give you is a snapshot of how your various expenses have fared over time and any aberration will be noticed quickly.

What this will help you do is

-Keep a track of your expenses category wise and send you alarm signals where you need to deep dive further

-Give you an estimate of your expenses. When you want to draw up your detailed financial plan and keep 6 months worth of expenses handy, you will exactly know which number to look for.

Make Saving a Discipline

Fiscal prudence means in simple terms Inflow > Outflow and in simpler terms means that you save some portion of your salary in a timely disciplined way. Heard of “Systematic Savings!” SIPs, Recurring deposits all enable you to save bit by bit and you can bring that force discipline yourself by setting up an SI (standing instruction) in your account to ensure that within a week of you salary hitting your account, your savings have been shifted out and what is remaining is then the expense management zone. Here again an excel can come in handy.

Practice Goal Oriented Investment

Saving money by itself will be no good if you don’t know what you are saving for. This brings forth the question of what are your life’s goals. If you know that then how much you need and when will determine how much you need to save and where!

Simple terms, plan for retirement today! And keep those vehicles of investment distinct and different. Apportion a percentage of your savings to PPF, EPF and pension schemes such that they take care of you retirement corpus in a systematic manner. Likewise, Child care, education needs etc can be planned by investing through equity oriented SIPs, Gold ETFs etc. and your Recurring deposits or multi deposits can take care of liquidity needs.

By keeping your investment vehicles separate for different goals you can manage them better.

Actually, if you think about it all three points are a no-brainer, so are all tips on healthy eating and weight management. What is difficult about them is the ability to be consistent and disciplined and that is what makes any tracker/diet plan effective!

So Cheers and wishing you all a “Fiscally” Glorious Year Ahead!

Courtesy: InvestmentYogi

Understanding Credit Card Numbers

Yogi — Tue, 15 Feb 2011 10:13:27 GMT

Have you ever given a second thought to the importance of the numbers on your credit card and what they might mean to you? You might be surprised to know that each number has a specific meaning. By knowing the meaning of the numbers and following a simple test, you can avoid credit card fraud. Read on to find out more.

International Standards

Credit card numbers are basically drawn up by the International Standards Organization (ISO). All credit cards share many similar characterisations due to the ISO; such as the size and the placement of the numbers, emblazoned across the front. ISO is a standard-setting body of international representatives that help produce global standards, both commercial and industrial.

Why is ISO so important in our global market? They not only create standards for credit cards but magnetic-striped ID cards as well, allowing for easier processing and recognition. Not only do credit cards across the board share the same material that they are made from (PVC), they share a common numbering sequence.

Understanding the Numbers

A credit card can be up to a maximum of 19 digits long according to ISO standards. Below is a breakdown of the numbers.

1) The First Six Digits: The first six digits of your credit card is the Major Industry Identifier (MII) and the Issuer Identifier Number (IIN). The first number, MII, represents the category or system in which your credit card was issued. The MII together with the other five numbers identify the exact issuer, IIN. Hence, the first 6 digits of a credit card are known as the Bank Identification Number (BIN). The numbers lets the merchant know what type of card you are using and with some cards, even the currency that will be used. An example of the most popular cards are:

3-Travel and Entertainment
    American Express-34xxxx-37xxxx
    Diners Club-38xxxx
4-Banking and Financial
    Visa-4xxxxx
5-Banking and Financial
    MasterCard-51xxxx-55xxxx
6-Merchandising and Banking
    Discover- 6011xx

2) Account Number: The account number can be up to 12 digits. Each issuer has trillions of possible account numbers. The credit card account number is used to identify you. Each bank or card issuer will have various lengths and number sequences. In some cases, your account number can be broken down in to when your card was last issued, if it has been lost or stolen, how many cards have been issued to an account, etc.

3) Check Digit or Checksum: The checksum is an algorithm that was awarded a US Patent to an IBM Scientist named Hans Peter Luhn (1896-1964). The checksum is called the Luhn algorithm.

The checksum is used to confirm the initial digits of the card number. Benefits of using a checksum is that it prevents casual attempts to invent credit card numbers, as only one in ten will be valid. If the credit card needs to be manually recorded, the checksum will help to prevent mistakes.

How to Use the Checksum

Step One: Take the credit card number below and double every other digit from the right. (I got this number off an ad on the internet).

5424 1801 2345 6789

5x2=10; 2x2=4; 1x2=2; etc.

(You should come up with the following sequence of numbers – 10, 4, 1, 0, 4, 8, 12, and 16.)

Step Two: Add the new numbers to the un-doubled numbers. All double digits should be added as a sum of their digits. An example would be a 12 becomes 1+2.

1+0+4+4+4 + 1+8+0+1 + 4+3+8+5 + 1+2+7+1+6+9 = 69

Step Three: If the final sum is divisible by 10, then the credit card number is valid. If it cannot be divided by 10, the number is invalid or fake.

69÷10 = 6.9

As you can see, the number I got off the ad is a fake or invalid number. Grab a credit card out of your wallet and try this simple and fun test.

In Addition

Additional numbers on a credit card are the issue and expiration dates and CVV, CID, or CVC codes, which are security codes for various credit card companies. Not all credit cards will have the same sets of extra codes to identify if the card is authentic.

With a little bit of knowledge, you can find out a lot about your credit card.

Source: InvestmentYogi

10 Times When You Shouldn’t Use Your Credit Card

Yogi — Tue, 01 Feb 2011 06:13:38 GMT

It’s a world of plastic money!! With the swipe of a card, you could shop and dine at the best places or even plan a holiday. But plastic money does not always bring cheer to all. Spenders are often burdened with high bills and accumulated charges. InvestmentYogi explains 10 occasions when credit card usage should be restricted, to avoid the vicious circle of debt.

1) Cash Advance for Emergencies - Do not use your credit card for cash advances. It sure is convenient to withdraw that readily available cash through your credit card from an ATM or bank, but be aware; the interest charged is around 2.85% per month. With interest being compounded monthly, the effective annual interest rate thus works out to a whopping 38%. The interest on the advanced amount starts accumulating from day one. Also, a flat transaction charge of 2.5 to 3% of the amount withdrawn is levied.

2) Credit Card for Everyday Expenses - Avoid using your credit card as a substitute for cash. When making daily purchases like groceries, food or household requirements, it is better to use cash rather than your card, to prevent overspending. The convenience of a card over cash does exist but it is equally important to stick to your monthly budget. Try using your debit card instead.

3) While Travelling Abroad - Restrict your card usage abroad to necessities, such as hotel bill settlement etc. Credit card transactions abroad carry a 3% charge on foreign currency transactions. Further, any ATM cash withdrawal attracts approximately Rs 150 plus service tax, as charges. International credit cards are billed at the rate of exchange, prevailing on the date of purchase. Try opting for a prepaid currency card instead which could work out more cost effective, as the exchange rate applied is as on the date the card has been loaded.

4) Shopping for the Sake of Reward Points -Credit card marketers generally lure buyers with reward points and great deals. Do not use your credit card for the sake of just accumulating reward points as most likely, you would end up with not just high reward points but also a large credit card bill to settle.

5) When You Would be Unable to Pay-up Before Due Date - Banks have an interest-free period of 20-50 days. Avoid using your card, if you are not capable of repaying within this period. For credit card defaults, banks charge a late payment fee between Rs 250 to Rs 600 and an interest of 2.5% to 3% on the outstanding amount, from the date of transaction and not from the due date. In case, the minimum amount is paid, an interest of around 5% is charged on the remaining outstanding balance.

6) Exceeding Your Credit Limit - Do not use your credit card if you are close to exceeding your credit limit. Credit limit is the maximum credit card spending allowed by banks. However, at their discretion, many banks permit spending over the original credit limit, at an additional charge of 2.5% of the overdrawn amount.

By restricting spending to 40% of credit limit, it is beneficial not only for one’s overall credit score, but it also brings with it an easier bill to manage.

7) Online Shopping at Unsecure Sites - Professional hackers have malicious intentions of decrypting passwords and credit card information. Do not use your credit card for online shopping if the website is not secure or is unknown. Look for ‘Verified by VeriSign’ or similar signs to confirm safety of site before keying in sensitive credit card details. Secure sites are denoted with https in the address instead of the usual http.

8) Billing Dates of Multiple Cards - If you have multiple credit cards, do not use the card closer to the billing date but instead spend on the card that still has days left for the billing date. This will ensure you receive a maximum interest free credit period, of around 20 days to pay the bill, after the statement has been generated.

9) Impulsive Shopping During Discount Sale - Discount sales at shopping malls definitely are attractive. However, it pays to make wise decisions before making those purchases with your credit card. Do not spend beyond your repayment capacity and affordability. Differentiate between wants and needs and exercise responsible usage of your card.

10) Living a Borrowed Lifestyle - Do not use your credit card to buy things which you can otherwise not afford. It pays to maintain a household budget and stick to it, when spending on your credit card. Piling on unaffordable purchases is one of the quickest ways to end up in long term debt.

A Penny Saved is a Penny Earned!!

So goes the wise old saying. In today’s times, credit cards have become a necessary evil. Various service agencies such as airlines and hotels seek credit cards for their transactions. One must thus learn to use them properly by maximizing free interest periods, avoiding overspending and accumulating dues. With a little discipline, one can avail the benefits of not carrying large amounts of cash in one’s wallet and make credit cards a great convenience.

Source: InvestmentYogi