Today we'll not talk about financial products or investments or goals, rather we'll concentrate on simple routine money habits which you can apply in your daily life and become financially prudent, i.e. spend less and earn more.

So, here are ten money habits that you can adopt in your everyday life:

1. Don't carry excessive cash in your wallet: Make it a rule, keep minimal cash with you. Cash generally isn't faithful to the owner. You must have experienced that once you pay for a purchase with a 2,000 rupee note, the change will vanish in no time, plus there are chances of cash being stolen or lost. So keep limited cash, you can always use a card or an e-wallet in case you fall short of money.

2. Be Vigilant with money: You must be careful with money in routine activities like you must always be aware of how much cash you have in your wallet as well as in your cupboard, otherwise you will never come to know if you have dropped or someone has slipped a few notes away. Write down if someone has borrowed money from you or vice versa if you owe someone, if you tend to forget such transactions. Regularly check your bank statements, check the sms' you get from your banks, so that any wrongful debits can be detected.

3. No to impulsive shopping: Put a strict no no to hasty shopping decisions, because in such cases you end up buying stuff you don't need or already have, and only waste your money. You should always make a buying list, after a careful consideration of your requirements, and strictly adhere to that list.

4. Don't go overboard in frugality: Don't go all the way to the wholesale market for buying 1 kg of dal, and waste your time and fuel, because it's 10 rupees cheaper. Although we must cut costs to save money, yet you must factor in the time and energy that goes into saving those bucks, the efforts gone must be worth the saving.

5. Pay your bills in time: Many of us are chronically late in paying our bills. We often end up paying late payment fee and penalties on our mobile bills, electricity, water bills, etc., not for lack of money, but for our lethargy. These penalties if avoided could have saved you thousands of rupees over the years. Make it a rule to always make your payments in time, you can use mobile apps to remind you of the bill dates or you can use automatic bill payments system.

6. Manage your credit cards: If you are using a credit card, you must be extremely careful in always making bill payments in full and in time, because:

> Late payment of bills attract heavy penalties

> If you just make the minimum payment, then though you don't have to pay the penalty, but you have to pay interest, and the interest rate in most credit cards is above 30% p.a.

> Thirdly, defaulting in credit card payments affects your CIBIL score.

7. Be a smart shopper: You can save a lot while spending. The first thing to do is compare the prices on different websites, or stores, at times there is a significant difference in the price of the same product at different places. Look for coupons, you can get discounts on various products and services, also remember to use your coupons before the expiry date. If there isn't an urgent need, wait for the sale, why spend more when you can get the same thing at a cheaper price, next month.

8. Budget: If you wish to achieve the ultimate objective: spending less than you earn, then you must create a budget and follow it religiously. Keep a track of your expenses, and try to keep them within the limit you have set for yourself. It is ideal to note down your expenses, it'll be easier to track them.

9. Crosscheck the bills: Make it a habit to always crosscheck your bills, like food bills at restaurants to ensure you are not paying for the dish ordered by people sitting at the next table. Similarly check your grocery bills, mobile, electricity bills etc., since there can be discrepancies.

10. Eat at home: The frequency of dining out has increased for most of us over the years. Eating out especially at fancy restaurants is an expensive affair, it occupies a significant piece of our total expenses, particularly in metro cities. We pay thousands of rupees for one dinner, if you calculate your restaurant expenses for an entire year, it'll be a significant sum. If you increase the frequency of eating home cooked food, it'll be good for your health as well as for your pocket.

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For many of us, the topic of ‘managing’ our finances only hits us when we find our expenses regularly surpassing our income. That is, we start to have problems in shelling out our monthly credit card bills, or if no credit cards, you may be just finding yourself in need of one in the last few days of the month. Situations like these quickly brings us back to the ground and remind us of all those advices we received from parents about discipline and saving.

The stories of people who toiled long and hard to save money to pursue their one dream, no longer motivates us to save or develop monetary discipline, we want to enjoy our present to the fullest. In doing so if we encounter a problem, we are bound to use the quick fix – ‘a drastic cut to the expenses next month or till the finances actually come in shape again, or may be a small loan a credit card application etc.’

Problem with quick fixes is that, they very successfully delude us into thinking that it’ll will always be handy, making us even more delinquent for the future. Moreover, as the prowess of the marketer grows not just the new purchasers but even some of the most disciplined and experienced one find themselves slipping once or twice on unplanned purchases.

Well, we cannot ask the marketers to go easy on us with their marketing skills. Then what should we do to make sure our financial harmony remains intact for a long time to come, and our focus remains towards the two things that brought us all the happiness – profession and family?

It is the answer to this question, that we shall explore in this article today. There are always three steps to resolve a situation:

 

1. First, understand what caused it.

 

1. Second, make a clear picture of how we want it to be.

 

1. Third, chalk out a plan detailing how it’ll be done.

 

Attending to the first step you only find two culprits:

• Income &
• Expenses

Given the rigidity on the income part, it is always easier to manage expenses than increase income. There are many possibilities on how does one gets his/her expenses out of proportions:

• Unplanned purchases/expenses
• Marriage
• Medical Emergency
• Other unforeseen financial requirement

A closer look will reveal the nature of these outlays. ‘Except unplanned expenses or purchases for that matter, all the other outlays are particularly non-recurring and of rare nature.’ Also, not only the unplanned regular expenses are frequent but form a major part of our entire life story. Getting hold of this one head, while you keep an strategic eye on the others, should solve a major chunk of your personal finance issues.

So, how do you really get hold of your personal finances? Well, I believe you already know, ‘budgeting, planning, being disciplined and blah blah...’ Yeah, you have heard all of that alright. You must be thinking right now, ‘you think I have not tried already, but when it comes to the decision of spending the need to buy is more urgent than any other thought. Its just spontaneous.’

You are absolutely correct, much of our purchasing decision is spontaneous. We certainly do not lack is the power of decision making, but the right motivation to be disciplined or the right motivation to postpone a expenditure. Budgeting is one of the tools you may use, but not the only one. Discussed below are three easy steps you can take to not just get hold of your personal money matters, but even make your financial lives more enjoyable and do away with the drought seasons on your lifestyle spend.

KNOW YOUR EXPENSES
The first step is something straight out of some holly wood action movie, or a crime thriller, where the villain stays at large till the end of the movie. It’s called ‘Thinking Ahead’, which is what your favourite hero does to nag the villain ultimately. When it comes to your financial matters, expenses are the real villain biting into your purse every other day. Therefore, first mission objective is to get hold of them before they get hold of us.

For ease of clarity we shall do it in three parts:

Part 1 of Beating Your Expenses ‘Thinking Ahead’
We all have certain expenses common among everyone, they are the basic living expenses, even if you have never noted them down somewhere, if you just sit down and put your head to it, they are easy to spot. Most come in the form of:

• Weekly grocery purchases,
• Kitchen expenses,
• Transporation, fuel expenses
• Last week’s movie tickets
• That dinner at your favourite restaurant last week etc.

Well the list can strech, and pretty soon you will be exclaiming in disbilief at some of the ridiculous heads you probably never thought of spending. But pretty soon you have the list of, if not all at least 90% of them in your hand, and whats more, you can put a number in the amount field as well.

Still, kindly check your excitement level. Well, yes your finances are coming back in place but hold on, we just took that most important first baby step into it. This is just the beginning, for now, we have just put down the regular weekly spends, and trust me the hard part is almost over.

Available Deductions
First of all let us look at the available limits of deductions that can be claimed from gross total income for the current assessment year. With the increase of deductions limits for Assessment Year 2015-16 following deductions are applicable for individual taxpayers:

Deductions from Gross Total Income:
Following deductions can be claimed against the Gross taxable income for the Assessment Year 2019-20:

Part 2 of Beating Your Expenses ‘Thinking Ahead’
Really, previous part is the scariest of them all, and this part however should be easy, because there are always documentary evidence of it. This part accounts for your monthly expenses, those big outlays, which are almost fixed; like:

• Electricity & water bills
• Telephone / Mobile bills
• Television / DTH bills
• House Rent
• Any Loan EMI payment
• Parlour & medical bills
• School fees etc.

These expenses, even if small are mostly documented, therefore easier to provide a number to and track, and not to forget predict. You may not want to miss on many of them – you don’t want your water & electricity bills piling up, you don’t want your mobile operator putting late payment charges on you, you don't even want to miss on those loan EMIs. That means, these expenses must be treated as important, unavoidable and fixed expenses. They can certainly be reduced by efficient and careful use of resources but still they will be there and to an extent they are necessary.

Part 3 of Beating your Expenses ‘Thinking Ahead’
Yes, you guessed it right, the annual expenses. These are most neglected until the deadline is close and situation becomes like do or die. Some of these are even statutory expenses and many times we simply tried to find a quick solution to it, only to realise later how bad that decision was. Let’s have a look at these kind of expenses in the first place:

• Annual Savings for Tax exemptions:
  • Insurance Premiums
  • Tax saving investments etc.
• The annual vacation expense
• Birthday party / Anniversary expenses
• Subscription fees to your favorite club etc.

Problem that these expenses can create is definitely huge, because these expenses can mean a huge outlay on your income, at the end of the financial year, in the middle of the year or whenever they occur. You may ask, how come a tax saving investment an expense? Well, because you cannot redeem it for a few years to keep your exemption intact, and much of it is done as a necessity.

Because of larger budget size of these expenses it is always recommended that you plan in advance for them, and not just about the party but also about the money that will run the party.

Most of the time it is up to us to put a figure to it in this case, except for the tax saving investment thing. But all others, like vacation, parties and subscriptions are defined by us and so the amount of spend is in our hands.

Once, you have completed the three parts of ‘Thinking ahead’ of your expenses, you have pretty much clear idea how your next year will be financially. Why a year? Because, that’s the time figure your income is assessed for, that’s the time figure you assess your income growth and more than that didn’t we make a new year resolution for a year?

BUDGETING
Great, so whats next now that we have overtaken our expenses on the time track? Now, we put the bumps in their path. Here’s how...

Many of you may argue, that what we just did was not budgeting? No, sir/ma’am, with due respect it was not, at least not yet. Why not? Let us see what difference budgeting makes.

We have noted almost all our expenses in the previous step, but they simply tell us one side of the story. So what’s the other side?

The income part. Expenses alone don’t show what lack of discipline did to your financial situation, actually matching them with income does, and that’s what budgeting is all about. So at the beginning of the budgeting exercise we just put all the income heads together and estimate the previous year’s total inflow in our bank accounts.

A good budget sheet would look something like this:

So in a way, budget is not only a prediction of all hte expenses over time, but also a prediction of income that will provide for those expenses and also savings. You may ask, how are we supposed to include savings when we are not even able to provide for expenses? Well, that’s where the real utility of budget kicks in.

Once you have included the following six parts in the budget, even if some of them do not have any amount in them:

1. Bank Balances
2. Cash in hand
3. Income at current level
4. Savings (even if zero)
5. Anticipated and fixed Expenses
6. Leftover

The next step is to provide some targets to your savings, start small, but start. In any case if your income is taxable according to the current slabs you must incur some expenses to ward of as much tax as possible. You will have to manage them from somewhere.

Then the next step would be to manage the expenses, remember that while in some months you came over bored with excess expenses your quick fix allowed you to provide for a large part of it in the next. But the problem with quick fix is like starving for a day and once the day is over, you go for the unhealthiest but tasty cuisine which ultimately makes you fatter than before.

Managing Expenses

Give your list of expenses three simple ratings:

1. For most important, unavoidable, necessary expenses, for example:
   • House Rent
   • EMIs
   • Electricity
   • Water etc.
2. For important but manageable expenses, for example:
   • Furniture purchase
   • Clothing
   • Fuel / Vehicle
   • Vacation etc.
3. For completely manageable expenses, for example:
   • Entertainment
   • Eating out
   • Birthday parties
   • Gifts etc.

That will allow you to focus on the expenses which are manageable and leave those fixed in nature alone, at least for now. Then you start to put the limits on each of the manageable ones, you are actually setting up targets for yourself.

A piece of advice though, don’t leave your spouse out of this, it’ll be fun activity that you can do along with your spouse, and have their say in the budget, it woudn’t be a surprise if you are amazed at some of their ideas.

It is likely that at the end of the day you will be able to add more amount to your savings than you imagined before. Just one caution though, do not squeeze the completely manageable expenses into oblivion, they are important recreational activities and a complete lack of them will be stressful causing a sudden surge sometime later.

So you managed to add up some savings in your budget, and now you are ready to implement, before you do, here’s a quick recap:

1. List down all expenses (For the Week, Month and then Whole Year)
2. Give an amount to all the heads (For a year)
3. Take Note of your current bank balances
4. Make a conservative estimate of income for the next one year
5. Give ratings to your various expense heads
6. Adjust those rated ‘C’ first and add the amount into ‘Savings’

Now the last step will be to implement and that should be simple. All you have to do is:

1. Divide your annual budget calculation into a month’s expenses (divide by 12)
2. Setup weekly targets for week related expenses (simply divide the monthly allocation by 4)
3. Review your weekly performance at the end of the week (Make adjustments for next week)
4. After the whole month you may sit down and review your monthly budget performance and again make necessary adjustments
5. Same goes for a whole year
6. Also recommended is that you get a ‘Family Floater Health Plan’ to provide medical cover to your family.

Remember that, because we only accounted for 90% of the expenses 10% will always be out there to disrupt the budget progress, but you must not worry as the flexibility of budget allows you to enjoy all those events without giving up your targets.
Similar to the expenses we made a conservative estimate of income as well, therefore any additional income by way of cash gifts, capital gains or bonuses must be used as follows:

1. Divide it in two parts if the amount is large
2. Save the first part as bonus savings
3. Send the other one to your savings account to fullfil some of your pending wishes

That way, you will not regret not enjoying your money, neither you will regret enjoying it. With this, we conclude our annual money management. Shall we call it over? Perhaps not. In the next to put your long life and money matters throughout in order, we move one to the next step.

INVOLVE PROFESSIONALS

Our life goals do not end in one year, we will have some major goals ahead of us, once in a few years, we will need to upgrade our vehicle, get a major repair done to the house, or may just encounter a sudden electronic appliance need, or what about that international vacation we planned about.

Making an annual budget was one thing, and it resolved one of the major hurdles of initiating/increasing your savings. But only saved money doesnot automatically grows and comes handy for major life goals. The greatest threat savings have comes from their use over time. A small omission in budget may cause a large expense to be overlooked and hit us when we have no option but to dig into our savings, that is when most of your future aspiration will take a financial hit.

To avoid such situations and sail through the ocean of life, which at times can be turbulent, you require strategic planning spanning for your life. Which should account for:

• Your current lifestyle along with
• Your long term aspirations &
• Prepare your money (Savings) to meet your future needs

This is where professionals like wealth managers and financial planners come into the picture. They will assist you in achieving answers to the following essential questions:

1. Whether you are saving enough for your family’s future? &
2. Whether your savings are working towards your family’s future?

The professional Wealth Manager/Financial Planner, will assist you with the following:

• Improve savings over time
• Prepare well in advance for important life goals, i.e.:
  • Kids’ education
  • Kids’ marriage
  • First House Purchase
  • Own retirement etc.
• Allocate your savings according to your goals and risk tolerance. So you are always at peace that your money will be available whenever you need it to be.
• Prepare you for emergencies, like:
  • Job Loss
  • Medical emergency etc.
• Allocate your additional income, bonuses etc.
• Review your plan time to time to check on progress and make adjustments
• And finally, to plan taxes and estate properly so that they pass in to the right hands after you.

A comprehensive and professional wealth plan provides you with a larger picture of your future vis a vis money, and this knowledge itself is really important. It prepares you to make necessary adjustments and provides you the necessary motivation we talked about in the beginning for such adjustments which are ultimately going to pay off over time.

The key to a better future, as most successful self-help professionals put it, is in “starting now” so that at least two – three years down the line your are there, where you wish you have been right now.

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In today's times, people want to get the best of everything for their child, the best education, food, clothing and the best quality of life. They say kids of the Z generation are born with a silver spoon, since most often parents bestow them with all the luxuries of life, without having to worry about the means, kids are totally left out of the money talk. Kids of this generation may not have experienced the financial difficulties as the earlier generations did. Until adolescence, they believe that money is unlimited, since they have been getting whatever they have ever wanted, decorated on a plate. And then a bomb is dropped when they move out of the house and step into the savage Adult world. That's the time when you'd expect your kid to save and start investing for his/her future, but chances are he/she would be entrapped in the vicious circle of Monetary Negligence accompanied with ruthless spending, zero saving and high credit card debt. It would take some precious years of their age before realizing Financial Cognizance.

To avoid this situation, it becomes crucial for parents to inculcate financial prudence among kids from a young age. If they have a strong base built, they acknowledge money's worth, saving & investing will run in their blood. In this passage, we'll share with you ideas on how you can go about constructing this base.

Understanding the Role of Money: Kids should be able to connect the dots, that:

1. Things come for a price, the price is Money And

2. That the supply of money is limited, and that is the reason why out of the ten toys they demand, they get only two.

There are small things that you can do in your everyday lives, for making them conscious of money's worth.

For preschoolers, all that matters is a balloon or a toy, which probably they'd buy, but may hardly ever play with. As a parent it's important that you don't give in to their demands too quickly and also not always. When fulfillment of wants isn't easy, kids will learn to be patient and start valuing things.

When your kids accompany you to the ATM, they may be fascinated by how cash is dispensed, you must tell them it's not magic and that when money comes out, concurrently your bank balance is reducing.

Send them for small purchases like buying stationary, a packet of milk, popcorn in the cinema hall, so that they can sense the exchange between money and the stuff bought. They'll get to know the prices of various products and that some products are more valuable than others.

You can instill diligence in your kids by involving them in your routine affairs like checking restaurant bills, you can ask them to compare prices of the same product offered by different brands, while you go shopping for groceries.

Saving: They understand the connection between money and the goodies money can buy, but do they really understand the connection between money and bifurcation between the goodies and savings? Young kids must understand that you put in a lot of hard work and efforts to run the house. They should realize the value of thrift and savings, and should start taking their first steps of being financially savvy. Your role as a parent is to familiarize the kids with the need to save and guide them as to how to go the about the saving process.

Tell them Why to Save

Narrate to them instances that how your savings helped you achieve your goals, that your car, which your son loves to the core, came because you saved for it, or the recent vacation where your kids had a great time, happened because you saved for it throughout the year. Also narrate instances when your savings helped you in meeting emergencies, like when their favourite aunt got married, you bought all the beautiful clothes and gifts for the aunt from your savings. The idea is kids should realize that why should they save, before moving on to the saving activity.

Tell them How to Save

A small allowance for winning a competition, or helping out their mother in the kitchen, or for scoring well in exams, will not just motivate kids but will also help them understand the concept of working hard for money. Concurrently, they should also be explained that although they've earned the money, they shouldn't be spending it all, a portion must be saved. You can always attach a goal as a motivation to save, like buying a gadget or having a grand birthday bash next year from the accumulated savings.

Budgeting: A crucial element of valuing money is learning to live within a budget. You must tell them that you prepare monthly budgets and manage all the expenses within that budget, which helps you in saving money for your goals, that you could save for the annual family vacation because you lived within your budget. A great idea to have your kids have the hang of budgeting is through a simple activity like letting them plan a birthday party within a budget, while you monitor the progress by checking the expenses and the budget left, poke them if they are spending too much on an item and remind them of the budget left.

So, the bottom line is, kids must start learning to value money right from the time when they start learning the “basics” like learning to value our culture, respecting elders, being hygienic, being kind, among others. It's extremely important to expose them to money matters gradually from their early years. There are little things you can do, which can help them become money wise, to help them establish a connection between ends and means.

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In it's 6^th and the last of this fiscal's bi-monthly monetary policy review, RBI kept the Repo rate unchanged at 6%, three times in a row, announced on 7th Feb 2018. What does it mean for the common man?, is the question to be answered in the following passage. But before moving on to the impact of the rate, let's understand what does Repo rate mean?

So, Repo Rate is the rate at which RBI lends money to commercial banks, generally against government securities. Repo Rate is used by the Central Bank to control the level of inflation in the country. When the Repo rate is low, banks get money at cheaper rates and consequently the lending rates also fall, which leads to increased supply of money in the economy thus accelerating inflation; and vice versa, the Repo rate is increased when the inflationary pressure is high in the economy.

Now we have some key takeaways from this Monetary Policy Review for the common man:

> Inflation: The retail inflation accelerated to a 17 month high of 5.21% in the month of December 2017. The RBI has raised its forecasts for CPI inflation to 5.1% for the March quarter and to 5.1-5.6% for the first half of FY 2019, before stabilizing to around 4.5-4.6%.

> Loans: The interest rates have taken the downward staircase since the last 3 years, and a stable repo rate means they aren't changing course any soon. Low and constant Repo rate means it's an opportunity for prospective home buyers as they can continue to avail loans from banks at cheaper rates.

> Deposit Rates: Like Lending rates, deposit rates are also caught on the downward trend. 1 year Fixed Deposit rates have fallen from the 8.5% range to a mere 6.5% range from 2014 to 2017 for all major banks, and apparently the scenario for the upcoming months also look muted. Similar is the plight of other traditional investments like PPF, NSC or fixed deposits with shorter or longer investment periods.

In light of the above situation, it may not be wise to keep your money in banks or other low interest bearing instruments.

- Liquid Funds for parking your savings: It'll be a better bet to park your extra cash or Emergency money in Liquid Mutual Funds, than letting them sit in your savings account for a meagre 4%. Liquid Funds can fetch you better returns than your savings account, plus it offers high level of liquidity also. In some funds, you can get your money in your bank account within 30 minutes of placing the redemption request.

- Short Term debt funds for lower horizon investments: When you have a short investment horizon of around 3 years, Short Term Debt Mutual Funds offer a better alternative to Fixed Deposits or other traditional investments, by offering marginally better returns as well as by offering indexation benefit which significantly reduces the investor's tax liability on capital gains.

- Equity Mutual Funds for longer term investments: After the recent announcement of Long Term Capital Gains Tax on returns from Equity, in the Union Budget this year, investors are skeptical about Equity. Just to put this into perspective, the tax will be levied at a modest rate of 10% and that too on the returns earned over Rs 1 lakh. So, if the returns from your Equity MF investment are 15%, 13.5% is still yours. Hence, Equity continues to remain an attractive investment option for long term investing, because of substantially higher returns than all other asset classes even after providing for taxes.