Tag: savings

Importance of Budgeting

The process of managing money in a way that it balances your income and expenses is Budgeting. It deals with managing funds and finances in accordance with business or planning your expenses and savings for household. A budget is a must keeping in view the growing needs and rising prices of commodities.

It has been a difficult time during the pandemic for people to allocate their resources in the correct manner. Many lost their jobs leading to end of savings, minimal expenses (leading to reduction in tax collection) and more of supply than demand for products in the market. The economy was down and budgets failed. However the demand was more for medical and necessity items followed by hike in their prices therefore, being out of reach of the poor. Here arouse the need of funds and savings out of the government’s budget (previous years’) that were successful and well managed. They were used to provide necessities to the under-privileged during such difficult times. Not only the government but people who had sufficient amount in their bank accounts (the higher income households) to extend support, did their best to provide relief to the affected ones.

This signifies how proper budgeting can lead to betterment in the future.

Expenses should be kept lower than income in order to save some amount for contingencies or entertainment purposes, as per the situation and requirements.

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People often get trapped in debt due to improper planning of their finances. More expenses, less income attracts the mind to tackle it through easy ways which is to take a loan. However the interests act as a load and gradually affect the mental health of a person trapped in them.

The focus should be on easy methods to tackle the problem of finance. Preparing budget plays a major role in it.

  • Monitor your stable incomes and expenses thereby, to get an idea of your current financial status.
  • Analyse your recent spending and start making your own plan. Following are the simple, useful steps to follow and get a perfect plan:
  1. Write up your income (monthly budget) and divide it into two sections namely, Expenses and Savings.
  2. Make place for permanent/ fixed expenses first.
  3. Keep a part from the remaining for your savings and then divide the rest between ‘other expenses’ that might not be compulsory or significant.

This plan would work for a standard budget but situations aren’t the same. There can be more fixed and important expenses than the amount of money in hand. Such cases require support through debt (loans). But it can be handled this time if you create a budget defining your limits of ‘extra-expenses’. Give priority to needs and sacrifice your wants to execute your plans and come out of the debts soon. Save money for investments. It helps in problem solving in future.

Similar is the case for businesses. Funds should be managed accordingly and investments be made to support future prospects of growth and development. Start-ups need to keep a check on their costs and take every possible step to reduce wastage, be it of money or human efforts, since it would ultimately affect the workings and may increase financial needs.

A budget helps allocate the essentials leaving no space for useless expenditures. Monitoring budget plans regularly would help achieve better each time you make one. The major requirement is sticking to it till the end.

Small Savings for Better Future

 Small Savings

“Small drops make a great ocean” is an elixir votes cast by some to explain the benefits and benefits of saving. We will see a little explanation about that in this article.

Small Savings to Help at Risk

Man needs money to lead a normal human life. Some costs are subject to human planning. Some costs are unplanned. Take medical expenses for example. At such times some will be heartbroken. The reason is that they do not plan and save. But those with a saving habit need not worry. Because their small savings will give them a hand.

Essential Cost Savings 

The first expense that each individual or family has to make according to his or her ability in the income available to him or her is to set aside for small savings. It is a good habit to set aside a certain percentage amount for the future.

Small Savings are Security for Tomorrow’s Generation 

To any man, “Why do you live?” If asked, the answer is “for the benefit of my children.” Yes, children faith on and depend on their parents. It is the duty of parents to ensure a secure future for their children. It is savings that provide such protection.

Those who save separately for children’s education, for clothes, for marriage need not worry about anything. For that, a long-term plan and a short-term plan must be drawn up and implemented.

It is just as important to save the occasional amount of money as it is to store rainwater in dams, lakes and ponds and use it for agriculture and drinking water for a long time. 

Savings methods

Little by little we have seen people screaming that the money we save is invested in private companies with high interest rates and that there is no interest. So it is safer to save in reliable, secure post offices or in state-owned banks, rather than saving in unsafe private companies. 

We really need the habit of saving. It should be stored in more reliable places. Then our life will be happy.

Mutual Funds 1O1- Advantages

Mutual Funds collect small sums of money from a large number of investors. This becomes a large pool of money which is invested into the market and the returns generated are distributed among the investors proportionately.

There are many advantages of investing in Mutual Funds:  

  • Professional Management: Investing directly in Equity is very risky for those who are not experts and lack the ability to track the market regularly.  Mutual Funds are managed by professionals with adequate  qualifications and experience.
  • In house research is undertaken to aid the fund manager. 
  • Top management involvement to guide the investment policy and the fund house philosophy.
  • Competitive performance resulting in constant improvement of portfolio and NAVs are disclosed at record timings.  
  • Diversification: Diversification is nothing but investing your money across different types of investments. An investor with a limited amount of funds might be able to invest in only one or two stocks/bonds. However, Mutual Funds invest in a no. of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because it is unlikely that all the stocks decline at the same time. So Unit holders of a mutual fund achieve this diversification with very less money that an investor cannot do on its own.  
  • Low Cost: Mutual Funds invest huge amounts of money on a regular basis. Therefore they pay very less % of the amount such as brokerage, depository and other types of charges as compared to the individual investors. So mutual funds provide a cost efficient way to invest in the financial market. 
  • Transparency: Mutual Funds have to publish their NAV on a daily basis and they have to periodically share the portfolio investments with the investors. They offer transparency to investors and have to publish their results semi-annually. Any important change in the scheme has to be duly informed to investors. 
  • Attractive Returns: Mutual Funds give very attractive returns in the long or medium term because fund managers invest in stocks after considering the fundamentals, future plans of companies with the help of trained research teams. They use every possible technique to save the investors’ money such as Hedging. So it’s a very good investment avenue used in the financial planning process. 
  • Well Regulated: All the mutual funds have to be mandatorily registered with SEBI. SEBI Mutual Fund Regulations 1996, as amended till date, governs the mutual fund operations and investments. The regulatory system aims to ensure the protection of interest of investors. The fund investments have to be as per the scheme’s objectives and there has to be complete transparency about funds investment and performance. NAV of the fund has to be published daily and scheme’s performance periodically. SID (Society for Information Display) & SAI contains all relevant and important information pertaining to scheme and fund and serves as an important investment document for the investor. Thus mutual funds are a well regulated investment vehicle in India. 
  • Choice of Options: In India, Mutual Funds offer different types of schemes to suit the varying needs of investors. Investors have different goals and objectives, which may range from retirement planning to investing for a vacation. Investor’s needs may include capital appreciation, liquidity, regular income etc. Because of several types of schemes launched by mutual funds catering to different investment requirements, investors have numerous options to choose from the wide range of schemes such as growth plan, regular income plans or Equity oriented plan, Gilt Funds. They also have the choice available in their method of investment. They can invest lump sum money or they can opt for periodic investment in the form of monthly installments through Systematic Investment Plan (SIP). Similarly they can opt for single withdrawal of entire funds when needed or monthly Systematic Withdrawal Plan (SWP). 
  • Liquidity: Open ended mutual funds are very liquid investment avenues because investors. Open-ended schemes are all the time open for subscription and redemption with the fund house itself. Investors can enter and exit from the scheme at any time at the prevailing NAV. Closed ended schemes offer limited liquidity to investors. Investors can buy the units only during NFO (new fund offer) and can exit at the maturity of the scheme when the mutual fund redeems the units at the prevailing NAV. However, all the closed ended schemes have to be necessarily listed on the stock exchanges in India. This provides a secondary market exit route to the investors of closed ended schemes. Though the schemes are listed but practically trading volumes in mutual fund units are negligible and therefore closed ended schemes don’t offer liquidity to investors. 
  • Convenience: Mutual funds provide a very easy and convenient way of investment as well as withdrawal of funds as compared to other investment avenues like Real estate, Debt instruments etc. Investors can invest in any manner either through distributors in the physical form or can buy units online whatever is convenient to them. Units can be held in physical or demat form. 

Mutual Fund is an investment avenue which gives the small investors an option to participate in the capital market with their small funds and limited knowledge of the volatile market.  

How to Become Rich Faster than Others (Practical Steps)

Everybody wants to become RICH one day.

Still, how is it that some people have all the answers? How do the rich keeping getting richer while the poor keep getting poorer? Is the game actually rigged against us? Are we, in fact, doomed to live ordinary lives, merely controlled by our hedonistic desires and pleasures, forced to succumb to our animalistic urges, never able to actually get ahead in life, let alone get rich? Or, is there some solution? A way out, if you will? 

How to Become a Millionaire and Get Rich the Right Way

Clearly, these are questions posed by the masses. But not everyone can pull it off. What separates those who seem to have all the answers from those that are constantly jumping from one ship to the next, never able to truly find their gravy train? Well, the answers are far simpler than most would imagine. 

Don’t spend more money than you make.

 Not many people follow this advice. Many are focused on spending as much as possible. Whether it’s to revel in the perception of being more well-off than they actually are, or some other purpose, this is the truth across much of the developed world. 

Keep a Diary of your Expenses.

Benjamin Franklin once said, “Beware of little expenses. A small leak will sink a great ship.”

As easy as it might seem to ignore the little stuff, so to speak, the more you sweat the details, the better off you’ll be. Cancel that gym membership you haven’t used in six months. Eliminate that costly cable television plan. Stop buying expensive lattes and eating out when you know you can’t afford to do it. Download an app or purchase a small notebook and track every expense no matter how small or how big. 

Quit all the Bad Habits- drinking, smoking, gambling, etc.

Bad habits hold us back from achieving many kinds of goals. They stop us from losing weight, making more money, saving, investing and everything in between. The only way you can actually get ahead in life is to decimate those bad habits. You need to quit the bad habits before they lead you down a deathly spiral. 

It’s hard to achieve something that takes so much of your energy, such as getting rich, without eliminating your bad habits first. I’m not just talking about poor financial habits; I’m also talking about any other habit that eats away at you, physically, emotionally or mentally. 

Save 20 % of your Income every Month.

In order to get rich, you need to save at least 20 percent of your income off the top. Everyone has heard this before, but how many people actually follow this advice? 

The term “pay yourself first” holds major weight here. While some don’t find the importance in this, others realize that this not only provides a rainy-day fund in case of emergencies, but also moment-of-the-opportunity cash. When the right opportunity comes by, you need cash to seize it. If you don’t have the cash, you just missed the proverbial boat. 

Pay-Off your Debts.

When you’re debt-free from the bad debt (not the good debt like mortgages for investment properties and loans to grow you business, for example), take that money and put it towards your savings. The trick is not to go spending cash and splurging on a vacation or a new car once you’re debt-free. Stay focused. 

Don’t Rent but Own your House.

No matter what it takes, even if you have to downgrade your living situation, you should do what it takes to purchase a home. Sit down with a mortgage broker and assess your situation. Set some goals and create a plan of action.

Even if you don’t have enough money saved for a down payment right now, figure out what it’s going to take to buy your home. We’re not talking about your dream home here. However, over time, the money spent on your mortgage is far better invested than money spent paying rent. 

Invest, but only after Researching the hell out of it.

Many people invest for the sake of it. If you don’t have proper knowledge about the plans your investment offers then you might never really grow your money in it. The better you know an industry or niche, the more likely you’ll be able to spot ideas that could possibly create massive amounts of income for you in the future. No one else is going to do this for you. And when you do invest in something that you know, be sure to track it vehemently.

Multiple source of income but not mainstream.

Anyone who’s serious about getting rich needs to build multiple streams of passive income. Passive income is incredibly important when it comes to amassing wealth. Simply put, you to need to generate your income on autopilot if you want to create a considerable net worth. 

There are a number of passive income generating ideas that you could implement. Some of the most popular involve real estate and dividend income for those that can afford the often high-cost barrier of entry into those fields. Others opt for generating passive income by starting a blog, creating digital products such as e-books or courses, and even creating online tutorials, just to name a few examples.

Time Value of Money.

We all have the same amount of time in this world. You don’t have more than the next person and that person doesn’t have more time than another. No matter if they’re a powerful politician, a business magnate or a famous athlete, they don’t have more time than you do. Time is life’s greatest equalizer. 

It all depends on how you utilize your time. Every second is precious. Become lazy or procrastinate and lose your dream of being rich.

Rome was not built in a day.

Daily goal setting provides milestones on your way to your bigger goals. Break the big goal down to achievable daily goals that won’t seem so overwhelming. For example, if you want a $10 million dollar net worth in the next five or 10 years, figure out what it’s going to take on a daily basis to move closer to that goal. 

Best low-risk Investments in 2020

Due to the Corona Virus Global Pandemic 2020, our economy has faced unprecedented challenges. With businesses shutting down and stocks facing a fall, INVESTORS are looking for stability in their returns by opting for low-risk investment options. Low-risk investments earn only modest or meager returns; and inflation can erode the purchasing power of money stashed in low-risk investments. But it all depends on what your economic requirement is and how much risk you are willing to accept.

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Lets dive into the top low-risk Investments in the year 2020.

  • High YEILD Savings Accounts.

Savings accounts offer a modest return on your money. A savings account is completely safe in the sense that you’ll never lose money. Most accounts are Government insured up to certain limits, so you’ll be compensated even if the financial institution fails.

  • Saving Bonds

Scrictly speaking rather than investments these bonds are more like saving instruments. Bond is a good choice for protection against inflation because you get a fixed rate and an inflation rate added to that every six months.

  • Certificate of Deposits

With a CD, the bank promises to pay you a set rate of interest over a specified term if you leave the Certificate of deposits intact until the term ends. Some savings accounts pay higher rates of interest than some CDs, but those so-called high-yield accounts may require a large deposit.

  • Money Market Funds

Unlike a CD, a Money market fund is liquid, which means you typically can take out your funds at any time without being penalized. Money market funds usually are pretty safe. The bank tells you what rate you’ll get, and its goal is that the value per share won’t be less than $1.

  • Corporate Bonds

Companies also issue bonds, which can come in relatively low-risk varieties (issued by large profitable companies) down to very risky ones. The lowest of the low are known as “junk bonds.” When you buy a corporate bond, you’re loaning money to the company. In return, you receive periodic interest payments until the bond matures and your principal investment is returned.

  • Dividend paying stocks

A dividend is a portion of a company’s profits paid out to the company’s shareholders. When a company makes a profit, it can choose to reinvest that profit back into the business, but sometimes it pays a percentage of it back out to shareholders. Not every company pays dividends, but those that do often have slow, reliable growth.

  • Preferred Stocks

Preferred stock is more like a lower-grade bond than it is a stock. Still, it may fluctuate substantially if the market falls. Like a bond, preferred stock makes a regular cash payout. But, unusually, preferred stock may be able to suspend this dividend in some circumstances, though often it has to make up any missed payments.

Building an investment portfolio that has at least some less-risky assets can be useful in helping you ride out the volatility in the market, and there’s been no shortage of that this year.