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)