Categories: Financial Cocktail Samosas

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Always Pay Yourself First

Have you ever heard about the ‘Pay Yourself First’ strategy? It is a classical strategy which means that you should treat your savings as you do your living expenses — your savings is to be considered as a bill that you must pay, and this bill is to be paid before your living expenses.

The saved money is meant to meet your future goals, requirement, retirement expenses etc. People who use this strategy invest a minimum of 15% of their monthly realized income before they pay to the sellers of their food, clothes, home and credit etc.

On the other hand, your total loan EMIs, including Home loan, personal loan and education loan, should not exceed 40% of your total monthly income. For buying a house the general rule of thumb is your housing costs not exceeding 30% of your monthly income. Lenders often approve borrowers for far more than that and borrowers avail it as an additional bonanza!

No one knows your financial situation like you do — not even a lender. Be sure that the monthly payment for your home fits comfortably within your budget. And remember, your monthly costs don’t just include your principal and interest, you also have to account for home insurance and taxes, which can be more expensive than people realize.

You should also understand what is a good loan and what is a bad loan for you. A good loan helps you increase your net worth while bad one ultimately decreases it. Our CEO Col Sanjeev Govila (Retd) spoke about the difference between bad loans and good loans, on ZEE Business show ‘Money Guru’ – Check out the video here

Please remember that people who are good with their money aren’t big spenders, and never buy what they can’t afford.

(Contributed by Shaheen Akhtar, Financial Planner, Team Prithvi, Hum Fauji Initiatives)

Manage your finances hassle free!

Most people scatter their investments in a manner that they find it difficult not only to manage them but even to track. If you wish to avoid such a scenario for yourself, there are certain principles you need to follow:-

1. First and foremost, identify whether you need that much of variety and diversification in your portfolio?

2. Identify whether the non-financial details (bank account, address, mail ID, phone number, nominee etc) are correct and same in all your investments?

3. Preferably keep same bank in all the investments and route all the transactions including the SIPs through it in a manageable number of funds that you can track.

There are some basic tools that you can use to keep a track of all of our investments. This is going to make you feel independent and act independent.

1. Consolidated Account Statement (CAS) gives you a consolidated mutual funds holding and transactions details. You can use the registered mail Id to download the statement from the link: https://www.camsonline.com/Investors/Statements/Consolidated-Account-Statement

2. NSDL/CDSL Statement consolidates all your investments in the securities market which has been done on a particular PAN number. It includes investments in equity shares, mutual funds, sovereign gold bonds, corporate bonds, debentures and many more. For this report, you need to have a Demat account. This report is shared every month on your mail Id by NSDL/CDSL.

3. 26AS (TDS report) is a consolidated annual tax statement that shows the details of tax deducted at source, tax collected at source, advance tax paid by the assesses along with self-assessment tax. It can be downloaded from https://www.tdscpc.gov.in/app/login.xhtml

Do contact your financial planner in Hum Fauji – our aim remains not just to guide you but make you self-reliant too when you move forward in your financial journey and help you Keep your investment portfolios neat and clean!

(Contributed by Ayushi Gupta, Financial Planner, Team Arjun, Hum Fauji Initiatives)

3 Golden rules to Invest profitably

Chasing Rainbows is certainly interesting, but we all know it yields nothing. But many of us try and do it so very often.

We as investors are generally returns oriented, based on the belief that it’s the only way to achieve our future financial goals – the more we earn, easier it will be able to meet our future financial requirements.

Returns are important but our Goals are the actual reason we’re investing in the first place. When you chase only returns, you are potentially compromising your goals by taking more risk than you really need to. There is no way to avoid risk totally but taking more of it than the goals and timelines warrant, is like driving at 100 Kmph when your destination is just a few meters away. Be smart, chase your goals, not returns.

Another mirage that most people try to chase is timing the Market. Market timing is a strategy in which the investor tries to identify the best times to be in the market, and when to get in and get out. It is pertinent to note that changes in a market trend can appear suddenly and almost randomly, making the risk of misjudgment significant. It clearly shows that time in the market can be a better ally than timing the market.

The third golden rule to investing is having the correct Asset Allocation and having investing Discipline. Getting the asset allocation right is important. Every asset will not perform at every point but it offers diversification and provides a cushion when one asset under performs. Aim is to have at least one asset class perform in your portfolio at any given time. Overall portfolio returns are more important than trying to have every asset class perform all the time, which will never ever happen.

Disciplined investment, proper asset allocation, and periodic reviews are what are needed to ensure that one’s life is well funded.

(Contributed by Kritika Saini, Assistant Manager, Team Sukhoi, Hum Fauji Initiatives)

October 28th, 2022
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Make the Most of the High Interest Rates

RBI’s actions have ripple effects on every aspect of your financial life, influencing how much you’re charged to borrow and how much you earn when saving. Even though red-hot levels of inflation has pushed up our monthly expenses, some investors have reasons to smile. 

Here are a few ways to situate your money so that you can benefit from rising rates, and protect yourself from their downside:

Fixed Deposits – Go short: The hike in repo rates has forced banks and NBFCs to raise their deposit rates. Even the government has raised the interest rate of Senior Citizen Savings Scheme to 7.6%. Don’t jump into a large purchase that isn’t right for you just because interest rates might go up in future. Investors should go for short-term Corporate FDs of 12-15 months and deploy for the long term when the interest rates have settled down.

Loan & Credit cards – Minimize the bite: If you’re carrying balances on your credit cards and loans – which typically have high variable interest rates – consider reducing the amount by pre-paying some of the amount. This would protect your wallet from upcoming high interest rates.

Stocks – Seek broad exposure: Typically financial service companies and banks do well in a rising rate environment because, among other things, they can make more money on loans. But if there’s a slowdown, their overall loan volume could go down. The idea of diversification is to hedge your bets, since some of those areas will come out ahead, but not all of them will.

Think short term: The past one year has not been very good for debt funds, especially long duration schemes holding very long term bonds. However, this doesn’t mean investors should dump debt funds now. In fact, this is the time to get into ultra-short and low duration funds because there is limited upside left in bond yields now. Also, during times of high inflation, indexation can reduce the tax to very low levels, ultimately benefiting you quite a bit. 

(Contributed by Priya Goel, Financial Planner, Team Sukhoi, Hum Fauji Initiatives)

Be transparent with Your Financial Planner as you would be with your Doctor

Do you hide your disease from your Doctor? 

Or do you hide the important details of your case from your lawyer?

Most people do not do that because they then put themselves in a big danger.

But then why are many people reluctant to disclose their financial condition like assets and liabilities, investments made, short term requirements, future financial goals, etc to their financial planner in a similar manner? 

Most people are aware that if they are to achieve their numerous life goals, financial planning is essential. Unfortunately, they egregiously downplay their own contribution to the financial planning process.

They are unaware that the information they do not give can destroy even a carefully plan. So, what is one supposed to do at various stages of preparation of their financial plan?

  • The Fundamental Step – Sharing your assets, liabilities, income expenses would help to make the perfect plan. Along with that, you also need communicate about your money habits, your aspirations, your career, and so on. A financial planner also needs to understand the client’s ambitions with their money and the rationale behind their priorities.
  • Right inputs – You could be asked to assign a priority to each of your goals by your financial advisor or provide you with rough estimates that you can work with. For example, if you want to go for vacations, a financial planner must know where and when is it likely to be in general so that the same can be factored in the plan. 
  • Disclosure of all Facts – Another crucial factor that could help you reach your financial goals comfortably is truthful disclosure, rather than hiding, of your assets or liabilities. For example, if you didn’t give out the correct and complete details of your DSOPF, FDs, real estate or Fixed Assets, the financial planner would make your Equity and Debt allocation incorrectly in your portfolio which will later hamper you meeting your requirements in future or not meeting your returns expectations.
  • Review of the Plan – As life progresses, there would be a lot of changes in aspirations, too. For example, you may have planned to buy a less expensive car after 5 years but after 1-2 years, you change your mind and now want to buy an expensive car. Conveying this to your financial planner about the recent changes and reviewing the plan is a must. It can help you prepare for your growing ambitions and also for any shortfalls in your preparation on the way to your financial goals.

(Contributed by Sweta Kumari, Associate Financial Planner, Team Arjun, Hum Fauji Initiatives)

Tokenization – RBI’s New Initiative to Safeguard Your Online Transactions

We all have seen how online payments have increased significantly over a period of time especially after gaining momentum post-covid-19. But with rising digital payments, there has also been a surge in online scams. In order to combat this, RBI keeps on taking some steps from time to time to improve the safety of the digital payment structure.

RBI has now come up with a new initiative to modify the existing card rules which has already been implemented from 1st October 2022 onwards. 

Tokenization refers to the replacement of actual card details with a ‘Token’. It is a unique alternate code, which is a combination of card, token requestor and identified device. In this process, the card details will be converted into a unique token that is specific to the individual’s card and available to only one merchant at a time. This token masks the actual details of the individual’s card, thus eliminating the scope for misuse. 

Now, e-commerce websites like flipkart, amazon, myntra, zomato, etc will not ask you to save card details as RBI has prohibited merchants from storing customer card details on their servers. They are required to delete any credit and debit card data stored on their platforms and replace them with tokens to secure card details of consumers.

This process adds an additional layer of security as the actual card details are not shared with the merchant during transaction processing. The authorised card networks, such as VISA and Mastercard, securely store actual card data, token, and other details with them.

With this initiative, it is expected that users’ payment experiences will be enhanced and transactions with credit card and debit card will become safer than before. Also, note that this tokenization only applies to domestic online transactions. 

(Contributed by Yogesh Gola, Associate Financial Planner, Team Vikrant, Hum Fauji Initiatives)

October 20th, 2022
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Make the Most of the High Interest Rates

RBI’s actions have ripple effects on every aspect of your financial life, influencing how much you’re charged to borrow and how much you earn when saving. Even though red-hot levels of inflation has pushed up our monthly expenses, some investors have reasons to smile.

Here are a few ways to situate your money so that you can benefit from rising rates, and protect yourself from their downside:

Fixed Deposits – Go short: The hike in repo rates has forced banks and NBFCs to raise their deposit rates. Even the government has raised the interest rate of Senior Citizen Savings Scheme to 7.6%. Don’t jump into a large purchase that isn’t right for you just because interest rates might go up in future. Investors should go for short-term Corporate FDs of 12-15 months and deploy for the long term when the interest rates have settled down.

Loan & Credit cards – Minimize the bite: If you’re carrying balances on your credit cards and loans – which typically have high variable interest rates – consider reducing the amount by pre-paying some of the amount. This would protect your wallet from upcoming high interest rates.

Stocks – Seek broad exposure: Typically financial service companies and banks do well in a rising rate environment because, among other things, they can make more money on loans. But if there’s a slowdown, their overall loan volume could go down. The idea of diversification is to hedge your bets, since some of those areas will come out ahead, but not all of them will.

Think short term: The past one year has not been very good for debt funds, especially long duration schemes holding very long term bonds. However, this doesn’t mean investors should dump debt funds now. In fact, this is the time to get into ultra-short and low duration funds because there is limited upside left in bond yields now. Also, during times of high inflation, indexation can reduce the tax to very low levels, ultimately benefiting you quite a bit.

(Contributed by Priya Goel, Financial Planner, Team Sukhoi, Hum Fauji Initiatives)

Be transparent with Your Financial Planner as you would be with your Doctor

Do you hide your disease from your Doctor?

Or do you hide the important details of your case from your lawyer?

Most people do not do that because they then put themselves in a big danger.

But then why are many people reluctant to disclose their financial condition like assets and liabilities, investments made, short term requirements, future financial goals, etc to their financial planner in a similar manner?

Most people are aware that if they are to achieve their numerous life goals, financial planning is essential. Unfortunately, they egregiously downplay their own contribution to the financial planning process.

They are unaware that the information they do not give can destroy even a carefully plan. So, what is one supposed to do at various stages of preparation of their financial plan?

  • The Fundamental Step – Sharing your assets, liabilities, income expenses would help to make the perfect plan. Along with that, you also need communicate about your money habits, your aspirations, your career, and so on. A financial planner also needs to understand the client’s ambitions with their money and the rationale behind their priorities.
  • Right inputs – You could be asked to assign a priority to each of your goals by your financial advisor or provide you with rough estimates that you can work with. For example, if you want to go for vacations, a financial planner must know where and when is it likely to be in general so that the same can be factored in the plan.
  • Disclosure of all Facts – Another crucial factor that could help you reach your financial goals comfortably is truthful disclosure, rather than hiding, of your assets or liabilities. For example, if you didn’t give out the correct and complete details of your DSOPF, FDs, real estate or Fixed Assets, the financial planner would make your Equity and Debt allocation incorrectly in your portfolio which will later hamper you meeting your requirements in future or not meeting your returns expectations.
  • Review of the Plan – As life progresses, there would be a lot of changes in aspirations, too. For example, you may have planned to buy a less expensive car after 5 years but after 1-2 years, you change your mind and now want to buy an expensive car. Conveying this to your financial planner about the recent changes and reviewing the plan is a must. It can help you prepare for your growing ambitions and also for any shortfalls in your preparation on the way to your financial goals.
(Contributed by Sweta Kumari, Associate Financial Planner, Team Arjun, Hum Fauji Initiatives)

Tokenization – RBI’s New Initiative to Safeguard Your Online Transactions

We all have seen how online payments have increased significantly over a period of time especially after gaining momentum post-covid-19. But with rising digital payments, there has also been a surge in online scams. In order to combat this, RBI keeps on taking some steps from time to time to improve the safety of the digital payment structure.

RBI has now come up with a new initiative to modify the existing card rules which has already been implemented from 1st October 2022 onwards.

Tokenization refers to the replacement of actual card details with a ‘Token’. It is a unique alternate code, which is a combination of card, token requestor and identified device. In this process, the card details will be converted into a unique token that is specific to the individual’s card and available to only one merchant at a time. This token masks the actual details of the individual’s card, thus eliminating the scope for misuse.

Now, e-commerce websites like flipkart, amazon, myntra, zomato, etc will not ask you to save card details as RBI has prohibited merchants from storing customer card details on their servers. They are required to delete any credit and debit card data stored on their platforms and replace them with tokens to secure card details of consumers.

This process adds an additional layer of security as the actual card details are not shared with the merchant during transaction processing. The authorised card networks, such as VISA and Mastercard, securely store actual card data, token, and other details with them.

With this initiative, it is expected that users’ payment experiences will be enhanced and transactions with credit card and debit card will become safer than before. Also, note that this tokenization only applies to domestic online transactions.

(Contributed by Yogesh Gola, Associate Financial Planner, Team Vikrant, Hum Fauji Initiatives)

October 13th, 2022

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