What Do The Numbers Tell Us?

It is beyond any doubt that we live in an era of numbers and it is impossible to imagine a World that believes in any hypothesis without numbers to back it up. May it be political rallies where we see to-be MPs shouting out big numbers in order to criticize the ruling government or an interview where the interviewer is grilling the candidate to test his ability, numbers play a pivotal role.

The most recent and popular target of number stories is “Apna own bollywood” as quality of movies is now gauged on the basis of box-office collection (The benchmark being Rs 100 crores).Even Sunny Leone’s latest movie Ragini MMS 2 used the strength of numbers in its tagline:

2 mai zyaada mazaa hai” (Translation: There is more fun in 2).
  [You are free to ponder upon its implications 😉 ]
Okay, before I lose you into thinking about the movie, songs, Honey Singh or Sunny Leone, let me tell you about the purpose of this article. As I mentioned, numbers are highly significant to impose any thesis on people and hence, I am here to introduce you to some numbers that could make you think more about your money. Just before we start, let me clearly point out that none of this numbers are made up. They have been taken from reliable sources. (Plus. you have Google with you to check its veracity.). So here we go:
4,866 crores is the amount of unclaimed insurance money lying with life insurance companies as at the end of 2012-13.
250% is the growth in amount of unclaimed money with life insurance companies over a period of four years starting 2009-10.
So, both of this numbers relate to unclaimed insurance money and emphasize of an extremely important point. The reason, as explained by IRDA, behind such massive amount of money lying with insurance companies is the fact that dependents are not aware of existence of a life insurance policy. So, if the husband has paid big premiums for securing the life of his spouse and the spouse is not aware of it, then the whole exercise is fruitless.
Takeaway: Let me tell you that while there are other reasons like delay in settlement of claims, complexity of claims process etc. behind that massive number, the biggest reason is failure to track finances.
In most of the households in India, financial information is kept by the breadwinner to himself/herself whereas the ideal approach is to let the family know about each and every of your investment. A lethargic attitude and other factors are responsible for the failure to maintain a log book on investments, which is must.
Hence, if you are reading this blog but do not have your investments tracked and informed to the family then my earnest request is that you do it ASAP!!
22,636 crores is the amount lying in inoperative Employee provident fund accounts as at the end of February, 2014.
We think that working people have a good idea of their money and can take adequate care of the same. Well, think again!!
As per data, the mentioned amount is linked to EPF accounts that are lying dormant for more than 36 months and have stopped earning interest. The primary reason that these accounts have become inoperative is because employees holding those accounts have moved on to new jobs but have missed transferring their EPF accounts to the new employment.
Takeaway: Again, as in the case of unclaimed insurance, the problem is failure to track your investments. For employees of big corporations, it is a tough to miss the transfer of EPF accounts since the payroll teams aware you of these accounts. However, it might not always be the case and the ideal approach is to keep a record of all your investments including the EPF accounts, lest you have a sharp memory that can remember everything.
1101 crores, the amount of unclaimed dividend lying with companies as of 2013. Once this money stays unclaimed for a period of seven years, it is transferred to Investor Education and Protection Fund (IEPF) post which no claims are entertained.
Takeaway: While there are various reasons behind unclaimed dividend, the primary reason is insignificant amount of dividend on an individual basis. The implication is that individuals hold a limited number of shares of companies and hence, the dividend due to them is quite low.
As a result, people are not highly bothered by dividend announcements and to top that. they are not quite aware of their portfolio as well because it is largely handled by stock brokers.
However, any amount of money is important and should not be forgone because of the magnitude. The ideal way to go is to keep a tab on the annual reports, dividend announcements etc. made by these companies and monitor your portfolio so as not to miss out on your income.
21% is the fall in savings rate in India since 2008. The current saving rate stands at 30.9% of GDP of which household sector is the biggest contributor. Household savings rate dropped a percent in 2012-13 to 22.8% of GDP.
Takeaway: Well, the takeaway is obvious here, isn’t it?
The need to save money is the basic principle in the skill of money management. However, I would like to make a small addition: As important it is to save money, it is equally important to channel it to productive use. Thus, it is extremely necessary that your savings are not lying idle at home but are being used to generate more money.
So, that is pretty much about the story of numbers behind “Money” in India!
Hope that these numbers would strengthen the hypothesis on “managing money”.
Any thoughts/opinions, please mention in the comments below!

Should you Pay Yourself First?

The term “Pay yourself first” has become a buzz word in the personal finance domain and it is not tough to find the elite financial coaches and educators making use of this ammo as if it were to directly hit the bull’s eye.

However, since this has become a takiyakalam in the industry, I thought that it could very well be picked up and explained since, most of the people who are not from this domain, find it confusing and ineffective

Are you thinking it wrong?

Just to clear the air about a accepted notion, paying yourself first (PYF) is not as same as paying your electricity bills, phone bills, groceries etc. Yes, you are paying for these services and utilities because they are used by YOU but think about who you are paying  it to. All these payments can be categorized as

“Paying for yourself”: Thus, while you are footing the bill for yourself, but you are paying to the company that provides electricity to you, the supermarket that sells you grocery and so on. However, we are not talking about this concept. Rather, we are asking you to do this:

Pay yourself first and Pay for yourself later!!

The above mentioned line may seem a bit but believe me, it is not!

Why “Pay myself first”?

So, to continue with the above-mentioned premise, paying yourself first basically implies saving some amount from your income to create a pool of funds that could support you in later part of your life or in some crisis situation. Thus, the primary motive of this concept is to compel you to set aside a portion of your income and then pay out all your bills or other expenses.

Since you ask about the significance of this indispensable concept, let me start off with a few counter-questions. (They might be hurtful but be sure that they are also beneficial)

1. What if your boss suddenly comes to you and says “You are no longer required on the job”
2. What if a medical emergency strikes in the family and you are required to foot a huge bill?
3. What if a natural calamity washes away your business/house or other prized assets and you are still supposed to cater to your and family needs?

Scary, is it? Well, these situations are not preposterous and numerous examples show that in an instance, people have lost their financial freedom and might because of unforeseen situations.

As Sheldon says : “ No one thinks it will happen until it happens”.

Therefore, why wait for something to happen. The better way is to create a pool of funds from the very beginning so that your financial life is not threatened when you are in caught in such a situation. By paying yourself first, you can create a emergency/savings fund, which is extremely necessary in order to provide a cover when you need it the most.

I hope you are sold on the concept of “Paying yourself first” and if you are not, then look at the three questions above and try to answer them. If your answer is a “Umm, Aaahh” or any other hesitation sound, then its time that you believe in it.

How to go about paying myself first?

Some things are easier said than done and the funda of paying yourself first is one of that category. But, it does not mean that its too tough or complex and requires some hard work to accomplish. In fact, paying yourself first is quite easy if you can combine three things i.e Attitude, technology and discipline.

So, here are some tips/suggestions or whatever you wanna call it :

A. Open a new account and keep it separate: Since the objective is to save for yourself, it is best that you have a separate account for the same. It is preferable to keep the money in a savings account or a flexi FD account so as to ensure liquidity of funds.

B. Get a direct debit facility: Since it is really tough transferring the money from your salary account to a savings account ( Tough because we might be lazy :P), it is prudent to get a direct debit facility for the account. This will ensure that funds from your income get transferred automatically without any hassle.

C. Hotlist the debit card: Cut the fire and there shall be no smoke. I mean that if you hotlist or inactivate the debit card for this account, then there would not be a means to spend even if you might have the urge.

That’s it! Quite simple, isn’t it?

Just one last thing: The amount that you are planning to set aside is completely dependent on you i.e your lifestyle, expenses etc and you should decide it soon!!

As always, if you have any ideas/opinions, the comments section is all yours 🙂