What is Financial Literacy?

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In the money world,

The term “financially literate”— or a related derivative—gets tossed around quite a bit. Not a whole lot of experts actually take the time to define exactly what financially literate means, leaving many statistics related to money habits void of their importance. Kids especially need a definition as they learn how to handle funds, because without it, they don’t know if they’ve reached the goals you want them to hit.

On the most basic level,

Financial literacy is simply about being knowledgeable. It means that you understand fundamental facts about money, such as the value of cash coins or bills. You also grasp standards and routine practices, such as the fact modern people generally pay for things with plastic (debit or credit card). With this information, you are able to follow most everyday conversations about money.

Research studies across,

Countries on financial literacy have shown that most individuals (including entrepreneurs) don’t understand the concept of compound interest and some consumers don’t actively seek out financial information before making financial decisions. Most financial consumers lack the ability to choose and manage a credit card efficiently, and lack of financial literacy education is responsible for lack of money management skills and financial planning for business and retirement.

Most potential retirees lack information about saving and investing for retirement. Many people fail to plan ahead and they take on financial risks without realizing it. Problems of debt are severe for a large proportion of the population because of financial illiteracy. Youth on average are less financially capable than their elders.

Financial education,

Benefit consumers of all ages and income levels. For young adults just beginning their working lives, it can provide basic tools for budgeting and saving so that expenses and debt can be kept controlled. Financial education can help families acquire the discipline to save for their own home and/or for their children’s education. It can help older workers ensure that they have enough savings for a comfortable retirement by providing them with the information and skills to make wise investment choices with their individual pension and savings plans. Financial education can help low-income people make the most of what they are able to save and help them avoid the high cost charged for financial transactions by non-financial institutions.

Decades ago, 

when it was considered bad manners to discuss money matters with others and many people didn’t even finish elementary school, people didn’t seem to have trouble grasping the basics of money management. People understood very clearly the need to live within their means and save for the future; not just because they lived in a cash-based society where solvency was admired and debt was frowned upon, but also because they had no real alternatives. When you’re paid in cash and you have no credit options available to you, the choice is pretty simple: you either live within your means or you go without.

Fear is a powerful motivator and, while I’m sure that there were plenty of people living pay cheque to pay cheque, I’m willing to bet that there were plenty more living within their means and building solid financial foundations in order to make sure they didn’t run out of cash. Then, in the 1980’s and 90’s, with the introduction of credit cards, an alternative approach to money emerged. Credit gave people the option of an easier path that removed the need to save and live within their means and offered them the opportunity to purchase experiences and products that might otherwise have been out of reach. It’s a tempting offer, and one that proved hard to resist. Human beings are hard-wired for pleasure and it

takes a greater degree of willpower and motivation to take the fiscally responsible path rather than the fun and easy one. Not surprisingly, as credit became more readily available and more socially acceptable, there was a steep decline in the amount people were saving and a sharp increase in the amount of debt they were carrying.

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Money Mysteries: Know Yourself Before You Invest.

When I look at the kind of investment questions that people ask–on the Internet generally, and on Value Research Online, there’s an interesting pattern that can be observed. There are savers who think that investing is about investments and there are those who think investments are about themselves.

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Let me give you two contrasting examples to demonstrate this.

Here is one real question:

“Is it advisable to invest in mid-cap and small-cap mutual funds in the current situation?”

“How long will the conditions remain favourable for such funds?”

Sounds like a perfectly reasonable question. However, contrast it with this question: “I am 40 years old but haven’t started saving for retirement, apart from the EPF deduction. When I retire, I will need Rs 75,000 a month….”, and then there are personal details that I will omit here.

While these are just questions that the two savers asked in emails to Value Research, I think it reflects their attitudes about #investment in general. The first questioner thinks investing decisions are to be based on what’s happening in the outside world while the second one sees it as a way of finding solutions to the problems in one’s own life.

Unless you are a rich dilettante who is just playing around, the second approach is the right one. This may sounds like some new age wisdom, but the first thing that an investor must do is to `Know Thyself ‘. The reason for this is there is no investment that can be judged to be the right one without knowing who it is for and what the investor needs it for. There are great mutual funds and stocks which could be completely unsuitable for certain investors.

An investment can’t be judged to be the right one without knowing more about the saver’s life. However, it can certainly be judged to be the wrong one–there are a lot of investments that are always unsuitable for everyone, but we will talk about those later.

Conventionally, the first step to knowing yourself from a saving point of view is to decide your financial goals, the time frame in which those goals have to be met, and the flexibility of those time frames, and overlay a certain amount of tax-awareness on top of these goals. Then, for each type of financial goal, work out which type of investment is needed, and decide on the specific investments.

See the sequence here?

The first step is to analyses your own life. Then comes the goals, and then follows the type of investment. There are other aspects apart from the goals.

How stable is your income, and your spouse’s?

How’s your health?

Do you have any older dependents?

And so on. Believe me, knowing whether small-cap stocks are going to be `hot or not’ over the next six months is utterly unrelated to the things that are the real inputs to your life’s savings and investment decisions.

There’s another, even deeper aspect that requires you to know yourself. Different people seem programmed to suffer different amounts of stress and anxiety when they are invested in asset types that are volatile. This is partly a function of experience–of having been invested through a volatile period and then seen recovery.

Investment advisers are fond of asking their clients about their `risk tolerance’, but the answers are useless unless someone has had a real life experience of facing losses

Never fall prey for insatiability

Greed is one of seven basic character flaws or “dark” personality traits. 

We all have the potential for greedy tendencies, but in people with a strong fear of lack or deprivation, Greed can become a dominant pattern. Greed is the tendency to selfish craving, grasping and hoarding.

It is defined as a selfish or excessive desire for more than is needed or deserved, especially of money, wealth, food, or other possessions. 

As with the opposite chief feature of self-destruction, greed stems from a basic fear of life. To be exact, greed is driven by a fundamental sense of deprivation, a need for something that is lacking or unavailable. When this feeling of lack is particularly strong, a person can become utterly fixated on seeking what they “need”, always trying to get hold of the one thing that will finally eliminate the deep-rooted feeling of not having enough. That one thing could be money, power, sex, food, attention, knowledge - just about anything. 

It could be something concrete or abstract, real or symbolic. However, it will be something very specific on which the entire need-greed complex becomes fixated. Once that happens, life becomes a quest to acquire as much of it as possible. Because the compulsion of greed is usually driven by some early, traumatising sense of deprivation that may be lost to memory, it often manifests only later in childhood, adolescence and adulthood as one of our most essential survival instincts comes into play: competition. Competition for resources is a universal instinct and one of the most important factors in biology. Different species can compete for the same watering hole, for example. Within the same species, males can compete for the same female, or for “top dog” position. 

This was just a synopsis what greed is as I am going to tell you a story relating to mutual fund and investments. I am sure everybody is familiar with Panchatantra – a story adapted from this canonical collection, which gives us life lessons. A farmer couple, many years ago resided in a village, where they found a goose who laid golden eggs. They were so immoderately desirous of acquiring the golden eggs; they planned to kill the goose to take out all the eggs from within. However, this is a real-life not a fantasy as the goose died immediately when the farmer plunged the knife into its body. Blood and dead goose – the end was truly tragic for the couple. Relating to this story, many investors make the same mistake for unreasonable high returns because of greed and expectations. 

So always invest as per your risk appetite and before that, contact Moneymindz, the best free online financial advice.

Financial tips for people who are about to tie knot

As we grow up, we each build a unique relationship with money – how we use it, how we save it, how much we share it, how much we borrow, how we plan to take care of our family, etc. After marriage, we end up sharing this money-relationship with our life partner. Often two people can have a very different approach to financial planning based on their upbringing and circumstances. In many relationships, financial issues are a huge source of stress, and lead to daily arguments.

1. Upbringing and what you have learnt from your parents about money

Talk about your parents’ attitude to money - how they saved money and what values you learnt from them. Mention how they financed your education, big vacations, or other large expenditures. Mention any financial mistakes made by your parents. Are they financially taking care of your grandparents? These answers will help both of you understand each other’s’ value system, and financial background.

2. Things you are determined to do which need money

We all have some things that we cannot compromise. For example, your father may have taken a loan to pay for your MBA, and you want to pay him back in a few years. Your parents may have used up all their retirement savings for you or your siblings, and you want to take care of them financially after their retirement. You may have a grandparent or a sibling who is very old or ill, and needs financial help and you plan to support them after marriage. These needs may apply to both partners – bride’s parents as well as the groom’s parents. When it comes to money, it is healthy if your spouse treats you and your family, at par with his/her family.

3. Spending habits and comfort with taking loans

This is a common area of conflict between couples. Have a frank conversation and tell your future life partner about all your assets and loans before marriage (you may have a student loan, or a car loan, etc). Mention your habits – how much you spend on your credit card, do you spend more than the limit? Do you borrow or lend money to friends? Some people are uncomfortable with the idea of “taking loans” or even “lending money to others”, while some are not. Some people save little, and do not invest in equity, whereas some people save a lot, and are scared of breaking their investments for any expenditure. Get a feel of how your partner's habits, compare with your habits.

Wish you a happy married life!

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Will home loans be the next big worry for banks?

Home loan growth is likely to be lower than the previous years as buyers and investors will defer their home purchase on expected correction in real estate prices. Following demonetization, the growth in home loans in FY 2017 is likely to be lower at 16-18% from earlier expectations of 18-20%, as stated by a rating company. Demand from the self-employed segment is also likely to be subdued, as their business volumes may have affected. Reduction in MCLR by various banks could lead to increased competition and balance transfers, especially in the prime salaried segment, a report said. 

In the Union Budget, the government has given 39% higher allocations under the Pradhan Mantri Awas Yojana along with infrastructure status accorded to affordable housing projects will stimulate wider investor community and improve the access to funding avenues. While growth in the prime home loan segment could witness moderation, affordable housing segment is likely to grow at a faster pace than industry with efforts, made to address the supply, demand and affordability issues. Asset quality indicators continue to remain resilient with the Gross NPAs of 0.8% as on September 30, 2016. Post demonetization, the delinquencies in the affordable housing and self-employed segments would increase given the borrowers’ reliance on cash transactions. Given the expected correction in property prices liquidity of properties may hamper, affecting the loss given default. Despite rising portfolio vulnerability owing to increasing share of non-housing loans, higher share of self-employed and low-income borrowers within housing loan segment and high competitive intensity leading to dilution in lending norms (like relaxation of LTVs/FOIRs), a gross NPAs for HFCs to remain range bound between 0.9% - 1.3% over the medium term. Incremental funding costs for HFCs have come down considerably in the second half of FY2017 with many HFCs raising funds at median rates of 7.5-8%. Therefore, cost of funds is likely to moderate further for HFCs. The reported capital adequacy for HFCs remained comfortable, due to the benefit from relatively lower risk.

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Limitations of Insurance Certificates

Policyholders mainly depend on certificates of insurance to prove that insurance coverage exists. However, in reality, the certificate of insurance has limited functionality as evidence of insurance coverage. While it may alleviate the potential for additional audit premiums, it is misused and over-valued and can easily leave the recipient with a false sense of security.

Limitations of these certificates:

There are, however, certain issues and limitations with certificates:

1) Possibly compromised limits: 

The limits of liability shown on the certificate of insurance are the exact amounts as shown in the insurance policy when issued. What you will not see is any reduction resulting from a claim and the reduced limits. A certificate is never adjusted to reflect any reductions in limits because of any claims.

2) It does not reflect subsequent changes: 

The certificate contains information on the date of issuance. The next day, either the first named insured or the insurance company could make changes and there is generally no legal obligation on the part of the insurance carrier or its legal representative to provide any notice of changes or cancellations. Some of the changes can be quite significant including: cancellation due to non-payment, at the insured’s request, for underwriting reasons or the exhaustion of the policy limits; reduction or removal of certain coverage or limits from within the policy; or the removal of additional insured status, waiver of subrogation, or primary and non-contributory.

3) Policy terms, conditions limitations or requirements: 

Every insurance policy will contain terms, conditions, limitations or requirements that can cause major coverage defects if not known or properly handled. As a certificate holder, you may not know if your required endorsements, which were properly added or what the requirements are for you to have status as an additional insured. It is imperative to have some understanding of these from another source, as they will most likely not appear on a certificate.

4) Other states coverage:

 Workers compensation insurance is state-specific and the certificate may not list all the states for which coverage is required and afforded. This can become an issue in dealing with claims, audits and liability exposures.

5) Coverage confusion: 

Agents and brokers may indicate that certain coverage or provisions, provided when, in fact, they are not. This can result in a denial of a claim by the insurer. A claim dispute can consume time and money and whether or not you will prevail is subject to many factors, such as jurisdiction, applicable state laws and court interpretations.

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How to Invest safely on Stock Market?

                    

Stock markets are a complex system comprising of indices, primary and secondary markets, IPO, etc. which is a long trench consisting of vast information, a single person might find difficult to understand. Investing in the stock market is a way to make more than just a little extra cash. In fact, with the right approach and the right skills, investing even a little in the stock market can put you on the road to earning millions. Becoming a stock market millionaire is not an easy task and it will not happen overnight. If you want to become a stock market millionaire then here are the most proven tips to reaching your goals and the earnings you have always wanted.

1) Focus on Hot Stocks Hitting New Highs - 

Do your research, look into their patterns and place your focus on stocks that are already growing. As you get started with your stock market dreams, make sure to focus on hot stocks wing as you plan to stick with them until they reach new heights. Do not look to stocks hitting new lows.

2) You Can Buy and Short Sell -

There are some people who think they need a bull market to get rich. This is not the case. Do not ignore short selling. You do not have to hold on to a stock for a long time to earn a profit. Just look at the success some day traders have; they are the epitome of earning off short selling.

3) Chop Your Losses Quickly - 

If you want to be successful in the market, take your ego completely out of the situation. If you face a setback, cut your losses and move on fast. Do not dwell on your failure, but instead look to the future. You are going to fail, so be prepared and just be ready to move on.

4) Do not Be Afraid to take profits either half or completely - 

The thing about your earnings is that - they are not really profits until you take them. Do not be afraid to take partial profits or take profits too quickly. The market changes fast; it is OK to get out when you feel it is right and take the profits that you can.

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Car Insurance: Two-wheelers can either lift up your spirit or fix your spirit for terrorizing

                                     

                                

The winter made the evening darker and gloomier. The valley, filled with mist, thicker and denser, seemed made it deeper and darker. The moisture got into everyone’s throat nostrils and most of the children came down with fever.

Haggard’s crossing in the valley is a cold and unfriendly place. It is a four point crossing where tired travellers stopped to take rest. However, this place in the valley was not comfortable as most of the people avoided it due to unfortunate circumstances happened before. The deep and dark valley filled with dense mist obliterated the serene beauty. The local people narrated that some horrific road accident happened at a winter night at Haggard’s crossing and the spirit of the deceased still rambles on frightening travellers who pass-by.

Joy lived at the head of the valley alone. He is an exceptional guitarist, stayed all by him only except when the neighbours called for supper or asked him for a glass of wine and play the guitar. His old friend Arun and his wife for a celebration asked once Joy to come over to play the guitar and have supper. He assured whether anyone in his locality will be going as the valley was not safe at night and he needed lift. Everything sorted; Joy reached on time and started tuning on his strings, consumption of food and drinks happened to be in vast quantity while energized guests kept on dancing. When, joy rose up from the floor it was past midnight and his companions were gone leaving him alone. He felt heavy on his head and waved a drowsy farewell before leaving for home. There were two roads leading to his home, one being the avoided Haggards crossing. The other road saw a landslide and Joy was left with no option other than taking the shorter and dangerous route. By the time he reached the crossing, he seemed fresh. The cold winds have robbed him off his drowsiness. Adding to that, he spelt a chill down his spine when he started hearing voices.

Now, the villagers say they are literally afraid of taking the road as everybody can see two forlorn figures on a moonlit night.

Get unbiased advice how to Insure your car and drive safely. Joy did not have a vehicle but the person killed there was a drunkard, driving. Have some responsibility because we do not expect you to frighten people by becoming some wandering spirit. The premium paid for car depends on Insured Declared Value.

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#SPEND #SAVE #AND #INVEST_SMARTLY

How to use a Credit Card Wisely?

One has seen the latest smart phone or a laptop and the desire is to purchase it right now. Paucity of funds is a problem and one does not know what to do. Buy now spend later is the need of the hour. Credit is the name of the game. It is at this time that one remembers plastic money. A rectangular plastic card with a magnetic strip at the back and the name of the owner printed on the card famously called a credit card. With this card in ones hands all one’s wants can be fulfilled. Time to shop?

What is a credit card?

A credit card enables one to borrow money from the issuer of the card mainly a bank .One pays for a product or a service using the banks money and has to repay these amounts over a period of time .Since the bank pays the amount one does not have to pay right away and can purchase an item even if he has no immediate cash. One has to pay for the use of the banks money which is basically someone else’s money by repaying the amount with interest after a period of time just as in a loan. The bank sets a credit limit which is a maximum amount one can spend on the card. This could be 2-3 times ones monthly salary .It could also depend on the number of loans one is servicing which might impact the credit score. It mainly depends on the debt burden ratio which is the sum total of all EMI’s being serviced divided by the monthly gross salary. One obtains a statement on a monthly basis which lists the number of transactions made as well as the amounts paid using the card .One can pay by submitting the credit card at the cashier and the account is validated by the merchant with the bank .If all conditions are satisfied with the bank such as one is within the credit limit then the transaction is processed and added to one’s credit account. In order to accept credit cards the merchant has to pay a fee to the banks and the bank which issues the credit card collects these amounts as revenue.

What happens if one slides back on his payments?

The idea of using a credit card is all about the grace period. One would not be charged interest during this period. It is advocated that the least one can do is make the minimum payments on the credit card instead of the full amount. The problem with this approach is that the outstanding amount increases until it becomes a severe burden on oneself and his family. This pulls one in a debt trap. If one were to default on the repayments his credit score would be badly affected. Cibil a credit rating agency monitors one’s credit card usage and assigns a score on a scale between 300-900.Too many cards or a consistent late payment might affect this score. One would find it very difficult to avail a car or a home loan if the credit score is poor .When one falls into a debt trap it is not easy to recover. The never ending cycle continues and one can find it very difficult to escape from this vicious circle .Balance transfer is an option which can be explored in order to escape from this cycle of debt.

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