New Year Resolutions For The Financially Fresh

We all have dreams, be it owning a car, a house, child attending a prestigious college or building a healthy retirement corpus. But we seldom pen down these goals and work towards a plan for achieving them. These can be termed as your life goals.

A Plan For Dealing With Unplanned Expenses

We invest to meet our goals and aspirations. It is important to nurture and protect these investments from disruptive emergencies. Find out how...

We save and invest to secure our future. But we may be overlooking the one thing that can undo all these efforts: an emergency. Think of the times when you had to use your already overdrawn credit card to meet a medical emergency or when you had to sell, maybe even at a loss, the investments you had been building for long to pay that equated monthly instalment (EMI) and the effect it had on your finances and goals.

Five Tips For A Low-Budget Wedding

Indian parents spend a fifth of their life savings on their children’s weddings. Expensive weddings are encouraged and seen as status symbols. Take stock of your financial position and estimate the amount of money that you can comfortably spend.

Ideally, you must start saving for a wedding months or years in advance. A dedicated wedding fund helps you prepare an adequate corpus for the wedding without disturbing your investments and savings meant for other goals.

The Good & Bad Of Financial Habits

We are creatures of habit, even when it comes to our money matters. While some habits can pave way to wealth and prosperity, others can lead to financial ruin. Sanket Dhanorkar provides a guide.

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Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. www.rwd.ecrmagic.com and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. www.rwd.ecrmagic.com, its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.
News Despatch
VOL IX, ISSUE IX
The start of a new year, also gives us a psychological chance to make a new beginning. The belief that we can make a fresh start is very powerful and goes back in time. The opportunity to clear our minds and give ourselves a new chance, should be used well. This is the reason why new year resolutions are popular.  

Now, new year resolutions are all about improving yourself, your life and the world around you. Would that ever be complete without ensuring that you are financially sorted? Or at least being on the path to financial well-being? Or at the very least, taking baby steps?

These three financial resolutions should be on your list

Resolution 1: Always spend less than you earn. It’s that simple. But with credit cards, and holidays, and all those shopping deals, it’s tougher than it looks. Practise asking yourself these three questions before your buy anything: Can I live without this? (Do I need this or want this). Is there a possibility that I won’t use it regularly?. Have I purchased anything similar in the past -  that is lying idle and wasted , or something that was not as useful as I thought it would be? If the answer to any of the three is yes, then you don’t buy. That’s’ how you can gain control over your spending.

Resolution 2: Set a savings target. Pick an amount of money that you would like to have left in your bank at the end of every month.  Reduce this desired bank balance down by 20-40%. This is your savings target. Now, don’t actually wait till the end of the month to achieve this saving. As soon as your salary comes in, move this amount to a recurring deposit or to a mutual fund SIP. Now your savings is done. Even, if you ever slip-up on Resolution 1, Resolution 2 has your back.

Resolution 3: Act & Make ONE financial decision. This is further to Resolution 2. The best way to get smarter with your money, is to start taking baby steps. If so far, you have shied away from all financial topics and decisions, this is the year to gather courage and take your first step. Make a small financial commitment – whether it is a tax-saving ELSS or a term insurance, read-up about the options and alternatives, consult your friends, family and financial advisor, and then sign the paperwork. Small decisions help build your confidence for bigger decisions tomorrow like buying your own home, or buying stocks. Now you are all set for making meaningful New Year Resolutions, that you can successfully achieve. Wish you a great year ahead!

The author is founder of www.finmitra.com, an automated personal financial advisor.

Source:moneycontrol

We invest to meet our goals and aspirations. It is important to nurture and protect these investments from disruptive emergencies. Find out how

We save and invest to secure our future. But we may be overlooking the one thing that can undo all these efforts: an emergency. Think of the times when you had to use your already overdrawn credit card to meet a medical emergency or when you had to sell, maybe even at a loss, the investments you had been building for long to pay that equated monthly instalment (EMI) and the effect it had on your finances and goals. The way to protect your financial security is to ensure that you are in a position to meet your essential expenses and emergencies without disturbing investments and savings earmarked for future needs, even if your regular income stops or reduces for any reason. You do it by building an emergency fund.

Why an emergency fund?
Your income is earmarked to meet your regular financial obligations. This includes the living expenses, repayment of loans and planned savings and investments. Your savings and investments are spoken for to meet your goals. You would have invested in long-term investments and there may be a penalty or loss of value if they are withdrawn earlier. A loss of job, a cut in income, an unforeseen expense—are all situations that call for access to funds that can help you tide over the shortage of income.
You cannot forecast emergencies and unplanned expenses, but you can estimate what you need to take care of your regular expenses, including loan repayments. Ideally, you should prepare to set aside funds to cover at least 3 to 6 months of expenses.

Use with discretion
The emergency fund is not for you to spend as you please. It is for use in an emergency or to meet essential expenses. If you use the fund at any time make sure you replenish it as soon as possible. As your income and expenses go up, your emergency fund requirement will also change and you will have to top the fund periodically. The emergency fund is your primary protection against vagaries of your income. Use it with discipline so that it serves the purpose of giving you financial security.

Source: LiveMint
Indian parents spend a fifth of their life savings on their children’s weddings. Expensive weddings are encouraged and seen as status symbols. Take stock of your financial position and estimate the amount of money that you can comfortably spend.

Ideally, you must start saving for a wedding months or years in advance. A dedicated wedding fund helps you prepare an adequate corpus for the wedding without disturbing your investments and savings meant for other goals. Once you are ready with the corpus, you can move to the next step of budgeting & spending.

1.Prepare The Wedding Budget:
There will be expenses on lodging and catering for guests, transportation, ceremonial preparations, jewellery, clothing, decorations and gifts. You must make an estimate for how much you wish to allocate for each of these broad expenses. Try not to allocate more funds than what you have decided.

2.Raising The Funds:
Once you have decided on the wedding date, start saving for it. You should put your money in liquid instruments that offer safety of money and instant redemption. Park your bonuses, and seasonal earnings in an account dedicated to expenses, to make getting to your target corpus a little easier.

3.Have An Off-Season Wedding:
Marriage halls and wedding service providers are hard to get during the busy wedding season. Howe about an off-season wedding? This would be a time when marriage related services are not much in demand and bookings may be cheaper.

4.Head To The Courthouse:
Even temple weddings aren’t the compact affairs that they used to be. Getting married in a courthouse should be the way to go if it’s a lean wedding you are looking for - a small, intimate event, with close family & friends. Complete your signature and paperwork at the court, and head for your wedding day lunch. If you are still undecided about whether to have a large wedding or a compact one, just calculate the potential costs of a large one.

5.Control The Menu:
Food is a very large and very important part of Indian wedding experience. Unfortunately, it is here that there’s an enormous amount of wastage. To reduce wastage, prepare a compact menu that covers the essentials of a wedding feast but leaves out its excesses. A clean, healthy meal will matter more to your guests than any extravagances. A careful headcount before the preparation of each meal would help reduce wastage of food.

Source: Financial Express
We are creatures of habit, even when it comes to our money matters. While some habits can pave way to wealth and prosperity, others can lead to financial ruin. Sanket Dhanorkar provides a guide.

Inculcate These Junk These
Review Your Portfolio
Keep track of your investments. If you don’t, you could end up with dud stocks & expose yourself to unnecessary risks. Weed out under-performers and re-balance the asset mix to keep the portfolio healthy

*A 5-10 % deviation from original asset allocation should be the tolerance limit beyond which you should rejig your asset mix.
Rolling Over Credit Card Debt
Paying only minimum amount due leads you into a debt trap that can take years to come out of. While you escape late fees, the card issuer charges a very high interest on the outstanding that keeps compounding. Always pay off the entire outstanding as quickly as possible.

* 36-45% is the annual interest unpaid credit card bills incur
Maintain A Budget
If you don’t keep tabs on your spending pattern, you will never figure where the leaks are & how can you plug them. Start by creating a monthly budget so that you know how much you can keep aside for discretionary spends after taking care of essentials each month.

*Follow the 50-20-30 rule to break up the total budget into fixed costs, investments & flexible spending
Overspending On Luxuries
Eating out often, catching a movie at the multiplex every weekend or going away for short breaks every now & then may give you a high, but will severely dent your savings. Outline a specific amount you can allocate to such spends in your monthly budget & stick to it.

* No more than 30% of your monthly budget can be used for luxuries
Create An Emergency Fund
A sudden illness, job loss or accident that keeps you away from work for a long stretch can severely dent your finances. A contingency fund will provide a buffer against unplanned expenses. Keep this money in a liquid or ultra short term debt fund.

*6 months worth of income should be kept aside in a contingency fund.
Neglecting Product Maintenance
Simple maintenance work on your car, air-conditioner, or even the house can save you a lot of money on repairs & replacements. Putting off routine maintenance will only leave you with a fatter bill.

*4-5 % is the cost of maintenance if you take into account the total cost of owning a hatchback over 5 years.
Have An Exit Strategy
Without exit strategies for your investments, you could either end up riding your winners for too long only to see them sour or get stuck with duds.

*20-30 % should be the stop-loss trigger for your equity investments
Using Credit Cards For Rewards
Avoid swiping your credit card for every purchase to earn reward points. Else, soon you would be living beyond your means. List the spends you can make with a credit card and those you cannot.

*Purchases worth Rs. 75,000 will probably fetch around Rs.450 equivalent of cash in reward points
Pay Your Bills On Time
Pay off bills as soon as your salary hits the bank account. If you regularly let payments run past the due date, you will rack up hefty late payment fees. Worse, your credit card will take a big hit

*Try & pay off bills 10 days before the due date
Using EMI Options For Credit Card Dues
This can cushion the impact on your cash flow but may be harmful if used often. You are likely to end up paying more than the actual cost of the item, which is the interest for the EMI scheme, apart from processing charges. Too many EMI arrangements can also hit the credit score adversely.

*Rs.1,10,209 is what you will pay in EMIs over 12 months for a principal amount of Rs.1 lakh (monthly EMI Rs.9074) assuming 16% rate of interest.
Be A Disciplined Investor
Since you cannot spend what you do not have access to, opt for automatic transfer of funds to your preferred saving instruments the minute your salary hits your account. Allocate a reasonable proportion of your income to this end.

*30-40 % of your monthly income should ideally be directed towards investments
Ignoring Credit Score
Every financial step of an individual is recorded in his credit history. Maintaining a good credit score is critical for availing loans when in need and at a good rate of interest.

* A score of less than 750 is considered a bad credit score.
Source: ET Wealth
Please do not reply back to this mail. This is sent from an unattended mail box. Please mark all your queries / responses to webmaster@ecrmagic.com.
Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. www.rwd.ecrmagic.com and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. www.rwd.ecrmagic.com, its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.