Saving and Investment

December 31, 2013

Most of the time, I pen out the ideas running randomly in my brain. This time it’s different. This post is dedicated to all my blog readers. I ask all of you to tell me the following.

Are Saving and investing same things?

Are these synonyms to each other?

If these are different, then do tell me what is saving and what is investing?

What ‘ll you define as saving and what ‘ll you define as investing.

Please feel free to pour your thoughts in the comments section below.

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SBI Max Gain Home Loan – Video

October 25, 2013

Dear friends, I have uploaded a Video on SBI Max Gain. It’s the very basic video and just the first one on SBI max Gain. based upon your queries, comments, views, I intend to produce more videos to simplify the concept of SBI Max Gain.

 http://youtu.be/wLJDK42GeCM

Please feel free to share your comments as usual.


Importance of correct BLD

September 15, 2013

First of all let me share, what does BLD mean in the title of this post.

B stands for Breakfast

L stands for Lunch

D stands for Dinner

Now my readers may ask, where does BLD stands in the discussion related to personal finance? Before I make any comment, Just look at the picture below.

1176347_146104045598554_714809520_n

What do you people interpret from the above image?

There is an old say, Breakfast like a KING, Lunch like a PRINCE & Dinner like a BEGGAR. Can you people recall all the knowledged shared by Doctors and many others for our food habits? How & what should be our Breakfast or Lunch or Dinner? All that gyan is displayed in this one picture. As the old saying goes, ” A Picture is more than the 1000 words.”

Yes I do agree, a picture is more than the 1000 words. So it’s important to have a good, proper Breakfast followed by a little lighter Lunch & finally the very small and easy to digest Dinner. Now compare it with your financial life, the morning time i.e. Breakfast time is the time, when you are young, just into you first job, without any responsibilities, no dependents. This is the time to start working heavily for your future. Invest maximum part of your income to create a corpus which ‘ll help you in future consumption. The good start made by you during this time ‘ll ease out the pressure from your life in later part.

The Lunch time is actually your middle age, when family size is increasing & from 30s to end 40s you are too busy with family, kids, home loan, car loan, education of kids, career of kids. At this point, you need to assessed your situation & still keep on investing a good part of your income. Your Risk taking ability ‘ll be a bit lower So Debt part in your portfolio should increase.

The Dinner time is actually your pre & post retirement years, where your primary aim is to live a healthy (financial) life. The Debt part ‘ll be higher at this time but still you need a support of light Eq. This is also the time when you ‘ll start redeeming the rewards of your initial hard work. Your risk taking ability is very low or near zero at this point of time and preservation of your created capital is of prime importance for you now.

So What’s your view on CORRECT BLD? Please do share in comment section.


Base Rate v/s Bank Prime Lending Rate

August 14, 2013

Many a times people are not aware of Base rate & Bank Prime Lending Rate while deciding their loan. What do these rates mean? What is it’s impact on their personal loan? Which is good or bad from the two? In this article I’m trying to differentiate between the two rates.

What is Base rate (BR)?

Base rate is the interest rate below which a bank operating in India can not provide loan unless any specific instruction is given by RBI or Govt. of India. It’s the minimum rate of Interest allowed to charge from the borrowers of the bank.

What is Bank Prime Lending Rate (BPLR)?

BPLR is the rate at which, a Bank is willing to lend to it’s most trustworthy, low risk customer. However often banks lend at rates far below this BPLR. For example, most home loan rates are at sub-BPLR levels. Some large corporates also get loans at rates substantially lower than BPLR. For all banks, BR will be much lower than their BPLR.

The Pain of BPLR?

Earlier almost all banks were adopting a common practice of increasing the BPLR when the over all interest rates in the economy are inching up but when the reverse was happening e.g. interest rates were coming down, the reduction in BPLR was either not done at all or not regularly. Instead of reducing the BPLR, the banks were ready to offer a higher spread (difference from BPLR) to it’s new customers (Mainly home loan customers). this was creating a lot of pain & unfair disadvantage to old customers as their loans were running on higher rates due to lower spread from BPLR & thus were not getting the benefit of low interest rates. To control these malpractices of banks, RBI came forward for the rescue of helpless home loan customers.

RBI Introduced Base Rate & made it compulsory for all banks to offer all new loans to be linked to Base  Rate from 1st July 2010. Also to save old customers, the conversion from BPLR to Base Rate was allowed free of cost. RBI gave free hand to each bank to calculate & declare it’s own BR but it was a more transparent number than BPLR.

How often can a bank change its BR?

A bank can change its BR every quarter, and also during the quarter.

What does it mean for corporate borrowers?

Under the BPLR system, large corporates who enjoyed rates as low as 4-6% will be hit since from July 1 no bank can lend at rates below BR. However, there is a chance that some corporates, with low-risk profile, would get a lower rate under the new system as under the BR regime banks are expected to take into consideration the risk levels of the borrower.

What does it mean for retail customers?

The impact could be an increase or decrease of 25 basis points (100 basis points = 1%) compared to the current rate of interest they are enjoying. However, existing customers will not be impacted by this change.

What does it mean for the banks?

Banks’ net interest margin will be unaffected.

Can a customer move from the BPLR to BR regime before the expiry of the current BPLR-linked loan tenure?

Yes, RBI has mandated clearly that all old customers should be given the choice to move/switch to BR linking of their loans if they so desire. For customers, a shift before the expiry of the tenure of the existing loan will make sense only if the BR-linked interest rate is lower than the BPLR-linked rate.

Although here is one interesting thing, housing finance companies like HDFC, LICHFC, Indiabulls, Dewan etc. are still charging BPLR linked rates as these are governed by National Housing Bank & not by RBI. So in case you have taken your loan from one such housing finance company & not from a bank, this Base rate thing is not applicable to you.

 

So what are your views on this article? Please feel free to share your views, queries in the comment section below.


Succession Certificate

August 1, 2013

I Thank Mr. Ashok Kumar Anand for giving the Idea of this article. He posted a query in our FaceBook group.

He posted a basic query as below.

Could someone pls guide me :-

1. What is a succession certificate?
2. How to obtain it?
3. What supporting documents are reqd to get it?
4. How many days it normally takes to get it?

Here we are trying to get answers for each query one by one.
Answer-1.
In the absence of a will, if there is no survivor amongst the account holders and a no nomination had been done by the holder(s) earlier, a Succession Certificate is the primary document through which the heirs can stake a claim to the assets of a deceased relative.
“A succession certificate, under the Indian Succession Act, is a document that gives authority to the person who obtains it, to represent the deceased for the purpose of collecting debts and securities due to him or payable in his name. It establishes the authenticity of the heirs and give them the authority to inherit debts, securities and other assets that the deceased may have left behind.”
Answer-2.
The beneficiary has to approach the district or the high court within whose jurisdiction, i.e legal territory, the assets fall (where the properties of your deceased relative are situated ) and file a petition for a succession certificate. Both these courts have concurrent jurisdiction, i.e they are both at par.  Depending on the value of the estate of the deceased, the matter shall go to the type of court, which can conduct cases for that value [This is known as “pecuniary jurisdiction” of the court]
Answer-3.
The petition should mention the relation of the petitioner with the deceased, details of other surviving legal heirs and beneficiaries, the time, date and place of death and also if he died intestate. You will also have to attach the death certificate and other documents that the court may require.
Answer-4.
The court, after examining the petition, issues a notice to all those concerned. It also issues a notice in a newspaper and specifies a time frame (usually one-and-a-half months) within which anyone who has objections may raise them. If no one contests the notice and the court is satisfied, it passes an order to issue a succession certificate to the petitioner. If there is more than one petitioner, then the court may jointly grant them a certificate but it will not grant more than one certificate for a single asset. For this you have to then submit Judicial Stamp papers of sufficient amount (as per the prescribed court fees structure) in the court, whereafter the Certificate is typed by the court staff, duly signed and sealed and delivered. If the petition is not contested then the court  should roughly take about 3-4 months (sometimes even 5-7) from date of filing to receive your certificate.
Once you have the certificate, you are authenticated to distribute the assets to the legal heirs as per the succession laws. Most people think that if the succession certificate is obtained then the person is the rightful owner of the deceased person’s properties, which is not true. A succession certificate allows the person to act exactly similar to how a nominee would act. It gives the authority to the holder for distributing the deceased person’s assets.
A Succession Certificate is not granted in cases where obtaining a Probate of Letter of Administration is necessary such as when there is a valid will.

We have created an E-book on Indian Succession Act 1925, The same can be downloaded from our facebook group.  

DisclaimerPlease do note, while efforts have been made to provide correct information, We are not an expert in legal laws and it is advisable to visit a qualified lawyer for information on such laws before making any legal moves. We do not take any responsibility, if you read this post and act based on it.


Financial Planning for WHOM? The Myths and Realities – 5

July 20, 2013

Regarding the Financial Planning, there are many myths in the minds of the common investor public. I’m trying to discuss some of these here. This is the Fifth & Final Article in this series.

Myth no. 5:-

Compounding is useless. It’s for poor or old fashioned not for us the younger generations. We can turn the things our way as & when we want to.

Reality:-

There is no substitute of compounding. Yes compounding is very dull & boring. Let’s try to understand it with this example. Just imagine if I ask you to put 1 Rs. in an square of a chess board & there after asking you to put, simply double the money in next square. Do you know what ‘ll be the result, at the end of all the 64 squares? Please look at this table to know the answer.

Square no.

Amount in Rs.

Square no.

Amount in Rs.

1

1

2

2

3

4

4

8

5

16

6

32

7

64

8

128

9

256

10

512

11

1024

12

2048

13

4096

14

8192

15

16384

16

32768

17

65563

18

131072

19

262144

20

524288

21

1048576

22

2097152

23

4194304

24

8388608

25

16777216

26

33554432

27

67108864

28

134217728

29

268435456

30

536870912

31

1073741824

32

2147483648

33

4294967296

34

8589934592

35

17179869184

36

34359738368

37

68719476736

38

137438953472

39

274877906944

40

549755813888

41

1099511627776

42

2199022255552

43

4398044511104

44

8796089022208

45

17592178044416

46

35184356088832

Now, I stopped here intentionally at the 46th Square. Do you know why? The reason is – the amount in 46th Square is 3518436 Crore. Why it’s important? My dear friend, do you know the size of Budget of Govt. of India in FY 2013-2014? It’s 2220619 Crore only. (source)

Now what this boring table indicates? This is the power of compounding that by the time, you reach the 46th Square, you have already surpassed the Budget amount for whole of India to be spent by Govt. of India.

You are still 18 more squares to calculate. Should I or you calculate any more? No it’s not required, I think. I hope, the very basic concept of Compounding is clear to you. If you give time, the money ‘ll grow on the basis of compounding.

OK, It’s about me. Agreed. Then what?:-

Please do not jump the gun. Take small steps, baby steps. Life is all about starting small. I know you are agree & now want to start your financial planning now. A word of caution here. “Over enthusiasm can actually do more harm than your inertia to take any action.” Let me explain a bit. Before planning anything, should you not check that there is water with you or not? Now as you have checked with yourself, that you are having the water & want to conserve it for your own betterment as well as for your family, your near & dear ones. The intention is not to make you a professional but an informed person who can make informed choices regarding his/her financial life.

This is the last article in this series. So what’s your take on this article? Can you face your own Myth for ‘Compounding is Nothing’ now? Can you now face some or all your Myths related to Financial Planning or Personal Finance?


Financial Planning for WHOM? The Myths and Realities – 4

July 14, 2013

Regarding the Financial Planning, there are many myths in the minds of the common investor public. I’m trying to discuss some of these here. This is the Fourth Article in this series.

Myth no. 4:-

My friend/uncle/neighbour/broker…… know some tricks/tips/shortcuts & on acting these I can mint a lot of money.

Reality:-

NO. There are no shortcuts for a good financial life. Slow & steady wins the race. The initial burst may create an illusion that you are doing good but at the end of the journey you ‘ll realize that you were not doing good at all. One more old known story here.

The Rabbit & the Tortoise:-

tortoise_hare

At the start of the story, the Rabbit was clearly in lead but the Tortoise, kept working hard & what was the end result? We all know it. Same is with your financial life. The person working on such tips/shortcuts may get ahead but in the long run, only the TORTOISE ‘ll win. So what’s the lesson here for you. Start small & simple but keep doing it without fail. the fruit of your hard work ‘ll come to you.

So what’s your take on this article? Can you face your own Myth for ‘Need of  Tips & Tricks’ now?