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Investing With Debt

This might seem huge risk to any body who is reading this. I have applied for a loan from my employer. As per the service rules of my company I am eligible for an interest free loan of Rs 50,000/- payable in 10 equal installments. This loan would put me in some more debt (you can see my current debt position here), but this would be the first time that I would be using the debt amount for leveraging my financial position.

For me I cannot see idle cash sitting around with me and doing nothing. I want it to get moving and for this reason i went for that loan. The options that I haveafter taking the loan are:

  • Pay off debt
  • Invest in Tax Savings Instruments
  • Purchase of Mutual Funds
  • Go to the stock market

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Posted 09 January 2008 † The Chef § Investing § My Money § Personal Finance ‡ Comments (3) ° Tagged: , ,

Carnival of Financial Goals #2

After reading almost 50 posts of the Carnival of Financial Goal #2. I am bit tired now, but I think Sam has done a very good job. There were some quite interesting posts and goals to be found on the carnival. I also secured a place in the carnival, with my post which i could find using Ctrl+F ;)

The most inspiring were as follows:

Pinyo at Moolanomy has posted a really inspiring and a structured goal.

The Little Dough Girl started with goals that are very conceptual. You stick to concepts ad you’ll achieve your goals.

The Goal at Digerati Life, I would call it as a big goal and shows her futuristic thinking for a better future.

The goal posted at Plonkee inspire us to analyze ourselves for our own future

The goals posted by Millionaire Mommy Next Door were methodical and well planned.

Goals at Cash Money Life were special in their own way and induce a positive optimism in the reader.

The dividend Guy presented a scenario analysis which can be applied to many situations.

Early Retirement Extreme provides us with the purpose with which we can achieve out goals. Passion!

Yoopersmith want us to change our attitude towards money and does a pretty good job with examples.

The last post that I like very much was of Adam Freedman at Investor Journal just that I had to add to his post that I would put the Dont’s first and then the Do’s as I’ll probably learn the Dont’s first by making mistakes and then rectifying them to arrive at the Do’s

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Posted 08 January 2008 † The Chef § Carnivals § Goals ‡ Comments (5) ° Tagged: ,

Leveraging Your Relationships #2: How To Achieve Better Relationships

Now that you have got the idea what leveraging is I want you to know how you can improve upon your relationships? Most of you would know might these simple steps and may know that it is not a rocket science.

The day when you make your first relationship (the day when you are born) you grab the attention of your mom by crying. This practice of grabbing attention stays but the mode with which it is attained changes with age.You give a smile, and that’s the beginning of a positive relationship. But to sustain it you need and later utilize it, it requires certain efforts.

Some days back I had a target to complete a project, simultaneously; I had to make a presentation, both the tasks were of high priority. I asked a colleague of mine for some help to make the presentation. I just asked her to make a skeleton for it and I would add the rest of the details. But to my surprise she completed the whole presentation for me and I got out with both the targets with flying colors. I didn’t forget to appreciate her in front of the team for the help she provided me.

This was a leverage of my relationship with her. Over the period of time I have developed a very positive rapport with my colleagues that we have a very healthy competition and a great helping team.

I achieved this by following certain simple steps.

Respect: You should be giving respect to the other person; it comes by talking with respect, sticking to time or being punctual with appointments and keeping your commitments. You never know how much it hurts the other person when you don’t keep your commitments.

No disparaging: You should not disparage your friends, colleagues in front of others and even behind them. You never know when your deed reaches your friend/colleague and in what format.

With family members it’s even simpler.
Working closely with family: any assignments or a group activity should be participated with full heart.

Reminding some good old moments: When you are out of touch with a colleague or a friend you can make him remember certain cherished old moments and repeat them more often.

Show interest in future endeavors: Whenever there are discussions in your family/office team show genuine interest and put relevant inputs after researching that subject. This would also help develop your knowledge base.

Help: Try to help from the bottom of your heart as your eyes will surely say whether you are genuinely interested in the tasks/talks or not.

If you don’t want it the straight way to build relationships then you learn to kiss ass from Jon.

Well, I follow a mixture of these tips and I am growing at a decent pace in my organization as well as sharing a beautiful relationship with my friends and family members.

I would pose similar questions to the readers; how well they are with their relationships? and are they in a position to leverage it? And do you think you can add to the list that I have provided above?

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Posted 07 January 2008 † The Chef § Gyaan § Idea Lab ‡ Comments (1) ° Tagged: ,

Leveraging Your Relationships #1: Defining A Leveraged Relationship

Debt! This is the most commonly word used on this blog; I have used it in the context of how to reduce it, effects of debt and in various other forms. Paying off my debt is my number one priority. Debt is not necessarily as bad as I have mentioned before, by definition it is a leverage that you can utilize to enhance your return on investments, provided that the debt is invested and not consumed.

This post is not about debt but about leverage. You would have seen this word ‘leverage’ in many financial books and novels. Some authors have written about leveraging money and some have written about leveraging time. These are primarily called as other people’s money (OPM) and other people’s time (OPT). Today I want to tell you something about leveraging our relationships.

Have a facebook, linkedin, myspace, or orkut profile? Then you know the concept of social networking. If you ask a question “why these sites are so popular?” you would get the answer as “A network of like minded people with similar interests can give you further opportunities in your career”, or “You can remain in touch with those who are close to you but physically distant apart” or you may find some other answer for your question. Nonetheless, you have an online social network.

In today’s world when networking is the happening phenomenon, people are resorting to virtual networks too as in Secondlife.com and There.com. If you go to the conceptual level then you will see that you are forming a community and want to share the relationships in those communities for mutual benefits.

Simply put, you want to use your relationships to improve your life.

The social networks are useful in long term but have you ever used or tried to improve your personal relationships that you created throughout your life? You have a debt of X amount, over which you are paying an interest, can’t you use your existing relationships with your close friends and family and borrow some money from them and pay of the debt. You might say that this would be rolling over your debt but this would be done at a lower interest or no interest (if you are in India).

You can leverage the relationships at workplace too… Ask your colleagues to do some minor works when you are in some work pressure or some deadline has to be met. This would provide efficiency in your work and you would be working as a good team player.

Now you would say that this is OPM and OPT but the underlying fact is that this is neither borrowed money (for which you pay interest) nor outsourced work (you pay for service). It’s just getting things done with your strong relationships. Now you cannot borrow huge amounts but you are borrowing relatively smaller amounts based on the strength of your relationship. Same is true with the work that you will ask from your colleagues.

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Posted 03 January 2008 † The Chef § Featured § Idea Lab ‡ Comments (2) ° Tagged: ,

Networth Update Dec’07

This month was good from the expense point of view. I spent much less and saved a lot. However, I didn’t do any investments this month. Whatever growth you can see in the stocks and the mutual funds is the capital appreciation. I have started my emergency account as planned with a goal of Rs 30,000/- this year. One more thing that I want to point out this month is the interest on my Employee Provident Fund (EPF). I am not adding any interest on my EPF and a cumulative interest shall be added after I receive my EPF statement from my employer.

This month I thought that tracking my networth is one way to track my financials but it would be great if I track my expenses too. I have thought of a graph in percentage that I would call as a consumption wheel. I shall put my investments too in the consumption wheel (investments are equivalent to an expense to buy future). My goal would be to reduce my variable expenses. The other goal would be to increase the investments category.

dec-networth.PNG

Coming over to this month’s performance I would say it is a significant improvement. My networth grew by 7% almost twice that of the previous month’s growth. The assets also grew by 16.06%. This is a major improvement. I want to increase my asset base to such a level that it can finance my liabilities. I have used my accumulated assets (stocks) to pay off my credit card.

Instead of paying the debt at a slow pace I prefer to have a dual approach. Pay the debt slowly and side by side accumulate money at a greater rate of return (than the interest rate that I am paying) and then make huge payments to kill the debt. Till now I am successful, I am going to try this approach for my personal loan and the student loan too.

Posted 01 January 2008 † The Chef § My Money ‡ Comments (1) °

De-Cluttering My Routine

I wish all of you a very Happy New Year and a belated Merry Christmas. I apologize for being gone for some time now. I was on a work related trip for the past few days and was now back again with a concept that I hope you would like.

Focus! This is what I lack sometimes and which obviously throws me out of competition most of the times. Due to lack of focus I am not able to address my priorities. My priority today is to reduce my debt and to have an initial financial plan for myself for the next five years.

Focus as per the wordweb online dictionary is defined as

The concentration of attention or energy on something.
Maximum clarity or distinctness of an idea.

I tried to frame my own definition as

Remove all the clutter around something (your priorities) and you are automatically focused or in other words finding the correct answer by eliminating the all the wrong answers.

Lacking focus and purposely avoiding a situation are two different things. When it comes to debt, at times I try to avoid the matter. This you can say as loosing focus on purpose. Take an example, I have host of interests; reading, playing chess, playing video games, photography, watching movies. Now when it comes to ponder upon my debt situation I tend to resort to any one of the interest that I have.

If I can quantify these interests then I can say that photography requires skill, not only for shooting but also for editing the photos etc. this means some investment of time in acquiring other skills and it’s an expensive hobby. Playing chess, games are addictive and it’s a shear waste of time but when you make the high score then it gives you a high.

Now if I think of my priority and the first thing come to my mind is my debt, financial planning and money matters. So what I do to address them, I generally tend to occupy my mind with other things like a movie, or the interest that I have mentioned. This is primarily because I don’t want to think about debt, same is with financial planning or any other matter of high importance. The bottom-line, I am forwarding the problem, running away from it but sooner or later I have to face it. This running away is one of the reasons that I find one day trapped and cornered by debt and I was not in position to handle it.

If we can work upon the problem this could be avoided. There are various methods to do it, considering money as my priority I can do budgeting, keeping a list of purchases, controlling my impulse buying behavior etc.

The method I am suggesting here is an alternative process that can be used to focus on your priority. If you have difficulties in having a direct focus or you are purposely avoiding it then remove the elements that make you lose focus from your routine to force yourself to stay focus. For example you can just stay away from watching a movie or a video game etc. for sometime, then you’ll have nothing to do and you’ll be forced to think of the priority which is your debt or financial planning.

This process I have termed as De-cluttering My Routine. By doing this I am not only focused but I can find out finer things in my behavior which has similar clutter and in the long run it will surely pay off at least I hope so.

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Posted 30 December 2007 † The Chef § Debt § Featured ‡ Comments (1) ° Tagged:

Time Distribution For A Day

Time, this is the only asset which everybody in the world have and is distributed equally i.e. 24 hours in a day. No matter how you spend your it, you will get the next set of 24 hours the next day. You can spend time wasting it or spending it constructively.

The essential condition comes along with this asset is that you have to spend it. You cannot accumulate it, store it or gain any kind of appreciation on it. But this asset has a peculiar characteristics, this particular asset can let you accumulate other assets if you spend it wisely.

Setting financial goals making resolutions for the next year are the part of goal setting. You can achieve these goals by working for them. The underlying assumption for this is that you will work hard, change your behavior to finally achieve these goals. The important thing knows is you can’t achieve your set goals if you don’t stick to a time schedule. Even if you achieve the goals without a schedule you cannot expand/enhance your goals in the future.

I just want to set my time straight for a single day. Practice the same for a few days and then make it a habit. Improve upon the habit thereby improving my life. To put this into effect I need to check the time that I spend in my available 24 hours. I was observing myself over the past few days and how I spend my time.

My typical day

Getting up at 8:00 in the morning getting ready for my job till 9 leaving for the office it takes 35 min to reach my office. This includes the breakfast time of 20-25 min. Spending time doing work for 8-9 hours and again back at home at nearly 8:00 in the eveining.

So my job is nearly 12 hours daily including the travel time. In the evening I watch TV for 1-1.5 hours and then prepare my dinner this takes my 2 hours. After having my dinner I surf the net, read blogs, write one or two and then sleep.

Broadly this is my daily routine. On weekends I meet some of my friends, read books and do some weekly chores like washing clothes, dusting my house, watch an occasional movie, etc.

This is a haphazard way of spending time simply because I have no goals for my time as I have with my money.

Setting my time straight

I sleep for eight hours; I am planning to reduce it to 6 hours. I have read a 6 hours sleep is a healthy sleep.

I am moving over to Hyderabad. There I’ll have my residence near my office that would save me nearly one hour a day spent for traveling.

I can have a cook as Hyderabad is relatively inexpensive compared to Bangalore, alternatively I can increase my cooking speed and complete my dinner in one hour, this would save me nearly one hour of time.

These are tentative figures that I am setting for me for now. This would bring some urgency in me, I would start respecting time. The tangible advantage that I’ll be having is earning a full four hours a day. This I can distribute for my daily exercise, reading and focusing on my other priorities.

The point I want to make through this post is that most of the people set their goals, financial goals, etc. but they never do consider the time in their goals except the deadline (a particular time) they put for their goal. But to me I have realized that time is a process which can be worked upon to have it more me. Some improvement in habits it will take to build a corpus of some hours daily.

Posted 20 December 2007 † The Chef § Featured § Goals ‡ Comments (2) °

2008 GOALS

After a review of my financial status for the year 2007 and setting up my resolutions for the year 2008, it’s time to set my goals for 2008. To keep things simple I have classified my goals under financial and non financial heads.

Financial Goals

Investments: Currently my investments stand at Rs. 17000/- which includes Rs. 5,000/- in mutual funds and 12,000/- in equities. In 2008 I will increase my investments to Rs 1,60,000/-. This would include, approximately Rs 80000 in mutual funds and 80,000 in direct equities. These numbers are slightly more than that I can invest this year (based on my calculations); I want to stretch to a maximum to achieve this goal.

Debt reduction: I have started automatic deduction for my personal loan and by the year end it would be almost over with three installments remaining for the year 2009. Automatic deduction will be started for my student loan as well from the month of April next year. By that time I will be settled in Hyderabad after my transfer from Bangalore in the next couple of months.

Emergency account: As I mentioned in my previous post I will start funding my emergency account. From this month onwards you will be seeing an emergency account category in my networth statement. The goal for the account is Rs. 30,000/-

Spending/Expenses: Next year I’ll keep my expenses to a minimum, but I’ll buy D-SLR camera to pursue my hobby as a photographer. This would be my single large purchase in 2008.

Non Financial Goals

Marriage: This year I am planning to get married. Though this would bring major expenses that I have not accounted for, but I would still manage to keep them low as possible as marriages in India are a family affair and everybody in the family shares the expenses.

Career: I will improve upon my career skills especially my financial modeling skills. I still have to build a successful financial model for a project.

Blogging: This year was pathetic as far as my blogging is concerned but I will increase my postings with regularity. I will increase my readership to 500 per day in the next year. I have taken a conservative figure just because I do not know the patterns, reasons and more importantly the methods to increase my blog traffic.

I am also planning to have another blog on photography; I have not yet decided whether it will be simply a photolog or a blog on photography with my own photographs and learning from my photography. Nevertheless I will have a blog on photography.

These are my short term goals: I have kept them simple and achievable as I am known to lose focus in whatever I do and I want to achieve these simple goals. This would boost up my confidence and will prompt me to set high standards for me in the long term.

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Posted 19 December 2007 † The Chef § Goals ‡ Comments (2) °

Financial Resolutions for 2008

Adding to my previous post of Year End Review I have decided to put down my resolutions for the next year. As I mentioned in my previous post, the following shall be my priority resolutions.

  1. Purchase only when I can afford it and not on credit.
  2. Have all the necessary insurance
  3. Help friends but not with money, no monetary support to friends to get them out of bad situations.
  4. No high price gifts for any occasions.

A careful thought and I came up with manageable resolutions. I say manageable because it’s a saying that resolutions are meant to be broken. Now I would not want to do that knowing the fact that that this will put me huge mental stress. I and as a matter of fact every one in the world can afford to miss upon their plans as it would surely put you way behind your competition (this includes competition with yourself too).

The other reason to have resolutions is, I found that my money didn’t work as I expected primarily a well thought out plan was not there. So now is the time to have certain guidelines to avoid mistakes that I have already made this year.

I have cooked some more resolutions for the next year.

To have an emergency account

I should set up an emergency account with at least Rs. 30,000 in it. Recent accident, unscheduled bike repairs and unexpected circumstances have provided sufficient grounds for me to have an emergency account.

I will plan my taxes from the start of the financial year 2008

This year I didn’t pay attention to plan my taxes. So I expect huge cuts this year form my salary. Next year I’ll not repeat the same mistake. I’ll fund my 80c investments (section 80c lists investment avenues for tax breaks in Indian income tax act) limits to the full to have maximum advantage. These avenues are primarily low return investments including mutual funds.

Invest only in direct equities

The disadvantage with investing in funds is that you do not have control of timing of the purhase (if it is an automatic/electronic clearing from your account) also it has lower returns as compared to direct equities.

Check on credit card spending

This year’s experiences of card spending have taught me a lot. Today I am out of my credit card debt, but now is the time that I will not make the same mistake again. Even if I spend with my credit card I would never roll-over my debt.

Do not cater to sales call on phone

This year I took my health insurance cover over the phone. I would rather say that the insurance was sold to me and I never realized whether I require it or not. I never planned for any insurance and got stuck with the premium payments that too on my credit card. Next year I’ll plan all my insurance needs and then purchase it.

Financial planning and Time planning

I have been concentrating my efforts on financial planning (primarily debt reduction) that I would continue to do but I have never paid any attention to my time planning. I would identify where I spend my time and then would make conscious efforts to reduce time wastage.

Improving my career skills

The most important resolution is that I would strive to improve my career/professional skills. Improve upon my resume as my career is the sole source of income to me. I have to improve my financial modeling skills.

These resolutions are surely manageable and more importantly very simple. If I stick to these resolutions I would surely be improving my networth and my overall standard of living by the next year end.

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Posted 14 December 2007 † The Chef § Featured § Goals ‡ Comments (2) °

Year End Review Of Financial Goal

This blog and I started our journey for managing my finances in the beginning of this year. I planned certain goals in January my financial goal for 2007 one would surly come to know that no money management has taken place.

Today I can see that I got digressed from what I had planned originally. My Financial Goal for 2007 is far away from accomplishment. A look at the table below will tell you clearly.

review.PNG

So what is there to be reviewed when I have failed miserably to achieve my goals and that too with a huge margin of more than 50 percent. The review can be done for my existing situation, the mistakes I made during this year and the learning that I should take from this year to the next year.

Existing situation
Though I may have a similar networth as that of the beginning of the year the good news is that I have removed my credit card debt. My total assets have increased and my standard of living has also been improved.

I refer to my improved standard of living because I have accumulated some physical assets. Today I have got my own television, a desktop, a washing machine an iron. All these I have purchased is a preparation for my yet to commence married life.(I have not purchased a double bed yet :) )

The basic necessities that I don’t have today is a refrigerator, a bed, a sofa, a watch, a good quality phone. I still live in a rented house and I have to buy a car too. To carry out my hobby I have to buy a D-SLR.

Well these are the distant dreams that I have to plan for.
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Posted 13 December 2007 † The Chef § Featured § Goals ‡ Comments (2) ° Tagged: