Manage Money - How to Manage Money in Your 20s - Manage Money

 The 20s in your life is possibly the first time you have to make very big decisions, capable of having a long-term effect on your life. Should you change jobs or career at this time? Should you get married and start a family? Should you buy a home or get a home loan? What about a car? Or should you travel the world instead?

All of these questions you may have already thought, or are thinking now. No matter which path you choose at this part of your life, it all comes down to health money management, which shall help you in meeting all your goals and dreams.

In this article, we are going to go through a few healthy financial habits you can start following today.

    Control spending: You set the real foundation of your financial health when you start spending responsibly. If you are struggling to decide how much you should be spending and on what, follow the 50/30/20 budget. According to this budget, spend 50% of your income on necessities, 30% on meeting your wants, and the last 20% on your various savings. When you do this, you’ll find that you get many benefits.

For instance, if earlier you could not decide whether buying a theater ticket is a need or a want, following a budget shall put things into perspective. You may discover that you are spending way too much on things you can easily cut down on, like dining out and entertainment.

If you want to control your spending, there are two strategies you can adopt. First of all, see your spending from a different light. For instance, if you spend ₹200 per day on takeout junk food, think how much it adds up in a year! A lot, right? Well, that is a good reason to curb expenses.
Secondly, if there is a strong desire to buy something, wait for 72 hours. Once that period is over and you have hopefully cooled down, do you still want to buy it? What value will it bring in your life? How much will it affect your finances?

Save regularly: This is a given. You need to save more than you spend. We get it, the 20s is a time when everything is still exciting and you want to splurge left and right. But you need to save regularly. The very first thing you should do is to build an emergency fund large enough to take care of three month’s worth of living expenses. There’s no need to build such a fund overnight, and in fact, it is not easy to do that. Build it slowly over time. Start small, and grow it from there. If your current expenses force you to take money off this emergency fund, don’t worry about it. When that situation is over, just start refilling your coffers again.

Build your credit score: Grade school may be over, but there’s one grade you can’t ignore. This is your credit score. High credit score helps you to get loans or credit on low interest rates. Credit score will be an important factor when getting a home loan, car loan, and the like. Your 20s is a time to increase or build your credit score.

Save for your retirement: When you are in your 20s, you may think that your retirement is a long way off. That may be true, but remember that time waits for no one. The fact that you are in your 20s makes it the perfect time to start planning for your retirement, and thus building your retirement fund.

7 Ways to Supercharge your Personal Finances - Personal Finances

Everyone has financial goals. What’s yours? Is it to buy a nice condo, or just to manage your personal finance better? In this article, we are going to help you out in getting you back on track to financial health.

Establish a baseline: In this fitness industry, there is something called a baseline. So what is a Baseline? It is a set of few exercises given to determine where you are in your fitness journey. Based on that, you get a new fitness plan, diet plan, etc. For the purpose of this article though, it will refer to where you are in your financial state.

Check your credit score for errors: You know that you can get a free credit report a year, right? Well, why not check your credit report for errors. Get the help of a professional if you don’t know how it works. Check for errors, and yes there may be errors, is important because these can cause some problems. Errors here won’t affect the score, but the same errors will tell you why your credit score is the way it is.

See where the money is moving: If you always have money problems at month end, it is never too late to see where you are spending the most. Once you know what is taking up so much of your money, you can find ways to save.

Here’s some quick fixes

Here are a few, small and easy fixes which can make a big difference in your financial life.

Think about lowering your interest rates: If you are paying a lot by way of interest rate, or credit card interest rates, think about getting a balance transfer credit card. This allows you to move over to a credit card which has 0% APR for some months. You can use this time to pay the debt without worrying about the time.

Set up over-the-limit alerts and low-balance alerts: Missed payments and using up too much of your credit facility will come to haunt you later. To ensure that you always have enough money in your account, think about setting up alerts. Also think of setting up warnings for when you are nearing 30% credit utilization ratio.

Improve your stamina

These are ways to maintain your financial health without stress.

Set up automatic bill payments: If you pay for things regularly, for instance subscriptions, memberships and EMIs for loans, why not set up automatic payments when possible? It is easy to make mistakes without this. Automatic payment leaves one thing less to worry about.

Make money transfers to accounts that are only dedicated to debt payoff: If you are a serial shopper and splurger, think about opening your separate checking account which is dedicated to that goal only. As soon as you get your salary, automatic transfers send the money over to that account. This way, you’ll always have money to pay your bills, you’ll pay off debts, and will have less money to splurge.

Have small payments with less-used credit cards: If you have old credit cards you don’t use anymore, don’t throw them off. Use them. Use these to make small transactions to keep the cards active. Shutting down old credit cards affects your credit score.

And so, there you have it! 7 ways to supercharge your personal finance.

Should You Pay Credit Card Bills with Other Cards?

Just out of the top of your head, think about the various mobile apps which allow you to make credit payments. We’re sure you know at least some of these. In fact, you may use these every day. Some of the most common apps that allow you to pay credit card bills include CRED, PhonePay and PayTM.

These are apps that not just allow you to pay multiple credit card bills, but also give cash back offers and more to keep you interested in using the services.

However, these are still third-party apps at the end of the day. Should you trust these blindly? Are they completely safe, or are there loopholes and risks? Remember, you are linking these apps to your bank accounts and credit cards.

But before we get to that, let us learn a bit more about these platforms, and why these are so popular.

A look at third—party credit card bill payment apps

Let’s look at CRED first. This is on top of our list, not just because of its popularity and positive reviews, but because of its high-end nature and myriad features. What do we mean by that?

CRED is an app which saves the details of your credit card or cards when you register on it. You can use it to pay your credit card bills by net banking by using the UPI and auto-payment feature on the app. It is ‘high-end’ because you need a credit score of more than 750 to just join. If your credit score is lower than that, you won’t be brushed aside, but shall be given time and even advice on how to increase your score. Pretty helpful, right? There’s more!

CRED gives you CRED Coins each time you make a credit card bill payment. For every rupee you give, get a coin. These can be used later to get various rewards in the form of shopping coupons and discounts. You can even get cash back. For every 1000 coins, you get Rs.5 to Rs.10 credited.

Now, let’s come to PayTM. It gives you 1000 PayTM First Points, which is what they call it, whenever you make credit card bills of Rs. 2500 or more from their platform. These points can be redeemed for offers and cashbacks.

As for PhonePay, there is no need to save credit card details like PayTM. Just select your provider network, the bank, card details, and you can make the payment.

Here’s what is good about these apps

CRED is great because it encourages you to build up your credit score, because it analyses your spending pattern, lets you know about charges and unexpected fees on your credit card, suspicious activities on your credit card, due date for fees, and much more. It gets these info from your bank account and from your email ID.

PhonePe for one is safe since your credit card details are not saved when making payments, and you need to enter it each time you make a transaction.

What is bad about these apps?

Remember, we are not reviewing the apps here, but how safe these are. There is always a risk of database hack and data privacy issues. Apps like CRED access your Email ID for data on spending patterns and credit card statements. For a skilled hacker, all this information can be accessed.

The bottom line- To Pay Or Not to Pay

Should you pay your credit card bills using these apps? You surely can, but only after knowing and understanding the risks. Know that using these apps, or any third-party app that keeps a record of your money, is risky.

In case you are still worried, you can always come back to using the traditional methods like net-banking and NEFT.

Loan Rejection - Is Loan Rejection Hurting Your Credit Score?

It hurts when your loan application is rejected. However, it hurts your credit score more than it hurts you. Getting rejected for a loan is bad for the score, not just for the short term, but for the long term as well. Getting rejected once increases your chances of getting rejected by other lenders as well. Yes, these things do get recorded in your credit report, and thus damage the score.

If your credit score is low, it can be due to a wide variety of factors. It can be due to debt settlements, on-payment of debts, not paying debt installments on time, high credit utilization, and much more. Thus, there can be many reasons for a low credit score.

The good news is that there are just as some ways to improve or increase it. But you won’t go into those points in this article. Here we shall detail out the impact of a rejected loan application on your credit score.
What is the credit score?

Your credit score is a 3-digit number that measures your credit worthiness, or how likely you are to repay loans. If the score goes down due to whatever reason, other lenders will see you are a risky candidate to give loans to.
Impact of a loan rejection on your credit score

Lenders make a credit inquiry each time you apply for a loan. This is known as a hard inquiry, which alone lowers your score if just a little bit. This is why experts warn not to apply at too many places at once for credit, as it only increases the risk of multiple rejections.

Thus, be careful before applying for credit. If there is a rejection, ask the bank or lender why it was so. Ensure that you don’t make the mistake again while applying next time.

Reasons why your loan may have been rejected

There can be many reasons behind a loan rejection. To know the reason behind a loan rejection, and what is affecting the score, check your credit report. Here are the common reasons behind a low credit score.

Taking multiple loans: Do you have more than one loan account? If so, banks are more likely to refuse you loans and even credit cards. This is because they see you as one with an unstable personal finance since you are always in need of loans.

Loans defaulted: Too many of these, regardless of whether it was solely your account or whether it was a joint-loan account, you will be penalized by loan denial later on. Banks don’t want to give loans to one who has defaulted on loans.

Credit score remarks: Loan defaults are not the only problem which can lower your credit score. Did you make a debt settlement with a bank? If so, then your credit report now contains the remark “settled.” This makes it hard to get loans later. However, you can still get credit if you give security. Lenders are more likely to reject unsecured loan applications at this point.

Employment status: Incidents of late salary credits and when the employer is not well-known to the bank can give rise to loan rejections.

6 things to do to raise your credit score?

Here are a few things you can do to get back on track. It’ll take time, but you’ll get there.

• Pay off all debts
• Have a low credit utilization ratio, below 30%
• Pay overdue bills
• Do not take multiple loans
• Get a loan tenure which suits you
• Get mixed loans

How to Manage Money in Your 30s - Open a savings account

Your 30s is perhaps the best time of your life to think seriously about your retirement goals along with repayment of college funds and down payments.

The 30s can be quite an exciting time of your life. It can be even your best decade ever. This is the time when you are advancing in your career and are starting to reach your income goals. However, it is also the time when you have new financial responsibilities, children, buying a new home, etc.

Of course, building a budget is essential. But that is not all. People in their 30s need to take extra steps to successfully manage their money.

Open a savings account: If you have not opened a savings account yet, now is a good time to do it. In fact, this is not something you would want to delay. The sooner you start saving, the easier it shall be when you retire.

Savings account is only one of the several ways to save up. Another good option is your company’s Employee Provident Fund. Contribute to it as much as you can. Your company shall possibly match your contributions or give a certain percentage of it. At the end of the day, all this is free money! So why not take its benefits?

When you get increments or raise, increase your contributions by 10% to 15%. Again, you are saving all this for your retirement, so that you won’t have to scrounge for money after your retirement.

Make your financial priorities concrete: Your spending patterns in your 30s won’t be the same as in your 20s. For one, your focus now is saving for retirement, disability, LIC, and the like. Never thought about all this in your 20s, did you? That is why you need to make some changes now! Apart from paying more attention to your retirement savings, you need to keep track of your spending.

It is very easy, and may even seem natural, to spend more when you are earning more. But that’s not right. What you need to do is to have a budget model. To be really effective, take the 50/30/20 budget model. Under this model, from your yearly or monthly take-home income, give 50% towards meeting needs, 30% towards wants, and the remaining 20% on savings and debt repayments.
If you are having problems with this, it is never wrong or late to take the help of a professional certified financial planner.
Now that you know about the 50/30/20 budget and know how important it is to budget and save up for different things, it is important to know about saving for emergencies. To save for the future should be your top priority. This does not just mean your retirement fund, but your emergency fund too. Take this Covid-19 pandemic and lockdown for example. No one planned for this financially nor expected it. This is why finances of both companies as well as individuals are in shambles. Situations like this tell us that it is so important to save up for meeting any emergency situation.

Get LIC and disability insurance: Remember where to put the 20% of your yearly or monthly income? In savings, right? Good. Well, here are two important places where to park your savings for the future. And look, having LIC and disability insurance is important. No one wants to plan or even think about facing the worst-case scenarios in their lives. However, if you do plan for it, it makes your life easier. This is when you need insurance.
Disability insurance helps you when you get career-threatening injuries and disabilities. Nowadays, people are actively insuring things which they feel are central to earning a paycheck. For instance, people who spend most of the day in front of their computer insure their eyesight. So in case they do lose their eyesight, they’ll get a lump sum or monthly coverage from the insurance company. Some companies give disability insurance too.

Smart Ways to Overcome Bad Credit - What Is Bad Credit?

Is bad credit keeping you awake at night? Unable to get loans or credit because your credit score is low?

56% of the population has problems with their credit score. Due to this, they cannot get the best mortgage rates. This is because the best interest rates for loans are reserved for those with a good or high credit score.

What Is Bad Credit?

You already know that the credit score range has specific benchmarks. The closer you are to the 900 mark, the better your chances to get the best credit will be. The further you are from the 900 range, you will get appropriately downgraded credit.

If your score is too low, lenders would not want to give you any loans at all for fear of inevitable loss. Bad credit is synonymous to a poor credit score. When you have so much debt that you are unable to pay back the loan on time repeatedly, it leads you to bad credit.

Bad credit considerably reduces the chances of your getting further loans even during emergencies, as it also adversely affects your creditworthiness.

The effect of bad credit on your credit score is a problem. With a bad credit record in your credit report, you won’t be able to get loans, especially during emergencies.

Even if you do get credit or loans, they would not have the best conditions or terms. Most likely, there will be a high APR (Annual Payment Rate), a high-interest rate, or a long-time payment plan.

However, all is not doom and gloom.The silver lining to the dark cloud of bad credit is that it can be improved with a few proven strategies.

Six Ways to Get Over Bad Credit

Here are six tips for improving your credit score and getting rid of bad credit. These are highly effective, and the only downside is that they take time to produce any results.

Check Your Credit Report

The very first thing you need to do is to check your credit report. This report has all the necessary data to calculate your credit score.

A mistake or miscalculation in the report will likewise affect your credit score. When you do get these reports, check for any errors. In particular, pay attention to payments and sums. These have a higher likelihood of showing errors.

In case you do find errors, let the concerned credit bureau know. Write a letter listing the mistakes, along with verified supporting documents as proof. Highlight the error to make it easier for them to follow up on it.

Set Automatic Payments or Payment Reminders

One of the most common, and very unfortunate, reasons for people missing monthly payments is that they forget to pay. To ensure that it does not happen to you, set payment reminders. Otherwise, talk to your bank’s representative to set monthly debit from your account.

Remember that late payments are penalized in the credit report by lowering your score. Hence, when you automate your payments, you remove a significant risk to your credit health.

Plan Your Finances

This step might not be easy or even possible from the very beginning. It needs to be done to salvage the situation.

Use credit cards as little as possible. Create a payment plan that facilitates paying off your credit cards with high interest first. At the same time, keep paying the minimum payments on the remaining credit card accounts.

Don’t Shut Down the Old Accounts

Is a bad payment history giving you nightmares? If so, you do not need to close down the old credit accounts.

First of all, doing so will not remove bad payment history.

Secondly, closing down your old accounts can make your credit history seem shorter and can negatively affect your credit score. Rather than removing old credit cards, you can use them the bare minimum needed to keep them active.

Keep Inquiries to a Minimum

While you can make an inquiry regarding a credit card at any time, too many inquiries can bring down your credit score by a significant amount.

Your credit score is affected because when you make an inquiry, as a potential creditor also makes a hard inquiry with the concerned credit report agency. Too many of such instances can be harmful to your credit score.

Be Responsible for Your Finances

Even if you follow all the steps above, you still may not be able to solve anything if you don’t become financially responsible. You can do this by using your credit card responsibly, differentiating needs from wants, and having a six-month emergency fund.

What is Your Take-Home Income - Gross Income and Net Income

Gross Income and Net Income

People still confuse between these two things, so let’s tackle these two essential terms. Gross income is the money you make before money is deducted from it by way of taxes, deductions, and personal contributions. Net income is one which you take home after all of that. Net income is therefore called Take Home Income. Net income is the one that actually gets credited into your bank account.

We understand that some people get paid by the hour or by per project done. For the purposes of this article, we are going to focus on salaried individuals only. For those operating as independent contractors, income is a bit different.

It is not hard to find out what your gross income is. If you are a salaried person, your gross income shall be the total number of hours you have worked in a week multiplied by your specific hourly rate. This is the income for hourly wage earners.

However, things are different if you are a salaried person. Your gross income is found out by dividing your income per annum by 12. This shows your monthly gross income.

Now comes a very important part: what happens between your gross income and net income? Where does that money go?

The answer in short: taxes and deductions.

Taxes

Taxes, also called withholding, are the funds you owe annually. These are deducted from your monthly paychecks regularly. This is just as well because you do not want to pay a huge lump sum tax at the end of the year.

Taxes are of various types. There can be central government taxes, state taxes, municipal taxes, and so much more. Taxes are also on Medicare, Provident Fund contributions, and such others.

What if you are an independent contractor?

 Some workers do not fall under the term “employee.” They are called independent contractors. Freelancers fall under this category, as well as self-employed people. Such people are responsible for paying their own taxes, and can’t rely on any company to match their contributions. For such people it is important not to spend too much money before paying taxes.

On to budgeting

Now that you know the difference between gross income, net income, and what happens in between them, you can now budget for your personal finance.

Unauthorized Hard Inquiries - How Do I Deal With Unauthorized Hard Inquiries?

A hard inquiry can be hard on your credit score, especially if it is an unrecognized one. Now you must be wondering how it could be unrecognized. Well, a hard inquiry could have happened for several reasons. It could have come from an authorized lender, it could be a reporting error, or it could even indicate possible identity theft. Let's get into these three issues in detail.

Authorized Lender

A hard inquiry on your credit report can ideally be made only with your permission. An organization cannot make a hard inquiry unless you authorize it. However, some situations can be confusing.

Even if you haven’t applied for a loan or a credit card recently, you might have undergone minor changes in your lifestyle that resulted in a hard inquiry. You might have inadvertently permitted your internet service provider, cable company, teleservice provider, and even your landlord to conduct a hard inquiry on your credit report. You probably signed on documents without carefully reading them, hence not realizing that you have authorized the company to perform a hard inquiry. Even upgrading your credit card or applying for an increase in credit limit could result in a hard inquiry.

Similarly, applying for auto financing can also result in several hard inquiries. You might have authorized one dealer assuming that it'll lead to a single hard inquiry. However, your dealer might have reached out to multiple lenders, and you end up with several hard inquiries that you weren't aware of.

However, many credit score models do keep a little window to take these minor slips into account when they calculate your credit score.

Reporting Error

If you find a hard inquiry that you didn't authorize, it could either be a reporting error or fraudulent activity. You can keep an eye on your credit report using mymoneykarma's Intelligent Finance Tool. This tool shows you the source of all hard inquiries made on your credit report. Once you know the name of the lender under suspicion, you can search online for contact details and approach the concerned lender to check the reason for the hard inquiry.

The credit bureau assessing your credit score can also help you obtain this information. If the inquiry was a reporting error, you could approach the bureau to file a dispute. If it wasn't a reporting error, it could very well be a case of fraud. In such situations, you must immediately notify the credit bureau as well as your card issuing company.

Identity Theft

If you suspect that your identity has been compromised, approach the card-issuing company, and extensively look for information regarding the account. Look at the account opening date, contact details, amount charged, etc. You must seek help from the company and follow the protocols to deal with fraudulent activity.

If the account information has already shown up on your credit report, you must contact the credit bureaus. Once you have resolved the fraudulent issues, you can seek help from the credit bureaus to secure your credit file further.

You could also set up a 'fraud alert', which would require additional steps of identity verification before starting a new line of credit. Furthermore, you could put your credit file on 'security freeze', which means your data can't be accessed for extending new lines of credit unless you unfreeze it.

Make sure that you report the fraud to your local police department as well.

What are Assets? Why should You Care?

An asset is anything that you own, and that which has monetary value. As you might have guessed already, assets include your house, agricultural land, properties, cars, stocks, checking account, and even investments.

It is important to take stock of, or inventory of, your assets. It helps you to find out what your assets are worth. And remember, the value of assets change over time. The value of your car depreciates with each passing year, while conversely, the value of land increases over time.

That being said, you want to ensure that they are protected. For instance, you want to ensure that your assets are protected from natural disasters, divorce cases, lawsuits, and more. All this helps you to leverage your assets to meet emergency situations on time.

Let’s start by giving you a very basic intro into assets, and how assets can affect you. Your assets can be business-related, or they can be personal things. However, for the purpose of our article here, we shall be focusing on personal assets only.

Let’s look at the type of assets you can have.

Remember, some assets depreciate in value over time.

Cash and cash equivalents: These are assets in the form of money which is stored in checking accounts, savings accounts, certificate of deposit, and other account types.

Tangible assets: These are physical things which you can touch. This includes business properties, personal properties, boats, cars, art and jewelry.  

Intangible assets: These are assets you cannot touch, and thus these are in the form of bonds, stocks, pensions and royalties.

Liquid assets: All liquid assets are cash, or can be converted into cash easily. As such, this category includes bonds and stocks which are easily tradable. Price is not affected when you sell these.

Fixed assets: These are the opposite of liquid assets, and are also called illiquid assets. These cannot be converted into cash quickly. Additionally, their values change over time. This includes antiques, real estate, furniture, and etc.

Fixed income assets: This includes money lent on interest, certificates of deposit, government bonds, securities, and etc.

Equity assets: These are the securities and other assets which you own, like mutual funds, stocks, and retirement accounts.

Why do your assets matter?

Your assets are important, not just because of the monetary value, but also because they are essential in determining your financial net worth. Net worth is a fancy word for personal price tag. Over time, your net worth increases.

Net worth helps you monitor your progress in reaching personal financial goals.

Here are some scenarios in which you have to know your asset value.

Net worth- Net worth, as we said before, helps in shaping your financial health.

How can you calculate your net worth? Just subtract your liabilities from your assets?

• Insurance- Want to insure your jewelry or your house? You need to know how much they are worth before doing that. Insurance helps you to deal with many things which may affect or impact these assets, such as flood, fire, robbery, liability, and even court cases. Assets can earn you an income too; you may want to consider protecting your livelihood from these assets with disability insurance.
• Loan applications- When you apply for loans, lenders check what liquid assets you have. In case you default, these shall be sold to give them a cover for their loss. If you have assets, you can negotiate a lower interest rate. Besides, having these ensure that you have funds enough to fall back on in times of emergencies.
• Collateral- Depending on what loan you are taking, you may have to give your car and home as collateral. As with all loans, in case you default, these go to the lender.
• Divorce- During divorce, your assets, money and possessions get divided between you and your spouse.
• Bankruptcy- If you file for bankruptcy, your assets can be sold.
• Retirement- When you retire, it is important to have assets to fall back on. What if you need money quickly after retirement, and a whole lot of it? You can sell some assets to meet such a situation.

70-30 Investing - Why Use the 70-30 Principle when Investing?

When it comes to equity investing, most traders in India tend to absorb losses when the prices of stocks fall, and then book stocks again when prices rise. Sadly, this strategy rarely works in the realm of equity investments.

Right now the economic scenario is unprecedented. The market is facing a threat which it had not faced in at least a 100 years. The pandemic has hit the global economy pretty hard. This has led investors wondering where to park their money in stocks and find safety. However, we wonder when the market condition returns to normal or when the market next time shows a boom period, will people buy more stocks or will they sell their current stocks to get a profit?

Right now, it may be tough to determine which stocks to buy since many stocks trade somewhat above their historical average valuations.

Trading market veterans say that it helps to follow a 3-point checklist. It is for investors who want to take informed buying decisions when the market shows inflated prices.

Earnings

Expect an economic revival after two to three quarters of the coming year.

The reason for this slow growth can be several.

First of all, the Indian GDP is considerably affected by the pandemic and its resultant lockdown. And by that, we do mean the economy is severely affected. As you may know, several industry sectors are crippled. Some are affected considerably, but are bouncing back. Others are thriving even in this situation! India’s net profit growth has gone down as well.

The next few quarters may not be a good-enough time for many industries, and therefore for many investors. Some companies will have to de-stock, especially in the domestic sector.

The good news? Some industries and even companies are showing aggressive growth.

To buy or sell

It is advised that you use the 70-30 principle.

It is also called the 80-20 principle. According to this, you spend 20% to 30% of your portfolio money on opportunistic investments only and for trading purposes. For instance, let’s say that you are choosing a stock and you know that it will likely double or triple its growth, may want to buy and hold such a stock.

At the same time, use 20 or 30 percent of your investment positions to actually trade since the market is volatile. Don’t be scared of market volatility. Volatility is not your enemy if you know how to use it. For instance, if you notice that a stock is showing a good run-up for a good period of time, pair down 20% of your positions even if it is for a core holding. Then wait for the stock price to come back before buying it again.

Financial Ruin - 5 Ways to Stay Away from Financial Ruin

You don’t need to buy stocks at top companies like Google or Apple to build wealth. You don’t need to speculate and play the stock market game either, Yes, the rewards are there, but the risks are huge. Do not make colossal financial problems for yourself, especially if there are others depending on you. The good thing is that there is an easy way to build wealth.

Investing is important to build wealth over time, but it is not the only thing that’s important. Investing is powerful, and some strategies there can make you pretty wealthy. However, you can be certain of windfall profits from your investments, and sometimes you may not get any profits at all. It is downright risky because, what’ll you do in case of certain life events like job loss, medical emergencies and the like?

You cannot prepare for every scenario, but you can cut down some mistakes that are costing you financially. Here are some of the ways to stay away from financial ruin.

Learn to say no: Don’t gamble to excess, don’t drink to excess, never do drugs, and never cheat your loved one. These things cost you a lot, financially and mentally. Just by avoiding them you can stay away from costly behaviors and problems, and you can therefore stay on the profitable path of your finances.

Invest like you earn: Are you a lottery winner? We thought not. And that means that you are earning your living from paycheck to paycheck per month. This is not a matter of luck anymore. Whatever you are earning right now, you deserve it due to your hard work over the years. Your current salary is the result of your discipline and hard work over the years.

As you can see, this is a long-term process, not unlike an outperforming stock. If a stock suddenly comes to your knowledge that swears to give immediate, big benefits, stay away from it. Don’t sacrifice your hard-earned savings.

Don’t get divorced: Seriously, don’t get divorced. This is because the cost of a divorce is huge in terms of alimony, living expenses and the like. One divorce can derail your personal finances for life. Now, we know that this is easier said than done, but try not to go your separate ways after tying the knot, ok?

Don’t sell off your primary income source: We know that you want to earn more. That is what everyone else wants. However, to earn more, do not give up your primary income source. For instance, to earn more, do not sacrifice a huge part of your savings on the share market. To earn more, don’t resign from your job until your side business is enough to pay for your livelihood.

Pay attention to your spending habits: You may not know, but you may be spending more than you know. You may think that a few bucks here are there won’t matter much, but if you add them all up at the end of the month, these can add up to quite a bit of money. In other words, spend consciously, and always think twice before buying something expensive.

 

Save Money - 4 Clever Ways to Save Money

Most of us tend to pay all our bills at the end of the month. During this time, expenses may seem to mount up rather quickly. Your bank account takes a hit. Perhaps you, like so many others, think what you can do to cut your expenses? Is there any smart way to minimize wastage?

In this article, we are going to show you what to do.

• Slash away your wireless service: If you don’t have a contract locked in with a nation-wide carrier company like Vi and Reliance Jio, you can always consider going for a cheaper plan. You may want to look at your data usage as well. Do you ever use that much net data and talk time? If not, you are probably wasting the pack. Just downgrade a bit till you find exactly what you need. When the time comes to upgrade your mobile phone, think hard if you really need an expensive set. If you don’t, go cheaper. You don’t have to buy luxury items to get adequate features.
• Throw your landline out of the window: Almost everyone has a cell phone nowadays. Households are increasingly cutting off their landline connections for good because they just do not use them anymore. People’s lives now practically revolve around their cell phones. Some have more than one handset. Let’s face the reality: times change. If you don’t use your landline either, ditch the connection for good. You’ll save money by doing this.
• Cut the cable connection: Your cable connection costs a lot. Do you really need it? Do you have time to watch TV anymore? When was the last time you did so, and for how long? If you don’t watch TV a lot anymore, why not remove the connection for good? Instead, you can take NetFlix, Amazon Prime and the like. You can thus watch all the movies and TV shows you like at a fraction of the cost!
• Cut down your electricity bill: Did you know that some machines and instruments in your home are “energy vampires”? This means that even when they remain dormant, they keep sucking up electricity. These include coffee makers, TV satellite boxes, DVD players and more. Just by unplugging these you can save 20% of your electricity bills.

It is always prudent to see where and how you can save money. Stop wasting your hard-earned money, cut out unnecessary expenses and save money!

How to Save Big Money - 3 Big Ways to Save Big Money

If you read about personal finance articles online, you may have noticed that while they do give well-meaning advice on saving small and sacrificing every time to save money, the money saved in such ways is way too small to notice. The kind of advice they give is “stop going out for coffee” or “don’t bring takeout food anymore”. Yes, it helps a bit, but it does not help you when you want to save up hundreds and thousands of bucks.

Rather than sacrificing the happiness of each moment of your life, why not try the age of personal finance advice: save from the three big categories of your life. If you want to save big, you should optimize your big expenses instead of cutting back on every small expense.

What are these three big categories?

• Housing
• Transportation
• Food

Anything you can possibly do in these categories can lead to big savings. And when we say big savings we do not mean a few rupees here and there, but thousands of bucks! Think about it, a few thousands more saved per month adds up to quite a big stack of funds at the end of the year. According to studies by the government, the three categories given above cover more than 60% of household expenses. This means that if you want to save a big amount of money in a relatively short amount of time, focus on saving in these categories.

In this article, we are going to show you how exactly to do that!

So, without further ado, let's get right down to it.

Optimize and save from your housing expenses: We are starting with housing because it is the largest expenses category or group, and you can save the most from this category alone. Studies show that the housing category takes about 33% of a household’s expenses. That’s quite a lot, right? And the biggest expenses in this category are mortgage and rent payments, as well as telephone and utility bills.

How can you save money? You can save a lot of money just by refinancing your mortgage. Just by doing this you’ll end up with a considerable pile of money per month. Additionally, you can save significantly over time on total interest.

If your property is a rented one, think of creative ways of keeping down your utility bills. To lower your mobile service bills, don’t be scared to negotiate with your service provider to lower your bills.

Optimizing your transportation expenses: This is the second-largest expenses category for a household. In this category, the three llain transport costs are new very buying, car insurance and gasoline. Everyone needs transportation, but you don’t have to spend a fortune behind it. Control it. If you live in an urban area, think about using public transportation or about getting a bike.

If you do need a car from time to time, use Ola or Uber for quick rides.

But what if you need to own a car? Well, in this case, the best thing to do is to optimize your car insurance. Shop around for this at least once a year and compare your interest rate for the car insurance. Additionally, if possible, ensure that you do have the optimal car insurance coverage to increase your deductible. This alone can save you many thousands a year.

• Optimizing your food bills: Did you know that food bills constitute your third-largest expense? The two major categories here are meals away from home and meals at home. These account for 12.5% of your annual expenses. Here’s what to do: increase the times you eat at home if you eat out a lot. Try using restaurant gift cards at discount from various websites.
• You can spend thousands a month on eating out, just for lunch. If your employer gives out free lunch, take advantage of that. You can bring in home-cooked food at times. It’ll be interesting to know that over time, eating at home and cooking your own food is healthier and less costly than eating out.
• For spending on food, focus on quality over quantity. Dump the fast food habits and instead go for dinner for two each month, or buy top ingredients for healthy home meals.

Think big to save big

If you compare your yearly expenses to your daily coffee habits, fast food buying and other easily avoidable expenses, you’ll see why it pays to think big when saving big. To save a lot, focus from where you are losing out a lot of money. Then optimize those areas. Finally, sit back and enjoy your bank account getting larger.

Emergency Fund Myths - 3 Emergency Fund Myths Debunked

One of the most essential parts of personal finance planning is to be prepared for any eventuality. It means to be prepared for all emergency situations, no matter what. It does not matter if the economy is devastated by the current Covid-19 pandemic, or whether you are facing a job loss. It does not mean much whether there is a medical emergency or whether your business is going on a loss. Do you know why these won’t matter you or trouble you? Because you would have prepared for them over time? Your emergency funds shall carry you through any problems whatsoever.

The rule of thumb is to have an emergency fund worth 6 months of savings. This means you can go through 6 months without needing funds from anywhere else. Remember, anything can happen during this time: medical emergency, job loss, loss in business, and more. That’s why it pays to be ready for such circumstances. You should save 6 month’s worth of basic living expenses at the very least. With such a fund, you won’t have to use credit cards to cover sudden expenses.

However, there are many emergency fund myths that need to be debunked. In this article, we are going to debunk them one by one.

Myth 1: To grow an emergency fund, it is important to put it into investments

Here’s the truth: your emergency fund is for one separate purpose and your investments are for a separate reason. Don’t mix up the two. Here’s the difference between the two.

Your emergency fund should be your last resort in case of any unexpected circumstance. Whether it is a financial emergency or a sudden job loss, this is the one you should be using. As such, this should be easy to access and should not be for investing purposes. The funds in your investments are for the long term. These are not to be withdrawn during emergencies unless you really need these of course.

So, these are for the long term and give you higher returns over time. If you withdraw from your investments, you lose income growth by that much amount. It does not matter if you withdraw Rs. 100 or Rs. 1000, you lose if you withdraw. There can be penalties to be paid as well if you are withdrawing from a retirement account.

If you look at your recent history, you can see what the risk is if you use your investment accounts in place of your emergency funds.

Myth 2: One needs to put as much money possible in emergency funds

The truth is that you’ll lose some serious net worth growth potential if all you do is put money in your emergency fund.

As of now, saving accounts interest rates is close to 0%. The national average APR just for a normal savings account is 0.5%. High-yield savings accounts money markets are giving interests between 0.75% and 1%. Pretty scary, huh?

You can grow your net worth considerably still if you put a part of your money in an investment account. These give 7% on an average in returns per year!

Look, it is not of much use to have too much cash in a low-rate environment, or to put a lot of your month in an emergency fund. You just need to be efficient and keep adequate money in the right account types.

Myth 3: One needs to save 3 to 6 months of current spending level

The truth is that you need to save 3 to 6 months of basic expenses. It is not much use of having an unnecessarily huge emergency fund.

To find out how much you should have in your emergency fund, find out what your core expenses are. This represents the amount you absolutely need to have without going down a debt spiral. There is no need to add discretionary spending here.

At the end of the day, you get great peace of mind to know that you have an emergency fund to act as a cushion in rough times.

Stress-Free Holiday - 5 Ways to Have a Stress-Free Holiday

If you are like most people, holidays are a time when you are more financially stressed out than other times of the year. It is during holidays that you have to worry extra about buying gifts and food. Things can get overwhelming in a hurry.

It might not be possible to remove all of your financial worries during holidays, but it is possible to remove some of your worries. While your shopping list only increases while your budget shrinks, you can actually enjoy the holidays without getting yourself bankrupt.

Here are 5 ways to stay sane during holidays:

Set up a budget: The very first thing you need to do is to check your earnings and expenses. Once you have done this, determine what you are willing to spend on things like gifts, food and holiday vacation packages. Make a list. Doing these things shall save you from having the temptation of buying on a whim, or from going on shopping sprees.

Plan your shopping sprees: You’ll have to go shopping during the holidays, but that is no reason to buy everything at the store! Before you even go anywhere near the shop, plan everything. Determine what you have to buy, and divide that into things you Need and things you Want. This way, there shall be no wastage of your valuable money.

If you can’t afford it, don’t buy it: If you knew how much percentage of buyers use their emergency savings to buy things, or use payday loans to take vacations, you’d be surprised! Around 25% of parents use their savings to buy items. If you cannot buy something without having to get a loan, it is best not to buy it.

Give creative when gifting: It’s not written in stone that you need to buy expensive gifts only! If you want to save money and be creative at the same time, why not give handmade presents which you have made? These things have more of an emotional impact which others can, because these are made with love and care. These are personalized, and therefore, the receiver shall love it even more.

Remember what the festival is all about: Think you have to buy expensive presents only? Well, think again. Festive seasons are times for friends and families to get together and have the time of their lives. So as you can see, gifts are secondary. They are not so important. Think about it: a person who loves and cares for you, will such a person give your expensive gift more value, or your presence?

Financial Management - How Can Freelancers Manage Their Money?

There are many benefits when you are your own boss. You can work when you want to, with whom you want to. You have the luxury of choosing your own clients, and can even work in your pajamas! In fact, working from the beach has always been the dream for freelancers!

However, at the end of the day, things are not always so good. For freelancers, life is not a party because there is a price to be paid for becoming one. First of all, income flow is uneven, and unless you pay close attention to it, you can fall into debt. Secondly, you miss out on employer benefits. Thirdly, you are the only one, on top of managing your business, who needs to manage your personal finances.

In this article, we at mymoneykarma shall help you to get your financial home in order, and will give you tips to make money by freelancing!
Track your income

The very first thing to do is to know how much you are making, or what your income is. Do you know what your income was last month or last week? Was it more or less than the previous period a year ago?

One financial expert says that freelancers have more predictable income flows than those who are not into freelancing. Most of them do not know or track their income, and feel overwhelmed when their financial situation becomes overwhelming, unmanageable and unpredictable.

On the other hand, if you do have a historic view of your income, it gets easier to prepare for the lean times of the year, especially if you have seasonal projects and repeat clients. Freelancing world can be irregular, but historic insights of your personal finance can give you some financial stability. Want to track your freelance income and expenses? Just use a separate bank account, a simple spreadsheet or a free app.
Plan to meet your tax obligations

You might be freelancing, but that doesn’t mean you can sneak away from paying your taxes. And that is one of the things which make this line or work tough by itself. It can get stressful in a hurry.

If you work in a corporate office, employers shield you from some taxes. But when you freelance, there is no such lenient shield. You’ll have to pay all your taxes yourself. But it is not so hard as it looks. Here’s what you got to do. Make an educated guess on your yearly earnings, and then make estimated quarterly payments to help you stay on track on taxes. If you can, use the previous year’s tax return as a baseline to work from.

There are, of course, things that you can deduct. These include expenses for professional development, work-related car use, and business expenses. And you can also deduct health insurance premiums, if you meet some requirements. To make sure that your tax season is smooth, learn all about the different tax rules for freelancers.
Create a budget

When you are a freelancer, budgeting may seem impossible. However, it does not have to be that way. You can use the 50/30/20 budgeting methods. In this method, 50% of your monthly income goes towards meeting your necessities post-income tax deduction, 30% towards meeting your needs, and 20% towards your savings and repaying debt.

Here are other smart things you can do:

• Stash away Rs. 50000 for emergencies.
• Save for retirement
• Pay off your bad debt first
• Don’t stop saving for emergencies
• Pay off your other debts
  

Get insured

Did you know that as much as 20% of freelancers are uninsured? And this is from a 2016 data. Today, with more and more freelancers joining the market, you can be rest assured that this percentage has increased. If you don’t have insurance coverage, you’ll have problems facing financial hardships in case of medical emergencies, health problems, and the like.

Here are your insurance options:

• Health insurance
• Car insurance
• Life insurance
  

Set competitive rates

It is always a good idea to periodically reevaluate whether or not you are compensated adequately for your efforts. According to what you find, you may need to adjust or change the price of your services. In one popular freelancing site, around half of the freelancers said they want to raise their rates the past year, and more than half opined that they planned to raise their rates the next year.

In this sense, freelancers are in a much better position. They are in control of their rates, and thus over how much they can make. This is a freedom most working people don’t have. So if you, as a freelancer, have a lot of expenses, think hard about increasing your rates.

When you earn more money, you remove financial pressure from yourself and can create a budget.

How can you be sure of which rate to have?

Talk to other freelancers. Go to sites like Glassdoor.com and see the average rate for your industry and for one of your skills and experience. When you find the average salary, break that down into hourly rate.

The 3 Money Numbers You Need to Know in 2021

When it comes to personal finance, some numbers matter more than others. Your income is important, for example, but also important is your financial health.

 There are certain numbers which can aid you in understanding how well you are converting your income into wealth. These also tell you about the effect of spending and taxes on your personal finance.

So, without further ado, here are the several calculations or numbers which can aid you in making better decisions.

Let’s start with…

Wealth Ratio

This is the ratio of your income against your wealth. In other words, this ratio tells how well (or how not so well) you have succeeded in converting your income into wealth over your lifetime.

When it comes to your personal finance, the wealth ratio is important. That is because in the long term, it matters little how much you have earned over the years, but how much of that you have converted into wealth. This wealth can be in the form of investments, savings, and the like.

To get started, add up your life’s annual earnings, old tax returns and untaxed money.

Next, find out your Net Worth. This is found out by deducting the value of your liabilities from the value of your assets.

But how to find out your wealth ratio? Easy! Just divide your Net Worth by your Lifetime Income. This is in the form of a percentage.

There is no pass or fail here. Everyone will get a ratio, but you’ll often see that younger people have lower net worth than older people. This is because the latter have been investing and saving for decades. However, even for your younger people, knowing where you stand in terms of your Wealth Ratio can be enough to motivate them.

Now, we turn to….

Overhead Ratio

Your overhead ratio is your Net Income divided by your Needs, or things you absolutely need. If the ratio is high, it means you have problems making ends meet. If that is the case with you, this ratio also shows you the reason. Overhead ratio is useful when you are determining whether or not you afford a new loan repayment, or how much you should be saving for an emergency fund.

Needs are those expenses like food, shelter and clothing which cannot be ignored, delayed or postponed. At least, not without having to deal with serious consequences. We recommend that you keep 50% of your monthly income post-tax aside to deal with your Needs.

You may find that saving 50% is too much, but doing this gives you a ton of benefits. For instance, it frees up money that would have otherwise gone behind impulse purchases.

It is also advised that you follow the 50/30/20 budget; your personal financial shall be balanced between needs, wants and savings/debt repayments.

And lastly, we come to…

Tax Rates

You pay taxes, right?

Just kidding.

Of course you do! But did you know that your tax bracket does not show you the total amount paid in tax from your total income. Tax brackets show instead how much of your money the government taxes as tax. The tax bracket you have determines the real value of your deductions and investments. This means that a person in a low tax bracket won’t get a lot of value from write-offs.

Your future tax bracket matters too. If you think that your bracket shall drop after you retire, it is a good idea to make deductible contributions to your individual retirement accounts since tax breaks from these contributions shall outweigh any taxes you’ll pay for future withdrawals of your retirement funds. But what if you expect your tax bracket to jump after retirement? It is better to park your money in non-deductible and tax-free contributions to your Employee Provident Fund.

 

6 Investing Concepts you Should Not Ignore - Investing Concept

Financial jargons can seem boring and dry. Heck, even some financial experts may tell you that! However, what makes these things interesting is how these impact our lives positively. Note that these are not industry words you need to learn for a test or terms which just wealth advisors use in their daily work. These are terms which can save you a lot of money, give you financial security and find you more opportunities to save and make additional money.

In this article, we are going to give you some key phrases, definitions and concepts related to your personal finance.

Cost per use and Cost per unit

This is a measure of a unit of purchase, and is found by dividing the number of units by the number of times you use them.

Try this exercise. Before you buy something the next time, calculate the cost per use. For example you buy a chocolate bar for Rs. 40. You’ll eat it by evening, and so its Cost per Unit shall be 40/1. On the other hand, you buy a fruit basket for Rs. 300 which lasts you a week. So that is 300/7. From the point of sustainability, the fruit basket in this case has more value, right? Because it lasts longer! And…because it is healthier! Jokes apart, it is better to get something that lasts longer. The more frequently you buy something, the more you spend over time. Always think about how many times you shall be using the product.

Diversification

Diversification means having a healthy mix of investment instruments. For instance, you may think that having only stocks are better for giving you a higher return, but it is safer to have a mix of bonds as well. Besides that, consider having both domestic and foreign bonds, stocks and items of other asset classes like real estate properties, or chunks of multiple real estate properties. Also remember - insurance like car insurance is not an investment for returns; it is an investment for security!

Your parents may have taught you the moral story “Never Put All Your Eggs In One Basket.” In the case of investment options, that is highly applicable. Investing in only stocks, for instance, is a recipe for disaster since these are highly volatile and unpredictable in nature. Your stock may be performing well today. But tomorrow? Or the next year? Who can say!

Liquid reserves

These are your funds which can be accessed quickly without affecting their value.

You may have a wealth of funds hidden away in investments, savings accounts, etc. But what happens when you are faced with an emergency situation? Will you take money from your retirement savings, or sell your stocks and bonds? Even if you wanted to do these things, time is a problem in emergency situations. This is why you need to have enough cash at hand to get you through any emergency situation. Have enough liquid cash at home, not just plastic cards like Debit cards, Credit cards and ATM cards.

Opportunity cost

When you peruse and gain something, you give up something else.

You cannot satisfy only so many needs in your life. If you take one path or option, you can’t take others. For instance, with a finite amount of money you can invest only in Stock A or Stock B. If you choose to invest in stocks and bonds, you can’t have that invested amount in cash as well. In other words, to gain something, you sacrifice something else. The best thing you can do is to determine whether the thing you want is worth sacrificing other things for.

Return on Investment

This is a measure of performance for investments, and is found out by dividing the investment’s net gain by the cost of investment.

The things which you have investment on, are they worth it? How much return on investment are they giving you, and how to find that out? Find out the price of getting that investment, and divide it with its returns which you are getting from it. That’ll tell you something about its value.

Return on investment is relevant not just for personal finance, but in other facets of your life. For instance, if you are giving someone a cake, is it better to buy a cake or to make one yourself? This is understandably subjective. The concept holds true in case of your education too. For instance, is it not better to go to a college, which is expensive, but gives a 90% graduation rate per year and better job prospects?

Compounding

Compounding is a process that gives you exponential interest growth of your savings. Such funds generate their own interest and over a long period of time.

Compounding can work for you, but also against you in the financial world. In case of investment growth and savings, compounding is good. You get higher returns as your interest rate grows periodically. You can add the power of compounding in other areas of your life as well. Take exercising, for instance. The more you exercise the better you’ll feel, and the more you’ll want to continue. Its positive effects just keep continuing.

70-30 Investing - Why Use the 70-30 Principle when Investing?

When it comes to equity investing, most traders in India tend to absorb losses when the prices of stocks fall, and then book stocks again when prices rise. Sadly, this strategy rarely works in the realm of equity investments.

Right now the economic scenario is unprecedented. The market is facing a threat which it had not faced in at least a 100 years. The pandemic has hit the global economy pretty hard. This has led investors wondering where to park their money in stocks and find safety. However, we wonder when the market condition returns to normal or when the market next time shows a boom period, will people buy more stocks or will they sell their current stocks to get a profit?

Right now, it may be tough to determine which stocks to buy since many stocks trade somewhat above their historical average valuations.

Trading market veterans say that it helps to follow a 3-point checklist. It is for investors who want to take informed buying decisions when the market shows inflated prices.

Earnings

Expect an economic revival after two to three quarters of the coming year.

The reason for this slow growth can be several.

First of all, the Indian GDP is considerably affected by the pandemic and its resultant lockdown. And by that, we do mean the economy is severely affected. As you may know, several industry sectors are crippled. Some are affected considerably, but are bouncing back. Others are thriving even in this situation! India’s net profit growth has gone down as well.

The next few quarters may not be a good-enough time for many industries, and therefore for many investors. Some companies will have to de-stock, especially in the domestic sector.

The good news? Some industries and even companies are showing aggressive growth.

To buy or sell

It is advised that you use the 70-30 principle.

It is also called the 80-20 principle. According to this, you spend 20% to 30% of your portfolio money on opportunistic investments only and for trading purposes. For instance, let’s say that you are choosing a stock and you know that it will likely double or triple its growth, may want to buy and hold such a stock.

At the same time, use 20 or 30 percent of your investment positions to actually trade since the market is volatile. Don’t be scared of market volatility. Volatility is not your enemy if you know how to use it. For instance, if you notice that a stock is showing a good run-up for a good period of time, pair down 20% of your positions even if it is for a core holding. Then wait for the stock price to come back before buying it again.

Debt-Free Year - 3 Steps to Have a Debt-Free Year

New Year is a time for making resolutions, decisions and for reflecting on the things in your life. Every year, countless numbers of people in India resolve, at the year’s beginning, to pay off their debt. However, very few of them actually do that.

By February, the enthusiasm you had in January may most likely wear off. This will be faster if your plan was too complex or too flimsy. In these cases, without a concrete plan, your plan shall fizzle out and finally be forgotten.

Instead, try out this plan. Complete the first two steps and you get to choose a payoff method in step three, which shall carry you through for the rest of the year.

1. Know your debts: It might sound scary, but you do need to know your debts, or the money you owe to people or agencies. Besides, you do need an honest evaluation of your debt. Also, you only need to do this just once.
2. Fund your debt accounts: Now that you know what debts you have, it is time to become free of them. To do that, there are a few sub steps. First of all, you need to calculate your monthly expenses, including what you need to create your emergency fund. Now, subtract that amount from your monthly income. This shall give you the funds you can dedicate towards eliminating debt.To make real progress, you need to do two things. Firstly, you need to earn a bit more, which you easily can by cutting off excess expenses, selling old electronics and even your cable connection. All this might not be fun to do, but remember that doing these shall help you a lot in settling your debts.
   
   Find a repayment strategy and stick to it: There are so many ways to fall into the debt trap, but just two ways to climb out of it. These strategies are the Debt Avalanche and the Debt Snowball. These depend on your preferences for persistence and instant gratification.
   
   
3. Debt Avalanche strategy can be used if you want results fast, but it can feel slow in the beginning. In this strategy, you pay off those debts with the highest interest first. Over time, this strategy saves you thousands. The only problem is that it takes time to get the first debt to be settled.

Debt Snowball is the strategy in which you get rewards upfront. In this, you focus on the smaller debts first. Since these get over faster, you get more motivation to keep continuing. You focus on the smaller debts first, no matter what the interest rates are. The catch is that this process takes longer and costs more in interest.
You can supplement either strategy with the strategy called Debt Snowflakes. In this strategy, you put small savings for your goals.

Debt Consolidation - 4 Tips for Effective Debt Consolidation

Did you know that people who take debt consolidation loans to pay off credit card debts actually end up with even more debt at year end? Did you know that it is one of the top reasons for the increasing stress levels in people nowadays? That is true as well, since people who take such loans remain with more stress than before taking them.

However, some people do have the good sense and a bit of luck to turn around their situation for good after taking debt consolidation loans. For instance, there are many examples of people learning from their mistakes and dumping their credit cards to avoid falling into debt again and again. Credit cards are of course useful, and doubly so when you can use them to get loans at 0% interest. However, things do not always go your way, and one credit card debt can be devastating.

Cons of Consolidation Loans

There have been way too many cases of people taking consolidation loans to take care of their credit card debt, only to fall deeper into debt trap by the end of the year. Many “manage” to double what debt they had previously. It is rightly called a Debt Trap because you end up with a huge debt but with no providers due to your low credit score. And how do you end up with a low credit score? By being continuously unable to repay your loans.

The second form of risk from consolidation loans come from the type of loans you use. In the case of unsecured personal loans, the rate may be lower or higher. It can range from 3% to 36%, and depends on your credit score and on the lender. It depends on your debt-to-income ratio too. If you have a good credit score, you can get a lower interest rate, but with a high debt level, the amount you can borrow can be limited.

The third way to consolidate your debt is by taking a secured loan. These have lower interest rates but the risk of losing your collateral is still there.

The fourth way to get a consolidation loan is by drawing money from your retirement account. It is risky as well since the balance can be penalized and taxed as withdrawal if you can’t repay the loan.

4 steps of doing debt consolidation the right way

Assess your situation objectively: You know you need to see a credit counselor and bankruptcy attorney if your medical bills and debt repayments take up more than half of your income. It is unlikely that you can pay off the debt within 5 years. However, you are likely to qualify for faster filing which can enable you to erase consumer debt within 3 to 4 months.

 Try not to take high-cost loans: Thinking about taking a loan? Think about these things first: the amount of monthly payments, the number of payments and other fees to be given. Then compare that with what you are paying now.

Choose the shortest possible loan term: To ensure that you pay the minimum interest, keep the loan to 3 years, and 5 years maximum.

Close off your cards: Perhaps the best way to get out of debt and stay out of it is to throw off your credit cards. This may cost you a bit, but at least you won’t be in debt anymore.

 

4 Clever Ways to Save Money - Best Ways to save money 2021

Most of us tend to pay all our bills at the end of the month. During this time, expenses may seem to mount up rather quickly. Your bank account takes a hit. Perhaps you, like so many others, think what you can do to cut your expenses? Is there any smart way to minimize wastage?

In this article, we are going to show you what to do.

Slash away your wireless service: If you don’t have a contract locked in with a nation-wide carrier company like Vi and Reliance Jio, you can always consider going for a cheaper plan. You may want to look at your data usage as well. Do you ever use that much net data and talk time? If not, you are probably wasting the pack. Just downgrade a bit till you find exactly what you need. When the time comes to upgrade your mobile phone, think hard if you really need an expensive set. If you don’t, go cheaper. You don’t have to buy luxury items to get adequate features.

Throw your landline out of the window: Almost everyone has a cell phone nowadays. Households are increasingly cutting off their landline connections for good because they just do not use them anymore. People’s lives now practically revolve around their cell phones. Some have more than one handset. Let’s face the reality: times change. If you don’t use your landline either, ditch the connection for good. You’ll save money by doing this.

Cut the cable connection: Your cable connection costs a lot. Do you really need it? Do you have time to watch TV anymore? When was the last time you did so, and for how long? If you don’t watch TV a lot anymore, why not remove the connection for good? Instead, you can take NetFlix, Amazon Prime and the like. You can thus watch all the movies and TV shows you like at a fraction of the cost!

Cut down your electricity bill: Did you know that some machines and instruments in your home are “energy vampires”? This means that even when they remain dormant, they keep sucking up electricity. These include coffee makers, TV satellite boxes, DVD players and more. Just by unplugging these you can save 20% of your electricity bills.

It is always prudent to see where and how you can save money. Stop wasting your hard-earned money, cut out unnecessary expenses and save money!

Zero-Based Budgeting - How to Make a Zero-Based Budget?

This is not a term you hear commonly. It is a deep personal finance term which maybe your insurance agent, wealth management expert and financial institutions know. This is a budgeting method that actually encourages you to spend everything that you earn. But, before you get excited, understand that this model does not encourage frivolous spending either.

The idea behind this budgeting model is that every denomination should be used for some good purpose. Zero-based budget is also called a zero-sum budget.

What is a Zero-based budget?

This is a method that encourages you to allocate all your money or monthly income to meeting expenses, debt payments and savings. The goal here is simple: income minus expenses equals zero by month end. One of the best things about this budget model is that it is very flexible. You can easily repeat expense categories each month or mix it up, just as you need to. If one month you come under the budget or have more income, keep the balance aside for meeting next month’s expenses, or you can move the excess up in another category too like emergency fund. 

Zero-based budget is the same as the Envelope System as a concept, which is all about distributing money for various expense categories.

Nowadays, there are some nice apps that help you to make a Zero-based budget, such as Goodbudget app. If you want to go the free way, just use a Google spreadsheet.

How to make a Zero-based budget?

Before you implement this budget module, there are few ways to make sure you are planning your spending realistically.

1. Know your income: Total up your benefits, paychecks and all other monthly income sources to find out how much you have to work with.
2. Track monthly expenses: It is important to know what you are spending on per month. You need to know what you are spending on, or where all the money is going. By scrutinizing your expenses, you’ll see which areas you can cut back on and in which areas you need to spend more.
3. Categorize expenses: This is perhaps the most important step here. Categorize your expenses and priorities, and that includes your needs and wants, savings goals and emergency fund. This will be very helpful. For instance, if you want to go on a vacation, you can create a Travel Fund. If you want to buy a new car, you save up for that.

How much to allocate to each of these categories?

This is a common question.

Experts suggest that you use the 50/30/20 method here as well. In this approach, 50% goes to meeting needs, 30% towards meeting wants, and 20% towards meeting debt repayments and savings.

 

6 Important Elements of Your Financial Health

When was the last time you thought of checking the state of your personal finances? A long time back?

Well, you’ll be surprised to know how many people make this mistake. It is always interesting to keep a tab of your finances, no matter whether you are just starting out on your career or are on the verge of retiring. It is always important to know where you stand in matters of your finance, before buying anything substantial. It helps to know what is realistic and what is not. It helps you to prioritize your financial goals too.

But…how can you know that your personal finance is in a good state? Easy! Just check the state of the below given areas of your life. Read the article below, and you’ll learn how to assess your finances, and what you should do when you do know what your situation is.

Your retirement savings: No one works forever. After a point of time, you’ll have to retire. It is therefore to save for your retirement since then you’ll have no income. Well, you may have, but it is safer to assume that you won’t have. Thus, by that time, you’ll have a nice nest of funds to fall back on. You should start saving for your retirement, the sooner the better. Saving for retirement is a top priority. Start by saving 15% of your income for this purpose, and your aim needs to be to replace 70% of your income when you will retire. At the very least, match your company’s contribution to your PF account.

Your debt: You can have debt in the form of student loan and mortgage. Know that not all debt is bad. However, debts having variable or high interest rates can be a problem. If you are managing your debts well, you won’t need to worry about them. When you do find out what your debts are, make a plan to pay them off. Use the help of a financial advisor if you have to.

Your income: Always focus on your Take Home Salary as this is the salary that remains after all manners of deductions and taxes. Your take home salary is the best way to measure your income. Your goal, as always, is to spend less than what you earn. It is never sustainable to spend more than what you are earning. If, by any chance, that is what your situation is right now, determine how you can cut down on costs.

Your emergency fund: An emergency fund, as the name suggests, is for emergency situations. If you don’t have one yet, it is time to build one. Start by keeping a bit of cash aside every month in a savings account or in a money market account.

Your credit score: Your credit score is a sign of how likely you are to pay back any loans. Your credit score is based on factors like credit utilization and credit history. It is important because it determines whether or not you’ll get the loan. 300 to 629 is considered to be bad credit score, 630 to 689 is considered to be good, and credit scores above 720 is considered to be excellent. If you want to build up your credit score, you need to pay bills on time and pay back your credit card balance each month.

Your insurance: You insurance coverage may include things like car insurance, home insurance and life insurance. You may also want to get disability insurance. At the very least, you want to have insurance enough to protect yourself from financial loss.

How to Manage Money in Your 20s - money management

The 20s in your life is possibly the first time you have to make very big decisions, capable of having a long-term effect on your life. Should you change jobs or career at this time? Should you get married and start a family? Should you buy a home or get a home loan? What about a car? Or should you travel the world instead?

All of these questions you may have already thought, or are thinking now. No matter which path you choose at this part of your life, it all comes down to health money management, which shall help you in meeting all your goals and dreams.

In this article, we are going to go through a few healthy financial habits you can start following today.

Control spending: You set the real foundation of your financial health when you start spending responsibly. If you are struggling to decide how much you should be spending and on what, follow the 50/30/20 budget. According to this budget, spend 50% of your income on necessities, 30% on meeting your wants, and the last 20% on your various savings. When you do this, you’ll find that you get many benefits.

For instance, if earlier you could not decide whether buying a theater ticket is a need or a want, following a budget shall put things into perspective. You may discover that you are spending way too much on things you can easily cut down on, like dining out and entertainment.

If you want to control your spending, there are two strategies you can adopt. First of all, see your spending from a different light. For instance, if you spend ₹200 per day on takeout junk food, think how much it adds up in a year! A lot, right? Well, that is a good reason to curb expenses.

Secondly, if there is a strong desire to buy something, wait for 72 hours. Once that period is over and you have hopefully cooled down, do you still want to buy it? What value will it bring in your life? How much will it affect your finances?

Save regularly: This is a given. You need to save more than you spend. We get it, the 20s is a time when everything is still exciting and you want to splurge left and right. But you need to save regularly. The very first thing you should do is to build an emergency fund large enough to take care of three month’s worth of living expenses. There’s no need to build such a fund overnight, and in fact, it is not easy to do that. Build it slowly over time. Start small, and grow it from there. If your current expenses force you to take money off this emergency fund, don’t worry about it. When that situation is over, just start refilling your coffers again.

Build your credit score: Grade school may be over, but there’s one grade you can’t ignore. This is your credit score. High credit score helps you to get loans or credit on low interest rates. Credit score will be an important factor when getting a home loan, car loan, and the like. Your 20s is a time to increase or build your credit score.

Save for your retirement: When you are in your 20s, you may think that your retirement is a long way off. That may be true, but remember that time waits for no one. The fact that you are in your 20s makes it the perfect time to start planning for your retirement, and thus building your retirement fund.

5 Ways to Reduce Money-Related Stress - Financial Management

Most of us think that if we just had more money, we would not have any problems in life. But then how will you explain the money-related stress which the rich people are in? It only takes one bankruptcy to propel back an affluent person into the lower ranks of society, let’s not forget. So it is not a question of having more money. It is more about better money management.

So, how can you have less money-related stress in life?

In this blog, we are going to show you 5 ways to de-money-stress!

Don’t monitor your accounts too much: It is not a healthy habit to log in to your savings or checking account each day to check your funds. No, it is not healthy at all. It is paranoia. Neither is it healthy to get text messages after every change in your account. Look, you are not Sherlock Holmes. Don’t try to be. It is highly stressful, does not help anything, and besides there is no mystery!

Focus on needs only: You may think that you really NEED the latest smartphone or the latest sports car, but those luxury items are not what you need. Those are your WANTS. In other words, you can do without them. Things you actually need are food, clothing, shelter and love. Once you cut down the frivolous things from your life, you'll know how many things you do not need. It’s actually liberating to know how much you can live without.

Set up spending limits: It can also be freeing to know how much money you can save by not spending. Set up a budget or limits to what you can actually spend per month. Leave a little bit of flexibility in the beginning, in case this is the first time you are setting spending limits or making a budget. If you wish, you can make it a hard limit. It’s totally your choice, but know that the latter brings results faster.

Designate an amount for everything, from eating out to entertainment. That way, when you do spend on them, you can do so guilt-free. And if money runs out? Well, you’ll know where you overspent and you can improve on that next month. This tip alone slashes down your money-related stress level!

Use money as a tool: Money is only a tool to use for buying things. If you already live a comfortable life, what then is the use of more money? You can save that instead of spending everything now! More money, if you are living a comfortable life already, won’t bring additional comfort or security. Remember, money is just a means of exchange.

Having money does not equal happiness always: More money does not always bring more happiness nor improve the quality of your life. People find joy when they have little money too, while some of the wealthiest people in the world are unhappy. Try finding joy in other things in your life apart from money. Be grateful for the things you do have.

Travel Insurance - Why Should You Buy Travel Insurance?

What is Travel Insurance?

Travel insurances are meant to protect people during trips. They typically cover medical expenses, trip cancellation costs, lost luggage, accidents and other losses incurred while traveling. They also provide coverage for legal liabilities and corresponding expenses. Usually, travel insurance can be purchased while booking a trip to cover the exact duration of that trip. Most travel insurance plans offer coverage for the following:

• Unexpected flight cancellation
• Loss of luggage
• A sudden need for prescribed medication
• Theft of wallet and passport
• Cancellation of the trip due to sickness
• Medical emergency in a foreign country
• Sudden evacuation due to natural calamities
• Personal Accident cover
• Trip cancellation due to terrorist activities at the destination
  

Travel insurances can be personalized to fit your specific purpose, but its main purpose is to give you the essential peace of mind required while you are out of your comfort zone and exploring the world. Let's look into why travel insurance is very often woth the cost.
Benefits of Travel Insurance

Medical Emergencies

During my trip to Singapore, I was overwhelmed by the spread of cuisines available there. Being a big foodie, I indulged in uncountable delicacies. I particularly overindulged in seafood. I woke up next morning in a terrible state - with severe diarrhea, high fever and feeling extremely nauseous. Self-medication didn't work, and my condition rapidly deteriorated. I had to be hospitalized and treated for food poisoning.

Apparently, the crab meat was the culprit. This little stint with crab meat cost me more than SG$1000, which converted to a whopping Rs.40,000 in Indian currency. My Indian health insurance didn't cover it. However, travel insurance could have spared me the horror of such a hefty expense. Sadly, I hadn't purchased one.


Most of us overlook this crucial factor. We often assume that we are covered for medical emergencies if we already have existing health insurance. However, most Indian health insurance policies provide coverage only within India. The moment you step out of the country, you are at risk. I learned this the hard way.

Most travel insurances provide Medical Expense Coverage that covers you for accidents and emergency medical care when you travel abroad. It even pays for emergency evacuation and repatriation in case of critical medical crisis, which is otherwise devastatingly expensive and unaffordable for many.

Lost Bags, Delayed Bags, Delayed Flights

My parents had visited Bali in 2015. Having landed at Bali Airport, they eagerly waited by the conveyor belt for their bags. However, their suitcases never arrived! Upon further inquiry, they were informed that their bags would arrive on the next day. Moreover, when they went back to the airport the next day to claim their delayed baggage, Mom got her suitcase, but Dad's couldn't be found.

They were at their dream destination in a vacation mood - the sea was inviting them for a refreshing swim, but the poor old guy did not have his swimming trunks! Moreover, their return flight was delayed by 9 hours. Doesn't it sound like a cursed trip?

Unlike my Singapore trip, this story ends on a brighter note. My earlier horrific experience at Singapore had thankfully taught my parents a lesson, and they were wise enough to purchase travel insurance this time. The travel insurance had Baggage Delay Coverage which covered for the purchase of essential items, such as a toiletry kit and a change of clothes until the delayed bags arrived almost 30 hours later. The insurance also provided Baggage Coverage, which reimbursed Dad for his lost belongings. The Travel Delay Coverage paid for the extra night in a hotel.

24x7 Assistance Worldwide

I was on an adventure-packed backpackers' trip to Europe last year. The trip was exhilarating until one day, in Holland, when I was mugged. My passport and wallet were gone, along with all the Euro I had. I was shaken up by the horrific experience that followed.

Since I don't speak Dutch, I could barely communicate. The Dutch folks barely spoke English, and I was at my wit's end trying to convey my problem to the local police. My trip almost got derailed! Thankfully, the 24x7 customer support helpline of the travel insurance company came to my rescue.

Every travel insurance company provides 24x7 support for such needs. They not only helped me overcome the language barrier with telephone interpretation assistance but also organized to transport me back to my hotel. They assisted me with my search for the lost belongings, provided stolen luggage replacement assistance and expedited the process of replacing my passport.

This service is extremely valuable in times of crisis. The 24x7 Travel Assistance Services can help with all kinds of emergencies during travel. This service comes especially handy during medical emergencies - they can locate nearby hospitals, organize medical transportation, and also arrange for treatment.

Life Insurance vs Mutual Funds - Which Is Better?

However, investing into the right tax saving fund is a common objective of all working individuals, yet a majority of the Indian working populace is forever confused. So, let's start from scratch by attempting to comprehend the difference between the two before determining which tax saving fund is ideal to invest in.

What are Mutual Funds?

Mutual Funds are professionally managed investments - a managed portfolio of stocks and bonds. Simply put, mutual funds are like baskets containing a diversified blend of stocks and bonds from various companies across different industries. When you purchase a mutual fund, you are basically buying one of these baskets that contains dozens (or even hundreds) of stocks from numerous companies. This is quite different from how stock market invesments work.

However, you don't get to buy a basket and lock it away for a certain period. As these are professionally managed investments, the fund managers decide what proportions of stocks your basket should store after carefully researching and predicting the market growth. They constantly shuffle the goodies in your basket to make sure that you profit from the market fluctuations. On an average, you can expect a steady annual return of at least 8% on these investments.

So, even if you are a risk-averse person, your money isn't at stake, and you can peacefully invest in these products for a long term. Tax saving mutual funds are all the more safe baits.

What are Insurances?

The Oxford English Dictionary defines insurance as "An arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium." Drawing on this definition, we can define life insurance as a similar arrangement in which the insurer compensates your survivors if you die; all you need to do is pay a specific amount for a specific period.

This is the pure and unadulterated definition of life insurance, which is commonly marketed as Term Insurance. However, there are several other types of insurances that are quite complicated.

What's the Problem?

The world of insurances is indeed mysterious. Investing your hard-earned money into them without adequate knowledge of what is to become of that amount is the biggest problem. Let us try to understand the complicated world of insurance in extremely simple words.

The Simple Ones

Term life insurances are pure protection products - they are available at a low cost and do not pay dividends. To put it in the simplest of words, if you purchase a term life insurance policy, you keep paying a certain premium towards the policy for a specific period - you won't get back a single penny from this policy. Your family gets a substantial fortune when you depart for your heavenly abode. A purist might not consider this a financial investment.

However, you and I can treat it as an investment in financial security as it pays a cash benefit to your family when you're not around to support them anymore. It just compensates the loss of income arising out of your death. On an average, a 30-year-old non-smoker can easily get a cover of Rs.1 crore by paying just Rs.12,000 a year. The premium amount of such policies is exempted from income tax. That's life insurance - simplified for you.

The Beguiling Ones

Insurance companies, however, have diversified their offerings and introduced several types of life insurance products which claim that they will return the premium after a specific period. Endowment Plans, ULIPs, Money Back Plans, Whole Life Plans, Annuity Plans and the likes belong to this category. These schemes have been cleverly designed by mixing insurance with investment.

The insurance companies position these products in such a way that they appear as lucrative investment options. Millions of Indians are tempted by the plethora of benefits, bonuses, coverage and a lump sum maturity amount that these policies offer. They rampantly purchase these products, not realizing that the apparently lucrative maturity value will be worth very little if inflation is accounted for.

The Dilemma

Let's try to understand how these insurance-cum-investment products work. Well, it's true that the hybrid insurance policies offer insurance coverage and simultaneously allow you to capitalize on various investment instruments like stocks, bonds and mutual funds. Let's say you decide to invest Rs.50,000 into an insurance-investment hybrid product. As insurances are meant to provide death benefits, a chunk of the invested amount is directed towards the life cover.

Let's assume that Rs.10,000 goes towards life coverage, and you don't earn a penny on this amount. The remaining Rs.40,000 becomes your investment. Alternatively, you can buy a term insurance policy with Rs.10,000 out of Rs.50,000 and invest the remainder in mutual funds. What difference does it make?

Most importantly, the hybrid insurance plans pay you round 5-6% return on the invested amount, which is much lesser than the minimum returns of 8% that you can expect from mutual funds. The hybrid insurances don't let your entire money grow. Moreover, term insurances generally insure you for much more than ULIPs and Endowments plans do.

People looking for life insurances undoubtedly want to leave a substantial corpus for their beneficiaries - the hybrid policies do not provide as high a death benefit as term life insurances do. It makes more sense to invest in a mutual fund to grow your money and enjoy it while you live; simultaneously, purchase a term life insurance for your family's future needs. That would be a better and smarter financial move.