Personal Finance Changes in India - Personal Finances Changes in India

The coronavirus or Covid-19 pandemic has affected the livelihood of people all over the country. Many have lost their jobs while others have to make do with 50% salaries. Some, even though are not laid off, have their salaries delayed by 2 or even 3 months. All of these have created a sense of panic and helplessness in daily-bread earners all over the country.

Earlier this year, the Government of India announced several measures to diminish the problems of the common man. These included ATM charge waiver, savings account non-maintenance charges fee waiver, and more.

However, from 1st July 2020, some of these relaxations shall be withdrawn. Here are the 5 money-related items which have come into effect from 1st July, 2020.

1) Restrictions on ATM use is back again

On March 24 this year, the government announced that for 3 months all debit card holders can make withdrawals from any ATMs without any withdrawal limit. From the 1st July, the regular charges and limits shall apply. Here are the numbers of free transactions a debit card holder can still make, according to the RBI.

Transactions at bank’s own ATM from anywhere: A debit card holder now has a minimum of 5 free financial transactions in any month. This will not depend on the location of the ATM. Furthermore, there shall be an unlimited number of non-cash withdrawals for free.

Transactions from ATMS in metro cities: If the ATMs are located in any of the 6 Metro cities namely Chennai, Bangalore, Kolkata, Hyderabad, Delhi and Mumbai, savings bank accounts customers get a minimum of 3 free transactions per month.

Transactions from other bank’s ATMS at non-metro areas: From any other location other than the 6 metro cities mentioned above, banks will give savings account holders a minimum of 5 free transactions per month at other bank’s ATMs.

Charges when exceeding transactions limit: According to RBI guidelines, these can’t charges cannot be more than Rs.20 at maximum, per transaction. Applicable taxes are extra.

2) Penalty charges for non-maintenance of bank account balance

A big relief measure provided by the Finance Minister Nirmala Sitharaman in March was the waiver of penalty on non-maintenance of one’s bank account balance. The waiver was for 3 months. This period is part now, and thus non-maintenance of bank account balance shall attract a penalty from now on. The penalty amount will differ from bank to bank.

3) Stamp duty on buying of mutual fund units and shares

From 1st July 2020, buying of mutual fund units and shares shall attract stamp duty. According to the FAQ published by the Finance Ministry, the previous system of giving stamp duties on securities caused multiple rates for the same financial instrument, which thus resulted in multiple incidences of duty and jurisdictional disputes. This in turn raised transactional costs in the security market and adversely affects capital formation. By the current amendment, the stamp duty shall be levied by one agency. Furthermore, the revised FAQ has clarified that there will be no stamp duty for redeeming mutual funds since it is neither a sale not a transaction. The duty is charged on the unit value, and does not include charges like GST, AMC fee, etc.

Goals Of Financial Management - 4 Personal Financial Goals

Remember those financial goals you make back at the beginning of this year? With the year drawing to an end, and with Fall just ahead, it is a good time to revisit your financial goals. It is also a good time to check if any of those goals have gone awry. Here are some financial must-do things or this Fall.

Create an emergency fund

This September has 5 Fridays, which means an extra week’s worth of paycheck! If you are getting this huge benefit, consider to use this bonus to start building your emergency fund. Even small amounts of emergency fund can help you during times of car repairs, medical expenses, unexpected emergencies, and more. A good place to start doing this from is your high-yield online savings account.

Already have a good enough emergency fund nest? Then use that bonus towards paying your mortgage debt or credit card debt, or even planning to use it next year.

Oh and by the way, this December has 5 Fridays as well!

Increase your retirement savings

Are you maximizing your PF or Provident Fund? If so, this is a good time to consider making an increase to this contribution.

The minimum goal for provident fund should be to contribute enough to get any employer in the future to match your current company’s offer. If it is possible, boost your contribution by 10% or even by 15% by the end of this year.

You can contribute up to a certain amount per year, and this amount is tax-deductible. If you are older than 50, you can add another certain amount to build up your retirement egg nest.

Save something for those shopping splurges

Special days for encouraging shopping sprees and increased consumerism are many. There are days like Black Friday when you are bombarded by huge discounts and price offs. Of course people buy! Even those who are not in the habit of splurging find it hard to stop themselves.

At times like these, what you can do is arrange an automatic weekly transfer of a certain amount to your savings account from the beginning of September. Thus, when Black Friday does come, you’ll have enough funds to buy things.

Understand that the huge discounts only set you up for buying something big or expensive, which mitigates the discount cost for the sellers.
Use technologies to pay off debt faster

Why not let technology help you out? For instance there are tools which let you see when you shall be debt-free based on your current assets and liabilities. Using these can fine-tune your finances in ways would not have imagined possible!

How to Set Financial Goals - 6 Things To Do After You’ve Met All Your Savings Goals

You’ve done a lot this year. You have created a nice emergency fund enough to take you over three months of all expenses. That high interest debt you had? You paid it off too, and have started to siphon a nice percentage of your income towards your retirement.

All this is great work, but now what?

In case you are wondering how to save money beyond the basic steps, this article is what you should read.

• Check your budget: Maybe you needed to have a strict budget to pay off a toxic debt. But now, with that over with, you can switch over to a 50/30/20 budget. If you are already using this budget model, reevaluate that and see what are your wants and needs. Thus, you’ll see that more money is available.
• Take care of the low priority debt: You have paid back the high-interest debt first, and that’s a good thing. In fact, that’s how it should be done. But don’t stop now that it’s paid. Start paying off the low priorities debts.
• Use your savings: A lot of people keep a significant part of their money in a savings account in the same bank that has a checking account. Perhaps you are doing this too. Now, this earns you maybe .06% interest a year. But this can grow faster. Consider moving your emergency fund or your savings into a different type of account. Consider Certificates of Deposits. These can lock up your money for a certain time while it earns a high interest rate. If you have extra savings, CDs can be a great option. However, these are not so good for your emergency fund since you may need it at any time. For emergency funds, a high-yield savings account is a much better option since these have a higher minimum balance requirement and have high interest rates.
• Don’t forget to invest: This is a good time to rethink how much you need to save up for your retirement. Perhaps you may need to start saving more for that, or even set up a personal retirement account. If you want to start building up a portfolio, reach out to a broker.
• Insure yourself: Revisit the basics like homeowner’s insurance and car insurance. Think about in which stage of life you are in, and what things you are preparing how.
• Think bigger: Till now, you have covered the basics. Now you can finally pay attention to savings goals and projects which you may have put off till now. Whether it is to start a new business, a family vacation, or perusing a new hobby, now is the time to do them all. Just focus on saving cash.

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

Want to know about your personal finance? If so, you need to understand your income more. What you have to know is how much you make per month, what your expenses are, what your savings are, and so on. If you make a budget, you can even predict your income at some small level.
So, let’s get down to it!

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.

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.

1. 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.
2. Tangible assets: These are physical things which you can touch. This includes business properties, personal properties, boats, cars, art and jewelry.   
3. Intangible assets: These are assets you cannot touch, and thus these are in the form of bonds, stocks, pensions and royalties.
4. 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.
5. 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.
6. Fixed income assets: This includes money lent on interest, certificates of deposit, government bonds, securities, and etc.
7. 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.

1. 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?
2. 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.
3. 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.
4. 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.
5. Divorce- During divorce, your assets, money and possessions get divided between you and your spouse.
6. Bankruptcy- If you file for bankruptcy, your assets can be sold. 
7. 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.

7 Ways to Supercharge your 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.

1. 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.
2. 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.
3. 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.

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.