Live the life King Size not with Loans - 2

In the last article we had seen about the loans and credit cards, in thisarticle we will see about how these EMI's are coughing up pur lives if not paid properly.

Life had become an EMI

Let us see the number of loans available in our lifetime to live an easy life,

• Education loan
• Personal Loan
• Credit card
• Home Loan
• Reverse Mortgage loan

For many EMI starts in their life with education loan, once the education is completed it then turns to getting a job and closing out this education loan. Life becomes a full circle once you get money in your hand and the immediate joy would be to buy things which we have longed as a teenager and start splashing money.

Now once the education loan is closed, thoughts move towards taking a personal loan as the credit card EMI’s has become a huge hill from being a mole as monthly expenditure had increased gradually. Now paying this personal loan due will be a regular expenditure and once this is about to get closed, marriage comes across and obviously the personal loan needs to be taken to have an above average marriage among peers.

Now being a family once we start a new life, new home needs new things and those EMI’s get added to monthly budget. Life gets moving all these days, slowly with kids and with family and peer pressure we are forced to buy a home. Absolutely this will also be above our buying capacity as we have home loans to cater. This home loan will take around 20 years to close and we never think about other luxuries until we close this. Now at the time of closing we would have reached near our retirement life and have kids who had grown reaching the college or finished their college.

Again no worries, we have reverse mortgage loan which is easy to obtain to have the retirement life as easy as you have wished. Based on the net worth of the home you can get a lumpsum or spread out across the years as you wish, once your lifetime is over the lender will take over your home. The only condition is that you need to maintain your home in good condition and any changes should be informed to the lender in advance.

Now looking back in whichever stage you are now, it is easy to completely live the life you had thought off in loans or financially stable and luxurious life.

Risk of living this life with loans:

It is easy to live this kind of life as you have loans available in each stage of life, but the only risk is that if there is any medical emergency for yourself or your closed ones at any stage of life. Further when you are living on loans you can thrive to go to next stage of luxury by crawling, but when you are living a EMI free life, you can get things which was an aspiration once and have vacations which you have never thought off in your life.

   

Easy way to get rid of Loans

The only way to get a financial discipline in your life is to, start a recurring deposit so that you are saving some amount every month, once you have accumulated an emergency fund you can start planning to invest via equity mutual funds,

Monthly investment of 1000 over a period of 5 years can give you around one lakh which is difficult with any other type of investment. By getting a loan, you would have ended up paying the same amount to any of the lender as interest.

Live the life King Size not with Loans

                                                 

     

Many of the Youngsters never think of the future and live the present including the newly married. You will not be able to sell any product except tax savers as they pay for all the bills in the first week and rely on credit card for the whole month. We can discuss here about these and make you to take a right decision. Don't wait for fat paycheck to start your savings or investments, start saving from your meager income itself, let us go through on how to achieve it. You would have heard many tips already and read through many articles on the same, so am not going to list down points to follow or prepare a excel sheet to make your budget for a month, let us do a common analysis and try to follow a simple exercise and see if it works.

Many of us dont even think about the interest part while taking personal loans, everyone of us are happy that we are getting money immediately and paying off in easy EMI's. Let that be buying home appliances, bike or anything we tend to buy things in easy EMI’s. Every last week of the month will be difficult to go through with less amount or swipe in credit cards which needs to be paid once the salary is credited to your account. This cycle continues and over the time we are not sure on how to get out of this vicious cycle.

Before going through ways to have a better financial life, below products should be touched upon only when it is really essential in your life and not in any other circumstances,

Credit card:

Credit card and its effects on our spending habit has been discussed in detail in our earlier article, thus it should be used only when it is essential and not more than 10% of your credit limit should be used for purchases. All credit card companies will lure with cash back offers and 0% EMI, but it is upto you to decide on whether to get it and spend. Interest rate of credit card is higher and many may tend to argue that you are paying your dues every month but the luxury can be limited and bought only when needed and can buy by paying in full.

Personal Loans:

Your pay slip and credit card in some of the cases are more than enough to get a personal loan and there are many people outside your companies offering these loans like vegetable nowadays. Many living the days with monthly salary tend to get things with these personal loans which are easy to get, many marriages and many important functions are happening with this personal loans. Though there are many positive things with this loan there are some options which can be explored if any careful planning or our search towards better financial life would have lead us to better path.

Unlike Home loans which can be used for showing for taxation under Section 80 C, this does not have any benefits. Though Tax saver mutual funds offer the best returns as well as can be shown for taxation.

To be continued in our next article....

Plan your life style

Life style Planning is not something we plan but we automatically keep looking to do without our knowledge. Moving to a smart phone from Nokia basic model is lifestyle improvement. Driving our own vehicle from travelling in bus, train and autos is a lifestyle improvement. Some of these may be well planned by many but for most others it is like did I actually plan to buy all these things or just peer pressure which forced me to buy all these things still exists. There is nothing wrong in improving ourselves when we draw the required salary to it, but we should also make sure to sustain the lifestyle which we are moving in.

Are you planning in your life?

Most of our answer will be NO, but this planning was done for us on our behalf in our society. Right from schooling, taking up sports, joining a college and joining an office, everything takes place automatically and each of our parents plays a significant role in our career. It is due to them that who we are, but one thing which we fail to recognize from them is saving and investing which they did diligently without affecting their entertainment quotient in their life. Now in our generation there is much to enjoy, much more to travel, much more to see and much more to spend, but the only thing we never give a thought is saving even a meager sum from our monthly salaries.

Even if you say that, everything in your life has happened on its own, the concept of marriage becomes zero. So we can never deny saying that I don’t plan in my life. It is not that you need to compete with your peers in all aspect; it is just to make sure you are able to compete in your life and lead a good life. Everybody including financial advisors will recommend just making sure that money you earn is sufficient for your later stage of life.

What is happening at present?

Mobiles have revolutionized not only in the way communication takes place, but also it has influenced day to day activities in our life. Initially it has just eased in the way that people stay in touch, from that period to now in sharing daily activities to our dear and loved ones in other part of the world has become easier. It has lead to surge in so many apps and so much data to collect and analyze the behavior of an individual. Now with this data many are being hooked to shop online in mobile itself from groceries to tv’s and now even bikes.

The amount of bill payment via mobile has increased significantly in the last 3 years. This shows that people are moving towards spending and enjoy their life unknowingly. On the other side savings rate has dipped constantly among Indian’s over the last 5 years, though it can be attributed to inflation, lesser increase in wages etc.

How should I Approach?

We had seen how the investments should be approached (Investments, How should I approach) over a period of time in our previous articles. Leaving aside investment which many see as a big thing, buying anything should be seen with an eye of whether it is a need or a Want in our life.

Need

Want

                                                        

There is a clear difference between these 2, you may be in need of smart phone for calling, browsing, chatting etc, but you need to analyze whether you NEED a iPHONE or Android phone at half the price and even lesser. There are so many advantages in buying an iPhone but a decision needs to be taken on whether my life will be stable during any unexpected events. This is a mere example with phone, this need to be practiced in everyday life activity unless this becomes a habit. Am not asking everyone to become frugal all of a sudden, introspect this need and want at least on certain big ticket purchases.

Everybody knows who Warren Buffet is, the biggest investor of our times and now the philanthropist too, he is still leaving in a 5 bed room home that he had bought in 1958 for 31500$. Can you believe that he is the owner of 62 Billion$?

How to file financial complaints

           

When we try new things or even in our day to day activities some may work perfectly and some may require little tweaking be it any electronic equipment or any financial related activity. Just like software update for mobile if you do that activity it will work perfectly again, but if you miss those updates and postpone it, phone will hang, applications will not work correctly and so many series of unexpected issues may happen.

We buy insurance, stocks, mutual funds, so many products etc but if there is a problem in any of the service many of us will try to contact customer care and if the response is poor, we may try to escalate but may not know the proper routes. Let us look at some of the mechanism available to resolve your grievance for the below important ones,

Product\Service;

For any consumer durable products contact customer care, get your complaint registered, If your grievance is not resolved, take it to the supervisor and send an email & physical mail for documentation.

Still if unresolved, approach National consumer helpline 1800114000 and register your complaint it at www.core.nic.in. Finally you can approach consumer court in your locality were you don’t need any lawyer to start a case.

Stocks\Funds;

Any delays or mis-selling or fraud done by broker, contact the fund house or the company immediately. If your grievance is not addressed approach SEBI via www.scores.gov.in to register and track your complaint.

Finally you can approach consumer court in your locality were you don’t need any lawyer to start a case.

Banking;

 Most of the Banks have in house grievance addressable system and most if the issues will be addressed here itself. If unresolved within a month, approach any of the 15 ombudsmen whose address is listed in RBI website.

If not satisfied with the settlement file an appeal before appellate authority – deputy governor within 30 days.

Real Estate;

I believe many will have complaints in this category, though there are some grievance addressable system in many of the leading companies it can be said that it is dysfunctional. Next level can be CREDAI, NARDECO and national association of realtors etc.

Final option is civil or consumer court to get proper settlement.

Insurance;

First and foremost try to get it addressed with customer care. Then you can approach grievance redressal officer of the branch, still if you are not satisfied you can approach http://www.policyholder.gov.in/report.aspx#.

You can call toll free number 1800-425-4732 or send an email to complaints@irda.gov.in

Telecom;

Most of us would have had this problem with mobile networks and ended up changing number. Take up the issue with customer care, and then escalate it to nodal office of the network. The grievance should be resolved within 10 days.

If you are not satisfied go to appellate authority in your circle within 3 months.

Invest via SIP

 

Introduction to SIP

Sipping the coffee were ever you are brings in fresh energy and nobody can disagree, in a similar way make a SIP account to bring a new zeal to your savings & investment in your life. There is always a saying ‘A stitch in time saves nine’; similarly SIP in time can help you to save you from losing lots of money. Most of the time you would have heard about mutual fund, saving for a longer time, opening a PPF, for retirement etc, have you heard about delay cost which might affect your corpus in long time. We have numerous examples of starting early so that you can have a safe retirement and definitely it is not about getting extra pressure to save more it is just planning for your retirement. If you have doubt like "Should i start SIP ? " , Start a SIP soon so that you can avoid delay cost.

Delay Cost:

Delay cost can be clearly understood from the increase in inflation. Our daily so called health drinks had increased by a huge margin from the price it was sold years ago, the cost of living had increased incomparably in the last 20 years. So the need to save more for our old age or retirement age will also increase more, wont you agree?

What is the rate of increase of Tur Dal in the last 2 months?

What is the rate of increase of home rent in the last 5 years?

What is the rate of increase of your fixed deposit rates in the bank account?

And finally,

What is the increase of savings in the last 3 or 4 years?

Why SIP?

May be because of the below reason you can choose SIP route,

1) You aren’t savvy enough, SIP can bring in habit of saving at the minimum of 500

2) If you aren’t sure enough of goals, SIP can make you start separate funds which you can utilize

3) If you don’t know anything about stock market, you can invest in mutual funds based on certain parameters

4) If you are not sure about lump sum investment, definitely you need to go with SIP

HDFC Equity fund was started in 1995 and if any one who had just invested 1000 since inception would have ended paying just around 2lakhs and it is worth 47 lakhs. It brings in the Compounded Annual growth rate of 21%, can you imagine any other asset bringing in this much growth for this much longer period and with liquidity. Suppose if you were investing 2000 instead of 1000, you would ended up with 1 crore.

Choose a best fund and invest blindly to enjoy your future with comfortable and ease.