Building Reserves v/s Debt Reduction – A Choice Worth Examining

This post has been contributed by Subhashini Attalani with editorial assistance from Team Fintuned.

Before you begin reading this article, let me tell you that this is not one of those traditional personal money management article(s) that you have been consuming. Yet, this article will afford you some amazing insights that will not only help you manage your money smarter but be super helpful when you make the decision about a crucial aspect regarding your business and that’s the debt appearing in your books.

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Thomas Fuller once remarked, “Debt is the worst poverty.” And, don’t we strive to minimize/end poverty? But should we always try minimizing debt when we have extra cash? That is an interesting question to address and let us try doing that in this post. Continue reading “Building Reserves v/s Debt Reduction – A Choice Worth Examining”

Keep More Than One But Forget None

This article has been contributed by our guest contributor Anchal Beriwal and edited by Fintuned team. The article is a good read for people in the age group 25-50.

Confused with the title of the article?

Well, today I came across a Business Insider post that mentioned the thinking differences that exist between rich (could be read as successful in today’s parlance :P) and average people. While I am not completely vocal about the way the article/piece was positioned, there was a line that has remained with me, which said:

“Rich people make money out of other people’s money while the average people think that one needs money to make money”. Again, I don’t support the statement as such and it is absolutely subjective but the part that you can use money even when you don’t have it reminds me of something.”

You probably guessed it right? It absolutely reminds me of credit cards 🙂

I am sure John Biggins might have fallen short of cash and therefore, thought of this idea and invented credit cards. In India, credit cards have always been an adverse money leverage option for people. However, as more options are available and with an increase awareness regarding the use of plastic money, Indians have begun using plastic money proactively. Probably, it is right if I say that we are aping the west in our spending culture as well. Truth be told, credit cards do have some indispensable benefits. For example, fulfilling immediate liquidity requirements and building positive credibility are a few of the positives.

But why am I harping on the benefits of credit cards? No, I do not represent any credit card company nor intend to be with one. This is because as we get accustomed to using credit cards, it is all the more important that we use it smartly.

Most of the banks provide privileges and schemes on applying for their credit cards resulting in a wide array of options to decide from.  For example

Love cash > go for cards that give cash backs

Love free stuff > go for those that offer freebies

If I may credit cards also come in different flavors. There are the superfluous travel credit cards that offer credit services on travel, hotel stays and conveyance and then there are awesome cards that provide credit facilities on meals in food joints and restaurants. Therefore, it is good to have more than one credit card, if you can manage them well.

In case you skipped that last sentence, read it again. To be absolutely specific and repetitive (not annoying :P), keep more than one credit card, if you can manage them well, which means payment of bills, maintaining limits etc.

*Do not screw your credit score

As a corollary to the last section, let me mention about something to take extra care of i.e. your credit score (am sure you know all about it). In case you are not aware,  RBI has entrusted CIBIL, Equifax and Experian to maintain the credit scores. CIBIL or the Credit Information Bureau (India) Limited being the oldest is more popular. These organizations collect and maintain records of every person regarding his loan and credit card transactions. These records are then used to prepare Credit Information Report (CIR) and credit scores and provided to banks and financial institutions to evaluate the credibility of a person.  Read more about it here.

#Quick tip: Simply owning more than one credit card does not affect your credit score in any way. The credit score depends on two things and they are payment of credit card bills and usage patterns.

As such, coming back to the point of having more than one credit card, it increases your overall credit limit. Owing to division of usage over more than one card it results in low usage per card. The lower the percentage of outstanding debt, the better the credit score.

Better offers, better credit scores, higher discipline etc. are some of the amazing benefits that ensue when you keep more than one credit card. So, what are you waiting for? Go ahead and experience it for yourself 🙂

Cheers

A Study On Buying A New Car V/S A Used Car

This article has been written by our guest contributor Harsh Singh Chauhan, with help from the Fintuned Editorial team.

I have always been a big fan of cars. You might casually say “Men will be Men” (please don’t take me to be a sexist) but cars are a passion for a good number of people. From the reel life of James Bond to the real life of living legend Michael Schumacher, cars represent a different but special class of machines and there is no denying the fact that a car has the ability to depict some milestone in a person’s life.

Buying car means happiness

Truth be told, I can go on and on about cars but probably, this isn’t the place for it. It is quite obvious that this post is related to cars in some way (who starts talking about cars randomly? Actually I can) and as I mentioned, a decision to get a car represents a significant milestone in a person’s life, even financially. While it is established that a car is an essential financial decision, an interesting dilemma that people face is a choice between buying a new car or a used car.

Continue reading “A Study On Buying A New Car V/S A Used Car”

Small Lessons To Make Your Life Larger & Wiser!

This post has been contributed by Tarun Bachhawat, our guest contributor, with help from the Fintuned Editorial team.

Just yesterday, I was watching the latest commercial from the stable of Royal Stag featuring the Bollywood A-guy Ranveer Singh. Basically, the punchline of that advert conveys the message that the culmination of small moments make your life large and one should strive for the same. Steering past that interesting life lesson, the reason my post begins with this annotation is because I could not think of a better introduction to the post.

Royal-stag-keep-perfecting

I assume that after reading the above paragraph, your instant question would be, “How does this relate to money management or finance in general, at all?”

Truth be told, you aren’t wrong in asking that question. The reason that I started with a synopsis of this commercial is because while watching this ad I was reminded of a short but insightful conversation with my father that turned out to be the best investment advice ever.

How did it play out?

One morning my dad saw my wallet that had some papers, money and my credit cards and said, “Do you carry everything in this one wallet?”  I simply replied, “Yes.” Post this answer, the conversation played out somewhat like this:

Dad: What if you are pick pocketed?

Me: That is sheer bad luck. There is nothing one can do about it.

Dad [Smiling]: There is a difference between hard luck and being foolish at your own will.

This remark did irritate me slightly.

Dad [Noticing the change in my expression]: Have you ever noticed how I keep my cash?

Me: Yes you keep some in your shirt, some in your right pant pocket and some in your inside pocket.

Dad [Smiling again]: Good. Have you ever thought why I do this? It is because if I am pick pocketed then I don’t have to worry as I will have some money in a different pocket which will help me reach home safely.

Honestly, that was a cool and helpful advice. Post this, he went on to share some more insights which I have shared below.

#1 Diversification is the key. Whether it be as big as managing your money portfolio or something as small as carrying your money, some assortment is important. In case of investments, you have to ensure that you try to cover considerable number of options, as per your risk appetite.

#2 Distance of pocket is directly related to the nature of your expenses

As my dad’s shirt pocket is the closest, it meets his daily expense requirements like travel, paying for a small snack in the evening etc. Similarly, the liquid amount in your bank account or hard cash has to be on you to meet you low-magnitude expenses.

The pocket in your trousers represents the requirement for short term plans like going for a short trip, buying a good watch or phone among other things. Finally, the inside (secret) pocket where my dad keeps a major chunk of his money is most difficult to access and he generally avoids taking out money from this pocket. As he mentions, this money generally represents savings for your long term requirements like marriage, education etc.

#3 Saving the best for the last: – Limit the use of credit cards

To be absolutely clear, my father is not at all against the use of credit cards and for myself, I have a couple of cards that are used to purchase tickets or pay online fee, pay taxes etc. That being said, he is against spending a portion of the money that you haven’t earned and on things you might not require. So the basic idea is to avoid spending money on luxuries that you have not earned or by taking money on credit from the bank.

Conclusion

In my brief but absolutely helpful conversation with my father, I learnt amazing money lessons that you might find in text books/lectures/seminars but don’t care to implement the same in a disciplined manner. I sincerely hope that my learning has made good sense to you and in case you have any doubts/suggestions for me, please feel free to reach out.

Cheers.

3 Important Money Lessons To Learn From Vasan’s Story

Vicarious learning is a notable method to avoid making similar mistakes others have made. This post gives you three important lessons from a story that surprised everyone.

Hey folks,

Hope every one of you is doing simply phenomenal and making money money money 😉

I have not been able to communicate with you since last few days (believe me, that’s a lot) because of all the running around I have been doing for work and marriages (well, it is the season). That being said, I wish to share some very interesting insights I gathered after reading the wonderful coverage of Vasan Healthcare’s story on Livemint. Leaving the political controversies aside for this post, allow me to focus strongly on significant takeaways from this entire episode. Agreeably, the story carries a lot of meat for early-stage ventures to learn from but if we think about it harder, there are some absolutely forthright money management lessons that standout in the saga. For your convenience and without further ado, here are 3 most important money lessons to learn from Vasan Healthcare’s story:

Vasan Healthcare Image

*Let thy step be slow and steady, thou shall stumble not: Almost on a daily basis, I come across buzzwords like instant gratification, super-normal growth, wide presence etc., implying the urgency of growing and reaping benefits instantaneously. In case of Vasan as well, the entrepreneur’s insatiable hunger to grow and grow fast brought about a dangerous climax. Even though the brand grew to around 200 centers in a short time frame, the entire model started becoming unsustainable and finally gave away under tremendous pressure from stakeholders.

In case of money management as well, we have often seen cases where people plan and try to reach the zenith as quickly as possible. In our opinion, it is equivalent to digging a grave for yourself. If you initiate the wealth creation exercise with the mindset of making a quick buck (time the markets, eh?), you are going to end up in a dismal state sooner than later.

*Lack of documentation becomes a problem for acceptance: True enough, the moment we stop keeping a track/record of significant activities, the results of those activities go out of control. If you read the Vasan story carefully, it doesn’t take long to realize that a grave error committed by the entrepreneur was to overlook the need of keeping a proper Balance Sheet for the company. As a result, both him and his stakeholders could never understand the intricacies of Vasan’s operations.

It goes without saying that a similar principle needs to be implemented in the money management exercise. You may be earning 18 percent plus returns from equity, invested money on a project with 20 percent IRR etc., but without reasonable record, it only becomes a mess at the end of the day.

*Have a mentor/coach and pay heed to him/her: Oh, this is the most critical learning I had after reading how the Vasan story played out. While the entrepreneur had scored the support of eminent personalities as mentors on board, the entire arrangement failed to produce result because of entrepreneur’s inattentiveness to their advice.

In order to manage money astutely, the presence of a great, experienced mentor is indispensable. However, the buck doesn’t stop at just having a mentor. The important thing is to understand, appreciate and evaluate his/her advice in the most legitimate possible. Mentors not only ease your path to success but also make sure that you go farther than you imagined!

While there may be more takeaways from the Vasan saga, I believe that these three are the most important lessons for me. I strongly recommend that you read all the literature available on the episode before making any conclusions. If you have any additions/suggestions to make, feel free to put it in the comments section.

Cheers,

Mihir