Month: May 2020

  • Managing Finances

    20 ways in which salaried class employees loses money

    1. Claiming company allowances and compensatory leave – Many employees do not read the fine print of the HR policies where the details of eligibility of claiming the allowances is given. Company allowances could be for travel allowance, cash allowance, meal allowance, stay allowance, per diems, compensatory off etc.
    2. Not claiming for Income tax rebates and tax allowances – Especially freshers do not understand the eligible contributions for 80C, 80D and other allowances under section 10. These directly assist in reducing the taxable income, and one must max all the possible sections to reduce the taxable salary and taxes.
    3. Charity – Most companies come up with the charity & other schemes where they ask employees to raise funds, many times they don’t provide tax certificate u/s 80G. If you have contributed, then you should get the tax certificate to claim tax deduction or else contribute to charity of your choice at individual level where you can get tax benefit.
    4. Attendance regularization – Many times employees forget to regularize their attendance, resulting in the loss of payment or reduction in leaves and entitled leave encashments.
    5. Salary slip reconciliation – Sometimes there can be some errors in salary credits, deductions, taxes etc. Check your salary payslip every month.
    6. Reimbursement claims – Many times, employees go out of office on tours, conferences, trips etc. on personal expenses and then forget to claim the reimbursement of those expenses and end up hurting their pockets.
    7. Not contributing to retirement – Especially young employees, wish to have more in hand salary component and hence do not opt for Employee Provident Fund (EPF) scheme and Employee’s Pension Scheme (EPS) contribution. More salary component means more expenditure in most of the cases in form of more taxes and lifestyle expenses.
    8. Health insurance – Most employers provide health insurance for your immediate family and also competitive rates for your parents without waiting period. If your parents do not have their insurance then it is best to enroll with such schemes, however read the fine print as there could be co-pay clause.
    9. Preventive health check-ups – Employees do not opt for health check-ups regularly due to procrastination and timely detection of lifestyle diseases such as diabetics, hypertension etc. goes unnoticed.
    10. Subscriptions & tie-ups – Some employers have tie-ups with certain retail chain shops, gyms, hotels, etc. Many employees do not smartly utilize this benefits to gain discounts, etc.
    11. Cheaper loans and competitive interest rates – Banks and other financial services employees get benefit of subsided home loans and competitive interest rates sometimes as low as 1- 3.5% against the market rate of 8.5%. Most employees do not use that benefit for fear of lock-in period.
    12. Advance salary – Some employees do not avail the benefit of advance salary when in need, they take personal loan which is at higher interest rate, thereby losing money on interest costs.
    13. Salary accounts – Many companies have salary accounts with top banks such as HDFC Bank, ICICI Bank, Citibank etc. which provide many benefits for corporate customers, many employees do not leverage that relationship and go for costlier options.
    14. Salary structure – Before signing the acceptance letter, one should study the salary structure and do the tax planning in the form of car lease, food coupons, etc. to get maximum benefit. Some employers allow employees to choose their salary structure once Cost to the Company (CTC) is fixed. There are other insurance which employers provide like disability, accident and loss of pay which differ from organization to organization.
    15. Negotiation – Most of the employees and largely women employees, fear to ask for a raise or negotiate the salary when the offer is made or during appraisals. Some lose out of joining bonus, buy out the notice period, some on designation and certain perks associated with it like company car, driver allowance, car lease etc. which could assist in reducing taxes. Make a strong case and negotiate while on job or seeking the job.
    16. Gratuity – Gratuity is tax free component of salary which is received once you complete 5 years of service. But did you know that if the employee completes 4 years 240 days, then too, they are eligible for that payout. Read your HR policies for further details.
    17. Resignation – Some employees do not negotiate the joining period and buy out by the new employer and also do not negotiate to waive off the notice period or salary recovery from the old employer, ending up paying for notice period shortfall.
    18. Severance packages – Most employees do not negotiate for severance packages if the terms with company gets bitter and they are asked to go. You have nothing to lose, once you are out of job, understand that.
    19. Transfer of EPF, Pension accounts – Many employees do not transfer the PF once they leave the organization, as the result lakhs of rupees are gone unclaimed. Also the interest on PF stops crediting in your account after 3 years if there is no credit by your employer. Many do not know this fact. In case something happens to them, their family is deprived of their hard earned money.
    20. Retirement benefits – Some employees do not claim their retirement benefits like insurance or medical facilities, superannuation, pension, gratuity, etc.

    Hope these pointers were helpful. Since you might have received your salary credit, this may assist you to make better decisions. Let me know your feedback.

  • Credit Cards, Recommendations

    American Express Travel Platinum Card Review

    As I love travelling and good hotel experience, I added this card in my portfolio of various credit cards.

    Product Features:

    Milestone:

    Spend Rs. 1,90,000 in a year and get Travel Vouchers worth more than Rs. 7,700
    Spend Rs. 4,00,000 in a year and additionally get Travel Vouchers worth more than Rs. 11,800. Get a Taj Experiences E-Gift Card worth Rs. 10,000 from the Taj, SeleQtions and Vivanta Hotels

    Annual Fee:

    First Year fee: Rs. 3,500 plus taxes NIL, if you apply using this link
    Second Year onwards : Rs. 5,000 plus taxes

    Key Benefits:

    2 Supplementary Cards at no additional cost
    24/7 Card Related Assistance
    Zero Lost Card Liability

    Highlights:

    • Enjoy 4 complimentary visits per year (limited to one complimentary visit per quarter) to airport lounges across India.
    • Enjoy complimentary membership to Priority Pass, with the US$ 99 annual membership fee waived off exclusively for you.

    Overall this card is excellent.

    Pro-tip: Use this card till the target of Rs. 4,00,000 is met.

    As per my experience, the points earned in this card cannot be merged with American express rewards card platinum charge card, as its a different category of card.

    American express gives a very good user experience and excellent customer support service and you should have this card if you love travelling.

    What are you waiting for.

    Apply here.

  • Investing, Managing Finances

    10 steps to align your finances

    As Indians, we have a saving rate of 30%, as per the data from the central statistical organization, in fiscal year 2019; compared to United States which was just 7.6% in the year 2019. We are ingrained since childhood to save for the future, however saving is just not enough, we should invest it appropriately. You spend so many years to build your career life, to get that income, but perhaps don’t pay heed on where that incomes goes. Financial Literacy is very important, and you just cannot take random tips from relatives, friends or follow blindly some investment advice given on television, print etc. Financial education is not taught in schools and colleges, yet money management is so important. You can’t outsource this, and it is important life skill from my point of view. Money management can be learned, it just needs your time and attention. Personal finance is very personal, however, these steps might be useful to start aligning your finances.

    Do finances together, it not complicated, take control and learn about money money management
    1. Have a financial plan – This is the first step for aligning the finances, as this creates a roadmap where the money should go. It should have all your financial goals, investment framework, financial strategies (paying off/eliminate debt, build and stick to budget, increase your credit score, etc.) asset allocation, investments (equities, fixed deposits, etc.), risk management by knowing your risk profile, asset portfolio (real estate, properties, etc.), insurance plan, and other important aspects related to your finances. Write your short term goals (0-12 months), medium term goals (1-5 years) and long term goals (5-20+ years). Know the future value of all the goals in present value and allocate the percentages of savings against each category and then decide what type of investments (i.e. equity, debt, fixed deposit) should you be making for each time horizon. For example, if your child is in 10th standard and you require to fund his college education then 6 months before, you shouldn’t invest that money in stock market. Another example if you are funding for retirement which is 30-40 years from now, then no point in keeping the entire money in Fixed deposits. Asset allocation is another important aspect here. Have a plan for appropriate mix of equity and debt in you plan. Usually the debt portion is your age and the equity portion is (100-age), however it depends on your financially position, current assets and time horizon of your goals. Your financial plan would give you and your money a clear direction. Revisit & update your financial plan annually or in case of change in any of the factors.
    2. Know your net worth – List down all your assets and liabilities at book value and estimated present marketable value. Assets are real estate investments, car, building, corporate fixed deposits, bank fixed deposits, shares, debentures, gold etc. Liabilities are mortgage loans, vehicle loans, items taken on installments, guarantees given to anyone’s loan, etc. If you do not know the exact market value, find out the nearest market value. Calculate the net worth by subtracting net liabilities by net assets at both book value and the present market value. This will also help to understand what price your assets has grown against book value.
    3. Insure yourself – The earning member in the family must insure themselves for at least 10-15 times of the gross annual income till the retirement starts or the person is financially free, to prevent the family from struggling from finances after that person is gone. Buy these policies online and early on to prevent paying high premiums. Pro tip – Make all the necessary disclosures such as preexisting illness, smoking and drinking habits, etc. even if it results in higher premium to avoid any claim rejections in future.
    4. Provide for health related contingencies – Even if you have corporate health insurance, then also insure yourself and your family by taking family floater policies and individual health policies for senior citizens. You should have a base cover of 20 lakhs and super top of 1-2 crores depending on the health condition of the family. Take into account the rising medical costs if you think this number is quite huge. Know these terms like exclusions, pre-existing waiting period (opt for the least waiting period), co-pay (avoid such policy if possible), sub limits (avoid if too many), special coverage (avoid if not needed e.g. maternity benefit if you already have children), etc. and read the fine print to understand what’s not covered, the benefits and always have health cash reserves handy. Port if your existing insurance policy doesn’t meet your requirements. Pro tip – Make all the necessary disclosures such as preexisting illness, smoking and drinking habits, etc. even if it results in higher premium to avoid any claim rejections in future.
    5. Prepare a budget – While everyone has a fair idea of how much was spend and how much they earn, unless you list down each and each expense. If you do not tell your money where it must go then you will not realize where it went.  Hence track your expenses for at least 3 months and then prepare the budget. Don’t forget to include taxes in the calculation, do the tracking on gross income and not on net income. Roughly, 50% of the incomes goes towards needs (groceries, basic clothing, rent, mortgages, bills and utilities, insurances, transportation, etc.), 20% towards wants (dining out, partying, vacations, weekend trips, events, shopping, hobbies, etc.), and 30% towards savings (debt/loans repayments, cash funds, liquid funds, health cash reserves, vacation funds, fun funds, retirement funding, child education, etc.). Label the expenses into fixed, variable, intermittent and discretionary expense. Fixed expenses are known expenses like rents, school fees, tuition fees, study classes, society maintenance charges, maid and cook expenses, etc. Variable expenses include groceries, electricity bills, gas, petrol, transportation, books, school and college related expenses etc. Intermittent expenses are expenses which pop up any time of the year such as repairs, maintenance of car, home, sudden unavoidable expenses, etc. Discretionary expenses include the expenses which you expend as per your wish such as gifts, birthday and wedding parties, dining out, weekend travel, dining out, etc.  You could further bifurcate this into money jars and separate the finances as per the requirement i.e. immediate needs and wants fund (55%), future retirement fund (10%), vacation fund (10%), child education fund (10%), cash reserves (10%) such as cash funds (6-12 months of living expenses), liquid funds (2-3 years of living expenses), health reserves (depending on health profile, at least 20 lakhs), and gifts and charity fund (5%) or your own personal allocation etc. This is a great money management tool. Whenever you receive a lumpsum amount like yearly bonus, income tax refund, etc., you and your money exactly knows where to go. This way you aren’t depriving yourself of anything but planning in advance. You can save up to 75-80% if you are aiming for financial freedom. Pro tip – All earning members should participant in the budgeting process for saving, spending and investments to a fair percentage, this helps to prevent high tax liabilities on one person and helps to accumulate assets for all members. This is especially for women who give all the money to their fathers and husbands to manage or in case they have to manage then just keep it in low interest yield savings accounts and lose opportunity to grow wealth.
    6. Use your credit card wisely – If you use the credit card towards all the possible expenses, then you get a complete picture of the spends and you can earn those points too. This is useful for funding your future travels without having a dent on your finances. It also assists to save by availing the discounts, cash backs, promotions, etc. Align your credit card billing cycle with your salary credit dates, so that you never miss that. Use CRED to pay and manage credit bill payments. Prudent credit cards usage helps to build good credit score and establishes credit worthiness, resulting in savings of lakhs of rupees by getting a better interest rate while availing a future housing loan. Pro-tip – Negotiate well and consider taking women home loan as it saves a lot of interest, even 0.25% over a long period of time is lot of money and at least pay 20% + down payment to reduce the loan amount.
    7. Automate everything – You have to automate your payments, savings and investments. As soon as you receive that salary or credit, allocate as per your budgeted percentages. Set with standing instructions, pay yourself that 30% + first, set up SIPs or schedule lump sum investments on shares or bonds, set up that cash funds, liquid funds, reserve funds, and contribute monthly towards it (remember money jars philosophy), transfer your expenses to joint account as per the share decided, pay credit card dues in full, set aside some money for cash expenses, save money for wants and desires as based your goals. Execute prudent goal based planning.
    8. Investments – Every member in the family must have investments in their name, this helps with better tax planning and in case things go bitter, then you have money to take care of yourself and your finances. Ensure that asset allocation of equity and debt is per your financial plan if not then rebalance your portfolio as and when needed. Invest according to your risk profile and ensure that you are investing in simple products which you understand. Do not chase that extra 1% and invest in the riskier investment like co-operative bank, get rich quickly schemes which gives higher interest rate. Return of capital is more important than return on capital. Any product which is complicated and you cannot understand is not worth considering as investment. Keep it simple. Consider the cost, time, liquidity and risk involved before committing your money towards that investment. Remember that whatever investment you chose, never lose money. Match your investments to your goals, and shift to low risk investment products when you come nearer to your goal. This is important aspect of goal based planning.  Look beyond fixed deposits and LIC for investments, as they would not beat inflation and not grow your wealth. This is where many people go wrong. Increase your financial knowledge. If you want to have equity exposure, go with low cost index funds. Do not mix your insurance with your investments. Get rid of the ULIPs, Child Insurance plans, Retirement plans, Endowment plans, etc. after calculating the Internal rate of return (IRR) of these products. You would be surprised that the cover given by these type of policies is so low and they do not give better returns too. Pro-tip – Before going full-on with investments towards long term investments, vacation fund investments, child education fund, etc. do consider repayment of all the debts including home loans if possible and save the lakhs of interest payments which would assist in building your wealth, as debt is secret destroyer of wealth.
    9. Track your progress – The first weekend of every month must go your tracking the progress and reconciling with the actuals. Take your credit card and your bank statements and classify each and every expense into needs, wants and investments and see how much did you stick to your budget. Track your no spend days initially and then set the days in your calendar for no spend days. Do not forget to reconcile your points earned through credit cards, debit cards, memberships, etc. Track your retirement contributions to Employees Provident Fund (EPF), Public Provident Fund (PPF), National Pension Scheme (NPS), Pension Fund (PF), too. Transfer your EPFs immediately when you change your job. Look critically into each item and see if you can do better by not expending towards unwanted or unneeded items. Cut costs brutally, look for reduction in variable and discretionary, expenses to begin with. Switch to unbranded items, stop impulse purchases. Schedule money dates, everyone’s buy-in is quite necessary to make this work.
    10. Filing of documents – Keep all the necessary documents in physical or soft copies for claiming income tax rebates, deductions and refunds. Also keep the spreadsheet for tracking all the investments, bank accounts, demat accounts, shares, bonds, retirement accounts, property details, nominations, passwords and let your family members know about it. Update this periodically and inform your family members from time to time. Make a will and get it registered.

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  • Credit Cards

    Credit Cards….A BIG YES

    Use it wisely

    Disclaimer – Only and only if your are financially disciplined then have credit cards, else it can be a debt trap and money losing instrument. 

    People believe that credit cards are bad for your finances. But to the contrary, it actually helps to earn money, save money and also to spend money wisely. There are so many benefits such as credit free period, building credit history or credit worthiness, discounts, cash backs, reward points, air-miles, etc.

    Decoding the credit cards basics

    • If you have your salary account with banks such ICICI Bank, HDFC Bank, Axis Bank etc. you can get your first card easily for free. Get it in your first job itself to starting building the credit history.
    • Do not be wary of paying credit cards fees, sometimes the value from the card is much higher than the charges. Understand the fine print, before you apply one.
    • Get credit cards via appropriate channels such as online applications, referrals from friends and relatives, credit cards desks in banks, airports, etc. Do not take t from random sales executive on road to prevent your documents from misuse or identity theft.
    • Use the cards diligently as if you are using your debit card or cash. Don’t indulge in unnecessary expenses to get into negative cash flow situation.
    • Pay all the dues in full. Do not jump to make the minimum payment due and think its sorted. You will have pay hefty interest amount on outstanding, and that’s the start of debt trap.
    • Pay the bill at-least 3-4 days before the due date to avoid late fees and interest charges. Change the billing cycle to match the salary credit period. As soon as you receive a credit, pay all the credit card bills. This way you won’t forget the payment dates.
    • Do not set standing instructions for payment of credit cards and just forget about it. This could make you complacent and you might end up paying the extra charges and expenses which you might have not incurred.
    • Always read the statement, check the important details, each charge item, due date, rewards points, promotions, etc. to be on top of your finances. It will help you to identify the unnecessary or impulse expenses which you might not find out when paid in cash. This helps in budgeting too.
    • Have multiple credit cards of leading banks and institutions such as HDFC Bank, Citibank, SBI Bank, Axis Bank, American Express etc. to take advantage of the various promotions and cash backs.
    • Increase your credit limits or card upgrade as soon as you get that message/ email. This would help to decrease your credit utilization ratio and increase your credit score.
    • Once you use the card diligently for 6-9 months, ask for upgrade and limit enhancement by submitting income and tax returns proofs or credit card statement of another card to increase the chances of approval to maximize the value from the card.
    • Track the reward points monthly and redeem them well before expiry.
    • Explore all the possible redemption options and maximize the value. This comes more important while travel hacking by redemption of air-miles for a free business class ticket, first class or premium class upgrades, free hotel stays, etc.
    • Call the call center executives for limit enhancement, card upgradation, reward points reconciliation, etc.
    • Do not hesitate to ask or negotiate on reversal of fees or late charges, getting vouchers on renewal, interest rates on card, registration of promotion if not eligible.
    • Do not apply for multiple cards at the same time and be choosy on which card you want to take or keep. Map the features of the cards against your needs.
    • Every person has a different perspective, like I can manage with 15+ cards yet I don’t default. Manage multiple cards through spreadsheets to track important details such as spends, reward points, etc.
    • Do not close the first card or one with longest credit history as it impacts your credit score adversely.
    • Be on top of your credit score by checking it at least quarterly. Good score helps in getting home, personal loans, etc. at cheaper interest rates and you can save lacs of rupees on it. It increases your negotiation power.

    Decoding the credit cards reward points

    Points are alternate currency
    • Always ask for card upgrade and gradually move to the premium card category to maximize the accumulation of rewards points.
    • Put all the expenses on credit card, even petty ones on the premium card. Do not use your debit card or cash unless unavoidable. Earn reward points each time.
    • Put all the big ticket expenses on white goods such as new car, appliances and accessories to achieve the spend criteria faster or making the most of promotions and earn more rewards points.
    • Recharge your wallet with your credit card. Earn reward points there too.
    • Register for all promotions, offers, etc. Talk to call center executives, if you have any queries on promotions or eligibility. Sometimes you might assume certain things and lose out due to misinformation or confusion.
    • Transfer the reward points or air miles to the airline or hotel partners during promotions to get value multiplier.
    • Use CRED to pay the bills, and earn points there too. Don’t worry its safe. Register using the link if you haven’t. https://cred.onelink.me/spQx/b5f0c2a7

    Decoding other credit card benefits

    • Use cards that offer cash backs, discounts, zero interest EMI schemes to reduce your spend.
    • Avail domestic lounge benefits and enjoy the buffet meals and desserts on the airports.
    • Take priority passes for accessing international airport lounges, hotel memberships, and even golf lessons (if interested) to maximize the value.
    • Avail benefit of meet and greet facilities to meet your favorite celebrity when these card companies organizes such events.
    • Make use of the concierge services to book hotels, reservations, planning for travel, etc.

    Hope you could get some insights and unspoken rules of credit cards. Let me know the feedback in the comments section.

  • Managing Finances, Saving

    20 ways to save your grocery bill

    Money saved is money earned

    There are smart ways of savings on the grocery bills, without compromising on the purchases you need. Lets take a deep dive.

    1. Prepare a list before shopping : Whether you shop online or in the stores, always check what is needed in the kitchen. Scan through your storage boxes to see whats already there, otherwise you would end up buying the same item again. Stick to the shopping list once ready.
    2. Plan budget : Not more than 10-15% of your monthly expenses should be spent towards grocery bills. Plan the budget. Do the calculation and have a number in mind and purchase within that.
    3. Meal Plans : Always have a weekly or monthly meal plans in place and then buy as per the meal plans. Don’t buy when you are hungry, otherwise you would pick up ready to eat foods, unhealthy chips, etc. Many times, people pick whatever is available on the store and then stock it, and end up throwing it away when unused.
    4. Buy as per yours needs : Do not buy what you don’t need. Just because there was an offer or promotion running, you don’t want to stock up and spend money on unwanted items.
    5. Buy organic : Opt for the organic versions of the food grains, pulses, vegetables, etc. It would seem as a pricey today, but in the long run it has many health benefits and save on the medical costs. There are farmers’ markets, big basket and many other options are available these days.
    6. Don’t waste : If you are not able to finish the prepared food at one go, then be innovative and create frankie, briyani, and other recipes with left over food. Do not throw it. If that is not possible, at least give the leftover food to the security personnel or food collection centers for giving it to the needy.
    7. Grow at home : There is no pleasure ever, than watching your plants grow. Plant your vegetables, herbs and micro greens at home. The concept of kitchen gardening is slowly gaining significance. Even you can grow collectively in the society compound if you have people with similar interests.
    8. Buy online : Always try to buy online, as the chances of impulse buying are lesser there. In departmental stores, they use customer psychology and marketing techniques such as display, promotions, freebies, and other offers, which result in buying items which you don’t need.
    9. Buy seasonal fruits and vegetables : Always buy seasonal fruits and vegetables, because they are fresh and healthy. It is available in bulk and hence the price is not high, they don’t dent your pockets too.
    10. Buy local : Don’t increase your bill for imported products like Californian almonds, Kashmiri apples, etc. Try to buy foods which have traveled less to reach you i.e. food mile is less.
    11. Avoid packaged foods : There are a variety of packaged and frozen foods which are very costly and unhealthy as they contain a lot of preservatives. Cook home made food, try OPOS (One pot One shot) techniques for cooking, slow cooking, etc.
    12. Explore options : Don’t always buy from the place which you always do, explore cost savings options, like switch from local departmental store to online purchases.
    13. Use coupon codes : Always check if there are coupon codes available on using certain credit cards, discount codes, etc. This helps to reduce the bill for at least 5-15%.
    14. Buy all at one go : Generally during the start of the month, there are many spend based offers which are running, leverage them. For e.g. Big basket (1-5th), Amazon Great Indian Sale or monthly Maha Bachat offer, etc.
    15. Buy unbranded products : There are many substitutes available in market for everything. Some of the products are as good as the branded ones but cost less. E.g. Big basket, Reliance Smart, etc. have their own products which are sold cheaper on their websites or physical stores.
    16. Memberships : If you are a loyal customer of a particular brand, then you should always subscribe to the membership plans. Most of the times these are free or pay back the nominal fee charged. Earn the points on every single purchase and track the expiry of those points. Redeem when the points are sufficient enough.
    17. Affiliate websites : There are websites like Timeprime, Cashkaro, Intermiles, Smartbuy etc. which give the points or cash discounts when the purchase is routed through their websites. Explore such options if you are a member with them.
    18. Sale Offers & Promotions : In case there are certain anniversary sale offers, Amazon Big Sale, Big Basket Independence sale, Grofers sale, then plan to buy the regular items for 2-3 months in advance, if the deals are really good. This saves a lot of money.
    19. Payment Options : Use the credit cards and earn those points and sometimes discounts. This would help to achieve the spend criteria of the card on certain cards. Sometimes are are offers on wallets, like patym, lazypay etc. In such cases use the credit card to charge the wallet either before or after the purchase is made. This way you get benefit of the credit card points and discount from the wallet also.
    20. Carry your own bag : If you shop from malls, departmental stores, then always carry your own bag. It will save the environment and also reduce the garbage at home too. It would add the surcharge on your purchases.

    Hope those tips were useful. Please comment below if it helped you.