tag:blogger.com,1999:blog-9958878119571206672024-03-13T20:33:52.771+05:30Loud Thinking; Who's Listening?BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.comBlogger20125tag:blogger.com,1999:blog-995887811957120667.post-67988753955372221572010-02-04T17:02:00.007+05:302010-02-04T19:35:43.725+05:30MODERN ALADDIN'S LAMP-CREDIT CARDS<p class="MsoNormal" align="center" style="text-align: left;"><b>WARNING: </b><i>The ideas and schemes discussed in this article have to be understood <span class="Apple-style-span" style="font-style: normal; "><i>properly before applied. Short-cuts or alterations can result in heavy <span class="Apple-style-span" style="font-style: normal; "><i>financial loses. Applied properly will start you on the path of riches.</i></span></i></span></i></p><p class="MsoNormal" align="center" style="text-align: left;"><i><span class="Apple-style-span" style="font-style: normal; "><i><span class="Apple-style-span" style="font-style: normal; "><i>------------</i></span></i></span></i></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">Credit Cards are the most misunderstood and misused financial instruments of our times. My attempt is to highlight the positive legal usage of credit cards and through it, the wonderful concept of payment by EMI system.</span></p><p class="MsoNormal" align="center" style="text-align: left;">I was totally thrilled when an idea of mine proved to be right. It all began one day when my credit card company called me up and offered a loan of Rs 1.74 lacs on my card. Since the voice on the other end was very pleasing and pleasant, just for the heck of it I thought of extending the conversation by asking for more details.</p><p class="MsoNormal" align="center" style="text-align: left;">It turned out that she was offering an amount of Rs 1.74 lacs for 36 months at 18% rate of interest on reducing balance basis on my card; the EMI would be Rs 6484.21 pm.</p><p class="MsoNormal" align="center" style="text-align: left;">I did some quick calculations and was completely surprised by the findings. To be safe I reconfirmed the facts with her and probed for hidden costs if any. Totally satisfied by her response, I decided to take the loan and see what happens. As expected my younger son, who is an MBA, told me "What is the use of asking now? You should have done so before taking the loan". </p><p class="MsoNormal" align="center" style="text-align: left;">I had a very sad and disappointed member in the family that day. This happened 2 years back.</p><p class="MsoNormal" align="center" style="text-align: left;">Today, on completion of 24 months out of 36months period, my initial calculations are withstanding the test of time, and appear to be correct:</p><p class="MsoNormal" align="center" style="text-align: left;"><br /></p><ol><li><span class="Apple-style-span" style="font-weight: normal; "><b><p class="MsoNormal" align="center" style="text-align: left; display: inline !important; "><span class="Apple-style-span" style="font-weight: normal;">Total to be repaid [36months x Rs 6484.21]<span class="Apple-tab-span" style="white-space:pre"> = </span></span><span class="Apple-style-span" style="font-weight: normal;">Rs 2,33,432</span></p></b></span></li><li><span class="Apple-style-span" style="font-weight: normal; "><b><p class="MsoNormal" align="center" style="text-align: left; display: inline !important; "><span class="Apple-style-span" style="font-weight: normal;">[Capital] Original loan amount</span><span class="Apple-tab-span" style="white-space:pre"><span class="Apple-style-span" style="font-weight: normal;"> = </span></span><span class="Apple-style-span" style="font-weight: normal;">Rs 1,74,000</span></p></b></span></li><li><span class="Apple-style-span" style="font-weight: normal; "><b><p class="MsoNormal" align="center" style="text-align: left; display: inline !important; "><span class="Apple-style-span" style="font-weight: normal;">Interest paid over 36 months [1-2]<span class="Apple-style-span" style="white-space: pre;"> = </span></span><span class="Apple-style-span" style="font-weight: normal;">Rs 59,432</span></p></b></span></li></ol><p></p><p class="MsoNormal" align="center" style="text-align: left;"><br /></p><p class="MsoNormal" align="center" style="text-align: left;">The entire loan amount I had invested in 4 mutual funds. These funds over 2 years have appreciated to Rs 2,14,204, thereby giving me a capital appreciation of Rs 39,204, leaving a deficit of Rs 20,000 [item 3 in table] to be covered in the last year of the loan.</p><p class="MsoNormal" align="center" style="text-align: left;">The point I am making is that this happened during the period when the Stock Markets around the world had collapsed. In the first year of the loan, I had lost 60% of the original amount, in the second year not only my loss had been recouped, I had recovered 67% of the interest to be paid [item 3 in table above]. This was the time when financial system round the world suddenly went into a spin [2008] and hence things can never be worse than theses.</p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="color:#990000;"><br /></span></span></p><p class="MsoNormal" align="center" style="text-align: left;"><i><span class="Apple-style-span" style="color:#990000;">The so-called 18% rate of interest charged on the loan amount under credit card will be earned back by the loan amount itself, and paid to the card company without any pressure on my finances!</span></i></p><p class="MsoNormal" align="center" style="text-align: left;"><i><span class="Apple-style-span" style="color:#990000;"><br /></span></i></p><p class="MsoNormal" align="center" style="text-align: left;"><i><span class="Apple-style-span" style="color:#990000;">Fouth year onwards, the capital appreciation in these funds is mine to keep. Plus, the loan is all cleared.</span></i></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;"><br /></span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal; "><b></b></span></p><b><p class="MsoNormal" align="center" style="text-align: left; display: inline !important; "><span class="Apple-style-span" style="font-weight: normal;">AM I NOT RICHER BY Rs 1.74 Lacs (and more...) AT THE END OF 3 YEARS?!!!!</span></p></b><p></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;"><br /></span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">Self discipline to be followed:</span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">1) Never delay in making payment of the amount due on credit card. Better to link credit card for auto payment from bank account. Disputes if any to be resolved separately.</span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">2) Always pay the full amount, never the minimum payable allowed, to avoid the debt trap.</span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">3) Loan amount need not be Rs 1.74 lacs, start with amount you are comfortable with.</span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">4) The first loan should never be for consumption purpose. Always invest it in mutual funds. After completing successfully the first cycle of 36 months, next loan can be used as your personal needs dictate. These mutual funds should not be redeemed as they will be your safety net in the future.</span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;"><br /></span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">Another area where you can earn sizable amount is when buying a new car. The thumb rule is never pay the cost of the car, or part thereof, from your funds.</span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;"><br /></span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">ALWAYS BUY A CAR ON CAR LOAN. PAYING INTEREST IS GOOD FOR YOUR FINANCIAL HEALTH.</span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;"><br /></span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">Go for maximum loan offered by the Bank and for maximum period. As long as the interest charged by the Bank on car loan is less than 15%, your car will be free of cost to you by the time your car loan EMIs get paid.</span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;"><br /></span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">Rules are the same as in case of loan on credit card. The entire loan amount or as much as you can comfortably afford, should be invested in equity dominated Mutual Funds. Just like you got your lovely child after 9 months, your mutual fund also needs time to multiply your money.Whatever amount you invest in mutual funds would double in 5 years if not earlier.</span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;"><br /></span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">This fact is accepted by all financial annalists and commentators and would be the conclusion anybody can draw based on the facts given in my above example on loan on credit card. Do not redeem the mutual funds created as they would make your ‘new car’ then free again. Money you earn from sale of ‘Old car’ should be invested in mutual funds also.</span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;"><br /></span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;">For various other ways to generate wealth from credit cards in small ways, please spend time with my blogs on Financial Planning, especially <a href="http://babajain.blogspot.com/2009/01/financial-planning-some-tips.html">FINANCIAL PLANNING-SOME TIPS</a>.</span></p><p class="MsoNormal" align="center" style="text-align: left;"><span class="Apple-style-span" style="font-weight: normal;"><br /></span></p><p class="MsoNormal" align="center" style="text-align: center;"><span class="Apple-style-span" style="font-weight: normal;">WHAT I HAVE STATED IS FOR ONE CREDIT CARD</span></p><p class="MsoNormal" align="center" style="text-align: center;"><span class="Apple-style-span" style="font-weight: normal;">YOU CAN HAVE MULTIPLE CARDS PROVIDED</span></p><p class="MsoNormal" align="center" style="text-align: center;"><span class="Apple-style-span" style="font-weight: normal;">YOU CAN AFFORD THEM</span></p><p class="MsoNormal" align="center" style="text-align: center;"><span class="Apple-style-span" style="font-weight: normal;">HAPPY JOURNEY</span></p><p></p>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com0tag:blogger.com,1999:blog-995887811957120667.post-50062023835914580762009-02-06T09:55:00.004+05:302009-02-17T17:14:00.119+05:30FINANCIAL PLANNING - FACTS 17 TO 22Financial planning is an on going process. It can be started at any stage in life. The benefits of course will take their normal time to manifest. Younger one starts, better are the results.<br /><br /><span style="font-weight: bold;">FACT # 17</span><br />MFs have specified funds eligible for Income Tax deductions under Sec 80c, these are known as Tax Savers Fund. The amount invested is locked in for 3 years. In these funds the payout option should be taken as some money will keeps coming back as dividend during these 3years also. In the 4th year the same amount can be redeemed and invested back as fresh subscription for tax break.<br /><br /><span style="font-weight: bold;">FACT # 18</span><br />Banks have an approved list of MF on which loans can be taken. This category of loans is known as loan against security [LAS]. Under this arrangement 50% of the current NAV is available as loan limit. In an economy when MFs are giving 25% or more annualized returns, this is a very attractive source of money earning money.<br /><br /><span style="font-weight: bold;">FACT # 19</span><br />Banks have a provision of getting a loan agreement signed on stamp paper. One can save on the cost of the agreement by opting for Rs 10 lacs limit at the first instance itself. Additional MF units can be pledged as one goes along.<br /><br /><span style="font-weight: bold;">FACT # 20</span><br />I missed an opportunity to book profits during the present meltdown as my best earning units were pledged under LAS. My bank does not allow partial redemption of pledged units. My suggestion is to build ones portfolio with equal amount of units as not pledged of the same fund. This will allow selling of units not pledged once the market starts to fall and buying them back again once it stabilizes at a lower level.<br /><br /><span style="font-weight: bold;">FACT # 21</span><br />Under LAS just like loan limit goes up, so can it fall also. To safeguard ones interest under such an eventuality, a safety net has to be in place. This safety net should be in form of additional FDs with OD facility. When the LAS limit is falling the difference can be met by withdrawals under OD limits of the FD. Once the markets stabilize amounts should be withdrawn from LAS account and deposited back in the OD account. This additional OD facility should be used only as back up for LAS otherwise the safety net gets weak.<br /><br /><span style="font-weight: bold;">FACT # 22</span><br />During ones earning period this amount acts as safety net and after retirement it become a component of savings required for old age [see <a href="http://babajain.blogspot.com/2009/01/financial-planning-pension-funds.html">Financial Planning- Pension Funds</a>]. This holds true for any safety net created as each net is loan specific but later on becomes part of the Pension Fund.<br /><br /><div style="text-align: center;">MONEY WORKING FOR ONES WEALTH CREATION<br /></div><br /><br />For the complete picture, I recommend you start with the first blog in this series; click <a href="http://babajain.blogspot.com/2008/12/financial-planning-for-beganers.html">here</a><br />For previous blog in the series; click <a href="http://babajain.blogspot.com/2009/02/financial-planning-facts-11-to-16.html">here</a>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com4tag:blogger.com,1999:blog-995887811957120667.post-22128735557809032012009-02-06T09:49:00.006+05:302009-02-12T19:19:16.219+05:30FINANCIAL PLANNING - FACTS 11 TO 16Financial planning and religions have many similarities. Both are good for mankind but a large number of people have decided to ignore them as a conscious decision. The ultimate goal is the same in both but multiple paths show how to achieve THE GOAL. We have believers, non-believers and fence sitters even though both are good for body and soul.<br /><br /><span style="font-weight: bold;">Fact # 11</span><br />Financial planning, like religion, cannot be forced on anyone. It has to be understood and accepted with free will. It can never succeed if followed as a ritual - in fact it can cause tremendous damage.<br /><br /><span style="font-weight: bold;">Fact # 12</span><br />For investment in equity, I personally prefer Mutual Funds to investing directly into shares of a company. Gains are comparatively less no doubt but so are the chances of loss. This decision naturally has to be left to individual choice, as being one of the multiple paths for achieving the same goal.<br /><br /><span style="font-weight: bold;">Fact # 13</span><br />For those who decide to follow the Mutual funds [MF] route, I recommend only growth funds [MF which invest 80% or more in shares, with balance in debt instruments]. Anyone who wishes to be safe should stay with FD as they are a multi purpose debt instrument and would serve them better.<br /><br /><span style="font-weight: bold;">Fact # 14</span><br />Mutual funds offer two options: growth or dividend. The only factor in deciding which to opt for is the age factor of the investor. Senior citizens should opt for 80 to 100% in dividend option, whilst youngsters should opt for just the reverse ratio.<span style="font-weight: bold;"> Reason</span>- senior citizens need money now whilst youngsters invest for old age.<br /><br /><span style="font-weight: bold;">Fact # 15</span><br />Within the dividend option again two options are provided:<br /><div style="text-align: center;">• payout<br /></div><div style="text-align: center;">• reinvest.<br /></div>This depends on individual cash flow requirement. I have payout option in 25% of the funds I have invested in, for the balance funds it is the reinvest option. <span style="font-weight: bold;">Reason</span>- dividends are normally announced in clusters like festive seasons or year end. My requirement is spread on monthly basis. By a combination of OD on FD and returns from MF, I can use my funds in the most optimum manner under this arrangement.<br /><br /><span style="font-weight: bold;">FACT # 16</span><br />Reinvested dividend can be redeemed when required, till then it continues to grow with changes in NAV like any normal investment. If for any reason the amount is not needed, the reinvested dividend is also entitled for dividend announced subsequently.<br /><br /><div style="text-align: center;"><span style="font-weight: bold;">MONEY EARNING MORE MONEY</span>.<br /><br /><br /><br /></div>For Facts # 17 onwards wait for my next post.<br />For the complete picture, I recommend you start with the first blog in this series; click <a href="http://babajain.blogspot.com/2008/12/financial-planning-for-beganers.html">here</a><br />For previous blog in the series; click<a href="http://babajain.blogspot.com/2009/01/financial-planning-facts-1-to-10.html"> here</a>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com2tag:blogger.com,1999:blog-995887811957120667.post-54647915189940372372009-02-01T10:05:00.006+05:302009-02-12T19:36:29.960+05:30FINANCIAL PLANNING-SOME MORE MYTHS AND FACTSIndia’s strength is a strong culture of domestic savings down the ages. This culture took such enduring roots maybe because we were poor and under the rule of foreigners. In today’s changing world we have to revisit our sound ancient values and bring them in line with global realities.<br /><br /><span style="font-weight: bold;">Myth # 4</span><br />One component of mother’s milk was discussed as Myth # 3 in <a href="http://babajain.blogspot.com/2009/01/financial-planning-myths-and-facts.html">FINANCIAL PLANNING- MYTHS AND FACTS</a>. Next important component of the same milk is that taking loans is bad- <span style="font-weight: bold;">first save</span> and <span style="font-weight: bold;">then buy</span> what you need - says the milk. ‘First save’ advice has stood the test of time. I agree with it totally. India is better off in the present meltdown mainly because of our national saving habit. I don’t agree with ‘<span style="font-weight: bold;">loans are bad</span>’ part of the advice which is implied.<br /><br />In today’s reality, variety of loans is available easily and on attractive terms. One should prefer to buy anything, especially household goods, from where EMI facility is available. Initially till the financial infrastructure is in place one may have to buy cash down but once ones savings [debt-bank fixed deposits (FDs) and /or equity-MFs] give sufficient return to cover the EMI, one should buy only under this facility, of course as far as possible. This applies to all types of purchases-big or small.<br /><br />The reason is obvious – after the present EMIs has been paid off, the basic pool [fund] will remains intact, this can support the next EMI linked purchase and so on. Simultaneously the pool is also growing as one is adding the monthly expenses as saving plus normal savings into this fund. The day may not be far when one can pay the EMI of the car or even a flat out of the returns from this pool of savings.<br /><br />The biggest advantage I can think of when EMI is paid from saving occurs when one is in-between jobs. There would be no pressure absolutely for repaying loans as these EMIs are being taken care of by returns from existing savings. Likewise overdraft [OD] on FDs [see my post <a href="http://babajain.blogspot.com/2009/01/financial-planning-some-tips.html">FINANCIAL PLANNING- SOME TIPS</a>] will be taking care of ones monthly expenses. This should be a tremendous relief. These stress busters should be good enough reason to promote such futuristic concepts. LOANS ARE GOOD NOT BAD.<br /><br /><span style="font-weight: bold;">Myth # 5</span><br />In India paying interest is considered as bad financial management. This was true when loans were taken from village money-lenders. In a situation when interest paid on loan is substantially less than returns from use of that loan, what should one do?<br /><br />Loan against securities [LAS] is a sure-shot method to fast track ones financial status. Banks have a list of approved mutual funds on which loans can be taken. People have suffered because they do not follow the rules of the game and a wonderful instrument of growth gets a bad name in the bargain. 50% of the current NAV is given as loan limit which means that as the value of the fund increases so does ones loan limit. Reverse is also true. This is where the importance of safety net comes in. One should always proceed slowly as speed is invariably injurious to financial health. For more details on LAS please visit my post <a href="http://babajain.blogspot.com/2008/10/money-plant-revisited.html">MONEY PLANT REVISITED</a>.<br /><br /><span style="font-weight: bold;">Myth # 6</span><br />One myth which has surprised me the most is that financial planning is for the rich only. The obvious question is what type of planning can poor people do when nothing is left at the end of the month? The truth on the other hand is that financial planning can make poor rich and rich richer. It is all in the mind. Today anybody can open a bank account. Fixed deposits and investment in mutual fund can be started with small amounts. Credit cards with small limits must be available, if not they can be demanded through Consumer Courts. With these <span style="font-weight: bold;">same tools </span>in hand the only difference between the rich and the poor would be the size of each transaction. <span style="font-weight: bold;">Slowly but steadily the financial status of the poor will start to improv</span>e. For actual details on how these tools can be used both by the rich and poor, see post <a href="http://babajain.blogspot.com/2009/01/financial-planning-some-tips.html">FINANCIAL PLANNING- SOME TIPS</a>.<br /><br /><span style="font-weight: bold;">Myth # 7</span><br />Youngsters sincerely believe that it is too early to think of old age. They want to cross the bridge when they come to it. Fine, I can only pray for such people that some old age support schemes are in place by the time they reach this inevitable bridge.<br /><br /><div style="text-align: center;">GOD BLESS<br /><br /><div style="text-align: left;">For first blog of this series; click <a href="http://babajain.blogspot.com/2008/12/financial-planning-for-beganers.html">here</a><br />For previous blog of this series; click <a href="http://babajain.blogspot.com/2009/01/financial-planning-myths-and-facts.html">here</a><br /></div></div>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com1tag:blogger.com,1999:blog-995887811957120667.post-47234661008753082582009-01-28T09:43:00.007+05:302009-02-13T15:59:21.553+05:30FINANCIAL PLANNING - FACTS 1 TO 10Time has come to put the body and soul of financial planning together so that a spinal cord can come into existence. This spinal cord, I trust, would be the place of reference whenever any doubt or clarification is required on this subject.<br /><br /><span style="font-weight: bold;">Fact # 1</span><br />Financial planning can be done by every one: males and females, young and old, rich and poor, white and black-with all shades in between.<br /><br /><span style="font-weight: bold;">Fact # 2</span><br />Financial Planning is no rocket science. It can be understood in simple layman’s language or in highly technical jargon. The number and variety of flavors that can be made of each concept is unlimited. Successful planning can still be done without any flavors. <span style="font-weight: bold;">This is its beauty</span>.<br /><br /><span style="font-weight: bold;">Fact # 3</span><br />The mantra of financial planning is that since one cannot work hard enough to earn the amount of money one requires- one should find ways to make the money work to earn more and more money. Planning shows the way.<br /><br /><span style="font-weight: bold;">Fact # 4</span><br />All infrastructures take time to build-this is also true of financial infrastructures. Excessive speed and / or greed will be disastrous. Once in place these structures will serve generations. Always follow the basic time tested concepts which also provides for shortcuts for risk takers. Those who leave the beaten path should be prepared for meltdowns.<br /><br /><span style="font-weight: bold;">Fact # 5</span><br />Investments should be equally distributed between debt [negligible risk] and equity [high risk]. Investments should start with debt [bank fixed deposits (FDs) with over draft (OD) facility]. The safety net should be provided from early stages itself.<br /><br /><span style="font-weight: bold;">Fact # 6</span><br />Once the financial<span style="font-weight: bold;"> infrastructures</span> are <span style="font-weight: bold;">in place</span>, the transition to change will begin. <span style="font-weight: bold;">Money </span>will start working to<span style="font-weight: bold;"> earn more and more money.</span><br /><br /><span style="font-weight: bold;">FACT # 7</span><br />Power of OD is stupendous. One has to understand it and then harness it. Same is the case with payment of EMI from returns on savings. Their stress busting qualities will enhance ones performance and make the period <span style="font-weight: bold;">between jobs</span> seamless and stress free.<br /><br /><span style="font-weight: bold;">Fact # 8</span><br />OD is nothing but creating a negative balance equivalent to little more than a months salary by putting it in FD from ones bank account by using the facility created in Fact # 5. The salary starts earning interest from the day it is credited to the account. Salary amount reduces the negative balance, hence on the principle of <span style="font-weight: bold;">interest saved is interest earned</span> ones wealth creation process starts functioning.<br /><br /><span style="font-weight: bold;">Fact # 9</span><br />Stop making purchases with cash or debit cards. All purchases should be with credit cards only. This extends the days interest is saved / earned on salary amount by the period of days credit card payments takes in getting debited to ones account or payment cheque is received by the credit card company. In simple language the account has a low negative balance for longer duration.<br /><br /><span style="font-weight: bold;">Fact # 10</span><br />By the time this cycle gets completed, hopefully next salary cheque should be on the way. The <span style="font-weight: bold;">difference between interests earned on FD and interest paid to bank for OD</span> is the MONEY EARNED BY MONEY.<br /><br /><div style="text-align: center;">Enjoy the journey on the path of becoming a HNI.<br /><br /></div><br />For full details on all posts written under this series refer <a href="http://babajain.blogspot.com/2008/12/financial-planning-for-beganers.html">here</a><br />For previous post in this series; click <a href="http://www.blogger.com/post-edit.g?blogID=995887811957120667&postID=5464791518994037237">here</a>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com1tag:blogger.com,1999:blog-995887811957120667.post-14132166927793467342009-01-19T16:21:00.007+05:302009-02-13T16:11:47.755+05:30FINANCIAL PLANNING - MYTHS AND FACTSFinancial Planning, per se, should be the same world-wide, but it is not so. Local beliefs, traditional practices and the level of economic development determines the type of financial planning a society would adopt. This is very similar to religious beliefs – the goal is the same, only the paths to achieve them differ.<br /><br />Functions relating to MONEY were divided between genders on an arbitrary basis:<br />Males are good at earning and managing money; females will spend and save money [gold and jewelry]. The compulsions of urban living have broken these artificial barriers to a great extent. Now females have entered the work place, started to earn money [though all of them are still not very comfortable in managing it] and males are spending and ‘saving’ money.<br /><br />Elders in India always said one has to work hard to earn money, which is true. But beyond a point one cannot work harder, while the need for more money still remains. At this point the boys get separated from the men. One has to learn how to make money <strong><em>work</em></strong> for you, rather than you work to earn money. Like in a car, maximum effort is required to make the car move. Once it starts moving, the effort gets gradually reduced-as momentum takes over. Gears exist in the financial world also, only one has to recognize them and use them appropriately.<br /><br /><strong>Myth #1</strong><br />Money/wealth is important only initially. Once you have it, the importance is reduced till it reaches zero. Nothing would be a bigger myth.<br /><br />The fact is more you have, the harder you have to work. The second richest person on earth is close behind the RICHEST PERSON ON EARTH and so on, down the ladder. Even independent islands of Dubai and elsewhere are becoming cramped. Mukesh Ambani requires a 15 plus storey building to house his family. Importance of money can never be zero.<br /><br /><strong>Myth#2</strong><br />Popular saying goes ‘make hay while the sun shines’. This is not true in financial matters. The hay made while the sun was shining can go up in smoke, even before one can blink. This actually happened during the global economic meltdown of 2008. Wealth has to be created slowly under all types of conditions, with proper safety nets put in place. Whenever the time to blink comes, the safety nets can be trusted to take care of one's interests.<br /><br /><strong>Myth #3</strong><br />We have been conditioned, right from the time we fed on mothers milk, that owning PROPERTY must be our first priority. Buying a house was like achieving a major milestone in life and respect in society went up accordingly. Gold and property were considered as saviors in bad times. This was true in the past but today we have better instruments to take care of the bad times. First of all it is cheaper and financially beneficial to stay in a rented premise. Your capital gets blocked in property till the time you sell it, which is like putting all eggs in one basket. Secondly if one has to relocate for employment reasons, the property becomes an avoidable concern.<br /><br />Buy first property just few years before retirement-- that is when requirements change. Whilst working, one prefer to stay close to work place-it cuts down on commuting time. Bigger accommodation may be needed when children are staying together, but not post retirement. Safety becomes a concern after retirement, but not so when young. The ideal property, even at compelling rates, when you are 30 may become a liability at 60. Property prices are neutralised as one would like to stay in smaller units in a residential areas with better security arrangements, even if they are in the suburbs (far from work zones).<br /><br />-----------<br /><br />These are some of the myths and facts, others will follow soon. If you do not agree with me please feel free to let me know. The debate will only help us all learn better...<br /><br /><br />For full details start from first blog in this series; click <a href="http://babajain.blogspot.com/2008/12/financial-planning-for-beganers.html">here</a><br />For previous blog in this series; click <a href="http://http://babajain.blogspot.com/2009/01/financial-planning-pension-funds.html"><span style="text-decoration: underline;">here</span></a>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com3tag:blogger.com,1999:blog-995887811957120667.post-54426938467527308362009-01-15T19:07:00.005+05:302009-01-20T10:33:04.676+05:30Financial Planning - Pension Funds<p class="MsoNormal">The pension funds which are setup by companies to meet their obligation under the Laws of the Land are not my direct concern. These funds are a result of collective wisdom of the nation. Members of these funds can also work out the pension they would be receiving on retirement and the amount they would be needing to live a comfortable live in old age. The gap can be arranged for on the basis of what we discuss below.</p><p class="MsoNormal"><br /></p><p class="MsoNormal">The very nature of pension funds is such that <strong>safety</strong> is the prime consideration; this makes it a <em>debt</em> based fund. Interest from debt instrument cannot beat / neutralise inflation hence I started to explore other alternatives. I have stated in <a href="http://babajain.blogspot.com/2008/12/financial-planning-for-beganers.html">FINANCIAL PLANNING FOR BEGINNERS </a>that Rs 1.5 C<span id="SPELLING_ERROR_0" class="blsp-spelling-error">rores</span> in savings would be required by today’s youngster to manage his old age. Let us have a fresh look at the above mentioned post and also at <a href="http://babajain.blogspot.com/2009/01/financial-planning-some-tips.html">FINANCIAL PLANNING – SOME TIPS </a>to explore whether the answer to pension funds lies therein.</p><p class="MsoNormal"><br /></p><p class="MsoNormal">Our target is to build bank fixed deposits [FD] of Rs. 10 Lacs as base and additional <span id="SPELLING_ERROR_1" class="blsp-spelling-error">FDs</span> to cover all loans that are taken subsequently.<span style="font-size:0;"> </span>These amounts have a specific purpose to serve whilst one is in employment; once we retire these amounts can become part of our PENSION FUND.</p><p class="MsoNormal"><br /></p><p class="MsoNormal">Likewise we plan to invest in equity through Mutual Funds [<span id="SPELLING_ERROR_2" class="blsp-spelling-error">MF</span>]. 80% of this investment is to be in growth option of <span id="SPELLING_ERROR_3" class="blsp-spelling-error">MFs</span> hence would earn a return of minimum 25% on an annualized basis. Which in other words mean that every 4 years the amount would double? This would become a major foundation of our PENSION FUND.</p><p class="MsoNormal"><br /></p><p class="MsoNormal">The likes of present meltdown had last come in 1930s hence it is safe to presume that it would not be repeated in the life span of today’s youngsters. Further the <?xml:namespace prefix = st1 /><st1:country-region><st1:place>India</st1:place></st1:country-region> growth story is secure for another 20 to 25 years if not more. Even when <st1:country-region><st1:place>India</st1:place></st1:country-region> becomes a fully developed economy, somewhere an emerging economy would take root which Indians can tap for better returns on investments.</p><p class="MsoNormal"><br /></p><p class="MsoNormal">Pure Life insurance policies play a vital role in our lives. Once all loans are safely paid, the maturity amount of Pure Life policies become the <em>second</em> major foundation of our PENSION FUND. The maturity amount received from insurance should be invested as FD's (debt) so that the monthly expenses get covered out of interest income of <span id="SPELLING_ERROR_6" class="blsp-spelling-error">FDs</span>. Additional <span id="SPELLING_ERROR_7" class="blsp-spelling-error">FDs</span> (from sources like gains in equity [MFs]) should also be maintained with OD facility, to cater for <span id="SPELLING_ERROR_8" class="blsp-spelling-corrected">emergencies</span> including medical.</p><p class="MsoNormal"><br /></p><p class="MsoNormal">Balance income from other investments including equity [<span id="SPELLING_ERROR_9" class="blsp-spelling-error">MFs</span>] should be used for holidaying, visit to children, friends, relatives buying properties and meeting similar avoidable (luxury?) expenses.</p><p class="MsoNormal"><br /></p><p class="MsoNormal">Pure Life policies are life insurance policies minus the investment, personal accident or any other add-<span id="SPELLING_ERROR_10" class="blsp-spelling-error">ons</span>. The rate of premium per 1000 rupees sum assured should be the lowest. It is a pure risk policy. Agents/<span id="SPELLING_ERROR_11" class="blsp-spelling-error">advisors</span> do not prefer to canvass these policies as they get negligible commission. That is sad, because these policies serve our interest <strong>the best.</strong></p><p class="MsoNormal"><br /></p><p class="MsoNormal">A point of caution is called for at this stage. <b>The premium saved from not investing in pension funds should not go into <em>pubs</em> but to <span id="SPELLING_ERROR_12" class="blsp-spelling-error">FDs</span> and/or <span id="SPELLING_ERROR_13" class="blsp-spelling-error">MFs</span> only.</b></p><p class="MsoNormal"><br /></p><p class="MsoNormal">To conclude, I am <strong>not</strong> against the concept of pension funds. It works well for those who feel that financial planning is too much of a nuisance, too complicated or time consuming. The bottomline is to ensure availability of funds in old age since <st1:country-region><st1:place>India</st1:place></st1:country-region> does not have a social security system in place.</p><p class="MsoNormal">--------------<br /></p><p class="MsoNormal">We will continue this discussion in future posts. Meanwhile, feel free to comment and debate. Your agreements and counter-arguments will help me to revisit my ideas.<br /></p><p class="MsoNormal"><br /></p><p style="TEXT-ALIGN: center; MARGIN-LEFT: -0.75in" class="MsoNormal" align="center">INVEST <strong>TIME</strong> IN PLANNING AND <em>SAVE</em> MONEY.</p><p style="TEXT-ALIGN: center; MARGIN-LEFT: -0.75in" class="MsoNormal" align="center">SAVE TIME IN PLANNING AND SPEND MONEY.<?xml:namespace prefix = o /><o:p></o:p></p><p style="MARGIN-RIGHT: -63pt" class="MsoNormal"><o:p></o:p></p>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com3tag:blogger.com,1999:blog-995887811957120667.post-24417472590897234202009-01-09T19:37:00.009+05:302009-01-24T11:32:15.981+05:30FINANCIAL PLANNING-SOME TIPSI am dropping the words 'FOR BEGINNERS' from the title as anybody who has read my post "FINANCIAL PLANNING FOR BEGINNERS" is no longer a beginner-he has graduated a step already. As I had said in my earlier post I have not studied financial subjects at any point of time. Whatever I know about making money has been picked up on the street. As it has worked for me, my desire is to share it with others so as to give them a head start.<br /><br />Among the various debt instrument available, I have found the <span style="font-weight: bold;">Bank Fixed Deposits[FDs]</span> as the most suited in today's times. Money does not like to be lazy. It is at its best when working, working and more working. To provide this enviorment one has to find a suitable instrument with multi-tasking capabilities. When multi-tasking is the mantra, FDs preform multi-functions like:<br /><ol><li>FDs can be built at ones own pace. Every FD should have the OD facility attached.</li><li>Once a respectable portfolio is built, 'money' can be put to work. </li><li>Idealy bank accounts should never have a credit balance. Money goes to sleep in such accounts. <span style="font-weight: bold;">Power of OD</span> comes into play when bank accounts have <span style="font-weight: bold;">negative balance</span>.<br /></li><li>Main role of OD on FDs is to make available funds in an emergency. Rs 50000/- is available like your own money[as per assumptions below Rs 80000-Rs30000].</li><li>They act as a safety net for all loans taken.<br /></li><li>To demonstrate the power of OD we make some assumptions- Monthly salary Rs 25000/-. OD limit on FD Rs 80000/-. FD rate of interest 9%. Current credit balance Rs 1000/-. Out of the OD limit make a FD of Rs 30000/- at 9%, this will create a negative balance of [Rs 30000-Rs 1000] Rs 29000/-. On Rs 29000/- the bank will start charging you interest of 11.5%[9+2.5].</li><li>On salary day the negative balance automatically gets reduced to Rs 4000[Rs29000-Rs25000]. This means the bank now charges 11.5% interest on Rs 4000/-, interest saved is interest earned. Your SB account is in effect earning you 11.5% on the salary amount deposited. All expenses / purchases do not happen on day one nor in one shot, but are spread over a period of days. Your money is happy working hard to earn money[interest] for this period of days. This process gets repeated month after month.<br /></li><li>Stop using Debit cards and make all payments by credit cards only. The advantage would be clubbing of all entries and one payment on the due date. This means effectively your salary remains in your account for longer duration thereby keeping the negative balance low [interest saved is interest earned and rewards points on the card are bonus].</li><li>All FD interest should be redeemed on quarterly basis and deposited in the account which has OD facility. This interest will also help to keep the negative balance low.<br /></li><li>You will be surprised on how fast the negative balance will get wiped out from the small small amounts earned by your 'money'. Repeat the process of creating negative balance by making fresh FDs and once that target is met start investment in equity.<br /></li></ol>From among the equity instruments available, I prefer <span style="font-weight: bold;">Mutual Funds [MF]</span> to direct investment in shares. Of course shares give far higher returns than MF because the risk of loss is far greater. The reason is quite simple- your money is resting on the fortunes of one company say like Satyam, very few would be able to exit at the right time. Your involvement with shares would have to be higher than with MF. In MF a fund manager is taking care of your investment and you can stay invested if you like his results or switch to another fund if you don't.<br /><br />Personally I prefer equity based fund as my monthly expenses are not coming out of this investment. The 30% annualised returns my investment in MF gave me was more money than I had during my entire service career. I recommend the same to youngsters as they would be needing this money after a few years.<br /><br />My advice is that property should be purchased only when your returns from investments in MF can pay the EMI of the property. You will reach the target of being a HNI much faster. Even after the EMI gets paid off, returns from this investment continues.<br /><br />MF can be purchased in lump sum or under SIP [systematic investment plan], for salaried persons SIP would be better. When ever you get bonus or lump sum amount, the same can be invested lump sum in funds which are under SIP or otherwise.<br /><br />MF are available with growth or dividend options. You should have a mix of both. Senior Citizens should opt for dividend option in 80% of the funds while youngsters 20% [up to a level where the EMI amount, when started, gets paid from dividend income]. It is financially beneficial to pay rent.<br /><br />Under dividend option again one can take reinvest or payout option. Reinvest option gives you the choice to redeem the dividend reinvested units when the actual need arises, otherwise they add to the units you own in normal course. The advantage is that the NAV keeps growing during the period you did not need the money, hence you get more money when you redeem than you would have got by depositing it in the bank account under payout option in the first place.BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com1tag:blogger.com,1999:blog-995887811957120667.post-31728629984744353252008-12-29T12:16:00.011+05:302009-02-12T12:07:21.683+05:30FINANCIAL PLANNING FOR BEGINNERSA request came to me for explaining the Basic Principles of Financial Planning for beginners, which can help today's rich youngsters. Financial Planning is no rocket science, its pure common sense- never keep all eggs in one basket. For saving money the common baskets are:-<br /><ol><li>Debt</li><li>Equity</li><li>Asset Creation[Property, car,two-wheeler]<br /></li><li>Pure Life Insurance Policy/s maturing at the age of 60 or 65.</li><li>Gold and other jewellery/precious metals</li><li>Commodities and Foreign Currencies.</li></ol>Before understanding the baskets let us understand the special features of the thing called MONEY.<br /><ul><li>Money is like a cricket pitch-action takes place at both ends and all round it.<br /></li><li>It is a science as well as an art.<br /></li><li>Money can be invested or gambled in the name of investment.<br /></li><li>Money is the laziest thing created and also a rocket which goes up and down at the craziest of speeds imaginable.<br /></li><li>Money can make or break you, it does not respect age, status, power or wealth. YOU RESPECT MONEY AND IT WILL KEEP YOU LIKE A KING.</li></ul>Let us understand these traits in some detail:<br /><br />Managing money goes on simultaneously in all areas depending on individual circumstances.<br />The saying goes "the science of investment" and "art of managing money". Economists and financial wizards realised that <span style="font-weight: bold;">higher the risk-greater the return </span>is the science behind money. The risk factor brings in an element of fear which leads to irrational behaviour, hence cannot be science alone. A scared person will not listen to reason and the art of managing is based on perceptions. Mature persons manage money in a scientific manner which is investing, whilst others follow the herd mentality which is gambling. When dealing with money, <span style="font-weight: bold;">never be greedy or in a hurry.</span><br /><br />This becomes the basis of next trait of money. A very very thin line separates investment from gambling. There is nothing wrong in gambling for fast returns. But here invest only what you can comfortably lose. Do not invest your life savings but create a small corpus separately for sake of excitement and thrill and indulge yourself as long as some money remains in this fund. Once it is wiped out[which it would] you would have hopefully matured and grown up to respect money.<br /><br />Money is very docile when kept in form of cash or bank saving accounts. Money in fixed deposits of Companies are normally safe but can become dicey, hence gets you a higher return than bank deposits. The risk element keeps increasing when investing in various debt instruments hence better returns. Money comes in its glorious best when invested in equity. The Stock Markets up to January 2008 had given returns beyond widest expectations. The subsequent crash [see my post<a href="http://babajain.blogspot.com/2008/10/global-financial-meltdown-laymans-view.html">[GLOBAL MELTDOWN-A LAYMANS VIEW</a>] has wiped away life saving of many even before they could blink.<br /><br />This meltdown has not affected everyone the same way. I came very close to grief but fortunately the safety net[see post <a href="http://babajain.blogspot.com/2008/07/equity-friend-or-foe.html">EQUITY- FRIEND OR FOE</a>, <a href="http://babajain.blogspot.com/2008/07/real-money-plant.html">THE REAL MONEY PLANT</a> and <a href="http://babajain.blogspot.com/2008/10/money-plant-revisited.html">MONEY PLANT REVISITED</a>] which I had put in place held and all my investments are safe. My respect for power of investing is keeping me like a KING - so far.<br /><br />Now let us understand the baskets through which financial planning is given shape and body. The amounts mentioned for each baskets would differ from person to person and are my own guesstimates not based on any study. The baskets are arranged in order of my priority.<br /><br />Investment in debt should be the starting point for anyone. Bank Fixed Deposits is the place to start with. I recommend Rs 10 lakhs as fixed deposit[FD] over a period of time. HDFC and Bank of India allow Over-draft[OD] facility on FDs which should be availed of. This has lots of advantages explained in my post <a href="http://babajain.blogspot.com/2008/10/global-financial-meltdown-laymans-view.html">THE REAL MONEY PLANT</a>. Once Rs 2 to 3 lakhs are in place, the next basket can be used. Of course for Income Tax purpose second basket can be availed of first, as deductions upto Rs 1 lakh under Sec 80 C saves tax outgo. This amount should be invested in equity dominated tax saving schemes of Mutual Funds. This process should be repeated year after year till your target of Rs 10 lakhs FD is achieved.<br /><br />Basket No.3 should be thought of only after meeting the demands of Basket Nos.1 and 2. Two or Four wheeler should always be purchased by availing loan as paying interest works out cheaper in the long run. Property should be thought of only when surplus remains after Auto loan. Before actually investing in property find out the loan amount which would be required. Take a pure life insurance policy for an amount which covers all your loans, including ODs [Basket No.4] and then only finalise the property deal.<br /><br />In my assessment when today's youngster retires they would be requiring Rs 1.5 crores in saving to survive his/her old age in comfort. Pension schemes are a part of Basket No.1 and should have separate target over and above Rs10 lakhs FD. Personally I prefer Mutual Funds to Pension Funds. The target for life insurance policy should be Rs 50 to 75 lakhs. The purpose of this policy is not investment per se, it is part of the safety net. The logic behind spending this money is that in a worst case scenario the loans would get paid by the insurance money without adding to the miseries of the family, in the best case scenario the maturity amount would help in meeting the target of retirement fund.<br /><br />By the time I could think of Baskets No.5 and 6 my funds had run out on me. I have no knowledge about these investment baskets. Anyway any beginner who reaches these baskets would be requiring the services of a professional financial advisor who would be knowing about these baskets.<br /><br />Before closing this post I would repeat the <span style="font-weight: bold;">guru mantra</span> which is always balance your investments 50-50 between debt and equity. This gives you the safety net. Those who wish to live on the edge can alter this ratio as per their capacity of absorbing loses.BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com3tag:blogger.com,1999:blog-995887811957120667.post-75116367925609883892008-10-31T19:48:00.005+05:302008-11-02T11:50:37.338+05:30GLOBAL FINANCIAL MELTDOWN- LAYMAN'S VIEWThe present global financial meltdown is something unbelievable. So many people of repute, trustworthiness, international icons and experts all became greedy at the same time. This is not individuals or local areas but Institutions with enviable linage going back 150 years <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">becoming</span> willing partners. This just cannot be a mistake or error of judgement. The various check and balances built into the system by our fore-fathers just failed or should I say were ignored.<strong>The only motive driving them collectively across nations has to be GREED. </strong>This never happened in the past but unfortunately can happen again in the future.<br /><br />To grasp what happened one has to <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">visualise</span> a large swimming pool full of people and a forest fire together. People individually can be at the deep end and enjoy the cool water without disturbing the persons around them. For any reason one person panics and grasp two <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">different</span> persons, with each hand. Had a solid support been available within reach the situation would have been controlled without much fuss. In the absence of such a support, the persons grasped would in turn try to hold on to persons around them, result total <span class="blsp-spelling-corrected" id="SPELLING_ERROR_3">chaos</span>. Likewise an out of control forest fire burns everything <span class="blsp-spelling-corrected" id="SPELLING_ERROR_4">coming</span> in its path.<br /><br /><p>Meltdown has two aspects: </p><ol><li><span class="blsp-spelling-error" id="SPELLING_ERROR_5">Physical</span> destruction of asset.</li><li>Asset is not destroyed but only its value is downgraded.</li></ol><p>The first by <span class="blsp-spelling-corrected" id="SPELLING_ERROR_6">definition</span> has to be a local situation, maybe wide spread but not global in reach. The second has no boundary as it is not based on strict facts but on perceptions. Perceptions may or may not be based on facts. This peculiar but standard business practice has stood the test of time and asset values were upgraded or downgraded on principle of supply and demand. <em>Like all good things this also had the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_7">potential</span> to become a tool of the Devil.</em> People the world trusted and respected, decided to become agents of Devil and start using this wonderful tool for devilish ends-- out of the main human failing-GREED. Since good always prevails over evil there is nothing to be <span class="blsp-spelling-corrected" id="SPELLING_ERROR_8">afraid</span> of. It will only take time to heal.</p><p>We all know that one should not buy based on the packaging alone but buy only if satisfied with the contents. This basic truth was kept aside and major <span class="blsp-spelling-corrected" id="SPELLING_ERROR_9">transactions</span> started based on packaging without due diligence of contents. Risky loans were given on higher rate of interests. These were then combined into exotic investment instruments and traded amongst the financial institutions as special packages. Since the rate of interest was high, institutions started making lots of profits. In turn these high profits justified higher pay packages and bonuses to the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_10">executives</span> of the financial institutions. <em>More risky the loan, higher the rate of interest resulting in more money going into the pockets of these people</em>.</p><p>Since people entrusted with the responsibility of keeping a check and balance, like <span class="blsp-spelling-error" id="SPELLING_ERROR_11">CEOs</span> and Senior Executives, became a part of this greed, the entire <span class="blsp-spelling-corrected" id="SPELLING_ERROR_12">phenomenon</span> became as simple as taking away candy from a baby's hand. One of the positive fallout of this was busting of the myth that 'Capitalist Model' was superior to the 'Control Model' as market forces were the only honest <span class="blsp-spelling-corrected" id="SPELLING_ERROR_13">reflection</span> of what is good for the human race. For the first time a <strong>real level playing ground</strong> has been created. Both 'models' could be easily manipulated by GREED FOR MONEY OR GREED FOR POWER. Finally the State had to <span class="blsp-spelling-corrected" id="SPELLING_ERROR_14">intervene</span> to bring back stability and trust in the market. A combination of both models will show the way forward.</p><p>What is true for the economy is true for individuals also. I sympathise with persons who lost their shirt in the fall of the share markets. Those who lost all their savings when banks went bust will have to take solace from karma theory. They were in the wrong place when the forest fire approached. All others who would like to invest wisely, the following ideas may prove useful: </p><ol><li>Control your natural greed. Do not try for maximising your returns from investment. Higher the risk better the return. Be satisfied with reasonable return in keeping with your risk profile.</li><li>Spread your resources within the asset classes, keeping the golden rule in mind always-50% in debt 50% in equity. To get better returns within this spread see my two blogs[ The Real Money Plant and Money Plant Revisited].</li><li>If you plan to take loans for vehicle, house or any other purpose, do so only after building up bank fixed deposits equal to two years <span class="blsp-spelling-error" id="SPELLING_ERROR_15">EMI</span> for each loan. You will not regret as these <span class="blsp-spelling-error" id="SPELLING_ERROR_16">FDs</span> will prove useful in more ways than one in the future. Yes, you can take these <span class="blsp-spelling-error" id="SPELLING_ERROR_17">FDs</span> towards the debt component of your investment plan.</li></ol><p>I know what I have suggested would appear as excess caution to many. I can only once again strongly recommend them as they saved my shirt in this meltdown. Wish there was a way to hold all these greedy persons accountable and prosecute them for criminal negligence <span class="blsp-spelling-error" id="SPELLING_ERROR_18">atleast</span>. I know this is wishful thinking.</p><p>DO NOT BE DISHEARTENED. YOU WILL ALSO MAKE MONEY THE WAY I HAVE.</p><p align="center">GOD BLESS.</p>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com5tag:blogger.com,1999:blog-995887811957120667.post-43375574836439066992008-10-24T12:32:00.006+05:302008-10-30T19:32:16.104+05:30MONEY PLANT REVISITEDI had written my blog [The real money plant] in the early stages of the present global meltdown. Since then I have become wiser as the southward journey of the share markets continued. It was gratifying to realise that my model for financial planning has passed the litmus test, though it needs a little straightening in the safety net area.<br /><br />Along with the power of overdraft, one more instrument for improving your investment returns, with somebody Else's money, is to take <strong>LOAN AGAINST SECURITIES[LAS]</strong>. It works like this:-<br /><br />Before investing in Mutual Fund check with your Bank which mutual funds are eligible for loans. Out of that list select the funds you like and make the investment. Once a sizable portfolio is ready you can open your account by pledging these units with the bank. After formalities are completed the bank will give you a limit which would be 40/50% of the current value of your units pledged. The limit gets revised as the value of the units change. The limit you get is what you invest again to buy units in any fund of your choice. The circle can be repeated endlessly. One has to decide the amount of loan one is comfortable with. Care should be taken to opt for final limits right at the beginning as it would save duties/expenses applicable whenever limits are increased. The limits sought are not linked to the value of units pledged.<br /><br /><strong>Please remember that money plant is like any other plant</strong>. It will take time before giving fruits. Yes if you have sufficient funds in one lot right at the start[like just retired persons or after selling a property], this period can be cut short. Following steps by way of safety net are recommended from personal experience.<br /><br /><ul><li>My Bank does not allow part redemption's of the pledged units. After achieving your desired LAS limit, it is adviceable to duplicate your investment in the same funds but do not pledge them. This will provide you with additional liquidity in the form of free units which can be sold for booking profits if the need arises. The free units sold can be purchased again when the market falls.</li><li>Keep atleast 25% of the limit availed in Fixed Deposit. You can link it to the OD account but avoid using these funds even for short or medium term requirement. This arrangement would prove very usefull in a meltdown like in 2008 or at the time of closing the account.</li><li>By experience you will know the level below which your LAS limits will not fall, this amount also becomes part of your safety net.</li><li>As markets grow you will soon reach the LAS limit. A stage will come when the value of the units pledged is higher than the LAS limits opted. This differance also becomes part of your safety net. At this stage review your position and set new targets for debt and equity investments.</li></ul><p>Students of economics will recall the concept of deficit financing which they had studied. Liveraging of today is a flavour of this concept. If done in excess it will lead to meltdown and doom, if not done at all you will remain at the present standard of living. The choice is difficult but not impossible to make. Find the right mix you are comfortable with. What is life without some <strong>RISK.</strong></p><p>Wish you a comfortable journey of making money with somebody Else's money. WIN WIN for all</p>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com1tag:blogger.com,1999:blog-995887811957120667.post-21545463200594213182008-09-23T10:47:00.006+05:302008-10-23T16:35:49.019+05:30What makes Golden Sunset Resorts viable?<p>Based on my observations and discussions within the group of senior citizens, I had visualised the concept of Golden Sunset Resorts. Two important aspects missed or misunderstood by present entrepreneurs in schemes for housing for Senior Citizens, are according to me :</p><ol><li>Senior Citizens are vary of schemes where they have to outright purchase the property. They have lost money in the past as such projects were not completed or were of inferior construction.</li><li>Senior Citizens in Group 2 [see post: <a href="http://babajain.blogspot.com/2008/06/golden-sunset-resorts.html">The Golden Sunset Resorts</a>] are not bothered where the resort is located. They would opt for it if facilities provided are good and expenses are within their budgets.</li></ol><p>The project can be viable if it is situated outside the city limits where land rates are still lower. A larger plot should be purchased as it would facilitate expansion/other usage in near future.The construction should be prefabricated, which can be dismantled and shifted when necessary. It should be near an urban center where medical facilities are available within a reasonable distance. Like all resorts the project should be on occupancy bases i.e. rental basis. Special packages can be offered for monthly bookings for rooms/services availed. Guests should have the option to walk out if they are not satisfied.</p><p>The layout and construction would be different for Sunset resort. Golden resort should have both rooms and dormitory. My feeling is that Senior Citizens would finally prefer the dormitory as privacy looses its priority as age advances. Being together would be most <span class="blsp-spelling-error" id="SPELLING_ERROR_0">prefered</span> option. This could bring down the cost substantially. All structures should be single storey with a wide veranda all around. Nothing can replace sitting/lying in the sun, weather permitting.</p><p>Apart from normal Spa services in the Sunset Resort, especial provision of services liked/required by Senior Citizens should also be planned for. These can be like simple oil massage in the sun, physio-therapy type body massages/baths. After all guests of Golden Resort would be regular customers of the Sunset Resort. Young persons from the neighbouring villages can be encouraged, in their spare time, to be with the guests for odd jobs and earn some pocket money.</p><p>Both resorts should be beautifully landscaped, have a common meditation cum praying center, areas for playing/entertainment. At the planning stage itself provision for expansion and alteration should be incorporated. Once the nearby urban area engulfs the resort area and land prices sky-rocket, the resorts can be relocated outside the city limits and the investor can go for the kill. The concept has the potential of becoming a national and international brand chain.</p><p>In India the natural urge to leave property/<span class="blsp-spelling-error" id="SPELLING_ERROR_1">assests</span> to children is very strong. This normally overlooks the treatment child had melted out to the parents. Even reverse mortgage would take time to become acceptable in our country. By providing an option on rental basis, we can attract a larger group who can sell their property and invest the money. Their monthly expenses can be met from the investment income. The amount invested goes to the children after both have commenced their final journey. </p><p>The beauty of this proposal is that resorts support each other. Main customers of Sunset Resort would be the residents of Golden Resorts-for some facilities if not all. Likewise children, friends and relatives of residents of Golden Resorts will have a place to stay in Sunset Resorts and hence can <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">conveniently</span> visit them as well as have a holiday <span class="blsp-spelling-corrected" id="SPELLING_ERROR_3">them self</span>. A win win situation all round.<br /></p><p></p>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com1tag:blogger.com,1999:blog-995887811957120667.post-19134291427264718292008-07-31T20:12:00.007+05:302008-08-22T15:22:51.614+05:30Credit Cards-Devil withinA friend of mine had a very interesting experience with his credit card. Cards were stolen from bags left outside front door of his flat [this is an interesting story which I may write about one day]. The cards were misused that night itself and the next day. He did not go out for two/three days. The credit card operator telephones him to confirm some transactions which were suspicious according to them. He immediately informed all the concerned Companies about loss of cards.<br /><br />Now as per requirement of the Company he went to the local Police Station to register the FI R. Police agreed to register the FIR only when told that card was used at an ATM in Pune [ruling out the train] and since the purse was not taken the theft cannot be in the bus[no pickpocket will put the purse back]. The most likely place of theft was outside the flat when the bags were left unattended. The credit cards had been used at various locations for about Rs 40,000. The issue has not been resolved yet, however it made me wonder whether his experience was unique or others are also facing similar problems. I am sure many are.<br /><br /><br /><p>Problem is who pays for Rs 40,000 for which the cards were used. Everyone I have asked this question without hesitation says it has to be paid by my friend. This does not appear fair to me. In a situation like this there are three main stakeholders </p><ol><li>The Bank which issued the credit card.</li><li>The credit card holder.</li><li>The commercial establishment which accepted the card in lieu of cash.<br /></li></ol><p>All three stakeholders are benefiting from the use of the card and hence have an obligation of trust and fair play towards each other. The Agreement which each stakeholder signs have to be within this perimeter. Unfair advantage by any stakeholder will invoke the Consumer Protection Act. Amongest all three stakeholders the commercial establishments have the most crucial role to play. Misuse of credit cards is not possible if laid down procedures are followed by all stakeholders. </p><p>This in short means that No 2 should inform No1 the moment the card is stolen. No 1 should block all transactions thereon. The main success would depend on No3. Why? The credit card consist of two parts- the physical part and the signature part. Commercial establishments would check the signature on the charge slip with that on the card and only then accept it as payment.</p><p>We know that the level of expertise available at the premises of No3 cannot identify 'good' forgeries. But to expect the expertise of a reasonable prudent person in matching the signatures cannot be faulted. Unfortunately this is not being done. We all must have noticed or can notice now, that normally the credit card is returned to us along with the charge slip for signature. In such situation even a causal glance at the signatures is not possible. No1 expects No2 to pay for all cases irrespective of blatant crude forgeries or still worse, no signatures at all.</p><p>The question arises why is No1 reimbursing No3 in such cases and demanding payment from No2. Simple answer would be that two business groups are joining hands to take undue advantage of the helpless unorganised No2. This would become an issue once the proposal to create an all India data-base of all loan takers is in place. No2 would be forced to succumb to the dictates of No1 as otherwise he is likely to be blacklisted by all loan giving agencies. If this is not the reason then what can it be?</p>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com2tag:blogger.com,1999:blog-995887811957120667.post-26391303920452065912008-07-09T09:39:00.009+05:302008-07-11T11:32:20.120+05:30Can Old Wine find New Bottle ?The result is the same, but inputs were totally different. Indian way of family relationship is gradually merging into the American model, but for different reasons. With the advent of 'nuclear' family concept, parents and their children prefer to reside separately after their marriages, even when living in the same city/town. Parents are happy as after a long time they can live according to their own likes and style, children likewise have Independence In fact the <strong>new wine</strong> had comfortably settled in the <strong>new bottle</strong>.<br /><br />This comfort zone extends into retired life as both, parents and children, are financially independent. This phase of freedom lasts for around 15 years in which parents can travel, visit places of interest and indulge in all activities which had been postponed due to 'children' considerations. The only limiting factor of this phase should have been the physical health of individuals(for details see The Golden Sunset Resort). Unfortunately sometimes this does not happen and the comfort zone is shaken due to family compulsions.<br /><br />Children of yesterday decide to be parents of today. Bringing up an infant into babyhood and then to boy/girlhood needs the gentle touch of grandparents. Are today's grandparents willing to give up their new found freedom? If yes in what form. Nobody wants to repeat the pain from breaking of the joint family all over again, Americans are looking eastward and we are looking westward as both are not happy. What form or shape will the new arrangement take is a million dollar question.<br /><br />My generation, the one before us and the one after us i.e. 3 generations where caught in the turning point of Indian joint family system. We had taken care of our parents, confident that when the time came, our sons will look after us. We never thought of planning for our old age. Suddenly things started to change. Nuclear family become the order of the day due to sheer compulsion, small flats or NRI status. After retirement parents had to decide how to spend/utilise their time. Once everything is in place over a period of time the issue of having issues which requires grandparents presence becomes a tricky issue. It becomes difficult to drop everything and rush to look after the grandchild that too for limited period.<br /><br />The question is further complicated as parents and new parents have conflicting motives for their actions/thoughts. Having accepted the nuclear family can the children take it for granted that parents have to come to their aid. Similarly parents have to reshedule their plans and also cope with an unknown fear- will they be able to live alone again after coming so close to their grandchild. Likewise how can anyone ignore or overlook the needs of the little one.<br /><br />In this entire scenario which grandparent do we have in mind? Reflex answer always is ofcourse the boy's parents. This was true during the joint family system, but today an additional option has been added. In reality it is the girl's parent who are called for duty invariably. The reason is very simple in today's circumstances. Girls are more comfortable with their mother than mother-in-law. Mother-in-laws are aware of this hence wonder whether it is worthwhile to drop everything and go to the son's house. This again raises issues.<br /><br />Both are right in their thinking yet the grandchild is the main sufferer in the end, hence an equitable solution has to be found. Each aspect will have to be examined in depth before a workable solution is arrived at. <strong>Can the old wine, which at tremendous cost, converted into new wine revert back into old wine and find a new bottle? </strong>Future bloggs will try to look into this very difficult area.BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com0tag:blogger.com,1999:blog-995887811957120667.post-72814545929372322422008-07-05T19:56:00.007+05:302008-07-07T19:48:33.448+05:30Equity - Friend or FoeMy friends, especially senior citizens, were very uncomfortable whenever the question of investment in equities was discussed amongst the group. Nobody said no, but they did not invest in equity either. This made me to think why this mind block. I remembered my service days when I was equally scared of putting a larger chunk of my savings in equity. I preferred life insurance. Apparently we all suffered from the fear of the unknown.<br /><br />We have a pretty good idea about pricing of most of the assets class of investments. Equity is one big black hole where pricing mechanism <strong>knowledge</strong> is concerned. Major factor in pricing of equity is the intrinsic valuation of the industry it relates to. This part everyone understands and has no problem with. Second and far more influential element in pricing is the perception of future earning possibilities of the particular company/industry. This brings in an element of personal arbitrariness bordering on gambling. Most of us are very uncomfortable with this hence prefer to stay away, which is sad.<br /><br />One fact cannot be overlooked. Equity is the only liquid investment opportunity to keep pace with and stay ahead of inflation. In short, equity is both Dr Jekyll and Mr Hyde. By controlling our natural greed we no doubt reduce the returns from equity but also drastically bring down the risk of losing the hard earned money. One has to find ways to befriend the good and avoid the evil- something we as it is do every moment of our existence.<br /><br />Equity for us has to be a long term investment. If we need to <span class="blsp-spelling-error" id="SPELLING_ERROR_0">encash</span> part of our investment we should do so well in advance as otherwise the market may fall and we suffer avoidable loss. This is the nature of this market hence we have to plan accordingly. When people play the stock market for short term gain, it should not concern us as they win or lose heavily, fully conscious of the risks involved. The fact someone lost heavily should not scare us or keep us away from the market.<br /><br />Today investment in equity has been made easy for us. Mutual Funds are a recent entry which reduces the risk element and therefore give lower returns. These lower returns are in comparison to direct investment in equity, but still higher than any other return on investment. Mutual Funds are nothing but collective investment in number of companies <em>in small lots</em>. If some company makes a loss another may make profits thereby averaging out the returns for us.<br /><br />Mutual Funds come in both debt and equity and in various combinations thereof. One can select a fund as per his risk appetite. Mutual Funds allows cumulative growth or annual payment of dividend if one so desires. Dividend again can be reinvested or payouts taken. The dividend option has again two components: long term capital appreciation which is retained and annual profits which are distributed. Mutual Funds allow partial redemption of units for greater flexibility.<br /><br />My <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">experience</span> shows <strong>equity is the best friend</strong> anyone can hope for. DO NOT WASTE TIME. For more information on mutual funds see my write-up "<a href="http://babajain.blogspot.com/2008/07/real-money-plant.html">The Real Money Plant</a>".BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com0tag:blogger.com,1999:blog-995887811957120667.post-2149292283978585582008-07-02T18:42:00.005+05:302008-07-04T10:54:05.642+05:30The Real Money PlantI should start with a disclaimer. I do not have any <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">academic</span> qualification in finance or investment subjects. My knowledge is totally street acquired. It has <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">benefited</span> me <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">tremendously</span> hence would like to share it with anyone who would like to listen. It is the most easy thing to make, one should only know how to do it. Yes I am talking MONEY.<br /><br />Never work for money, always think and plan how money can work for you. Earning from someone e<span class="blsp-spelling-corrected" id="SPELLING_ERROR_3">lse's</span> money is called the POWER OF OVER DRAFT. Without a business/employment one cannot reach within <span class="blsp-spelling-corrected" id="SPELLING_ERROR_4">striking</span> distance of money-hence put everything in to get something started. I am saying this so that your priorities are clear and no rash steps are taken.<br /><br />From whatever you earn, save what you can. Amount saved depends on individual circumstances but the key word is constant conscious effort to save money. Initially do not bother about investments, simply convert your savings in bank fixed deposits. Again how much depends on individual circumstances-any figure between 5 lacs to 10 lacs would be a good beginning. Ask your bank to give you OD facility on your FD. This varies from 70 to 90% of the FD original amount(<span class="blsp-spelling-error" id="SPELLING_ERROR_5">HDFC</span> and most public sector banks have this facilities as far as I know). Now you are ready to make money work for you.<br /><br />'Fools buy houses and <span class="blsp-spelling-corrected" id="SPELLING_ERROR_6">intelligent</span> people stay in them'- still holds true. Property is a great investment but not as a starting point. Property accretions are locked in till the same is sold. Therefore think of buying only when your investment income can cover the <span class="blsp-spelling-error" id="SPELLING_ERROR_7">EMI</span> (your salary/business income should not be locked in property). The best investment is in mutual funds. You can try shares if you have the feel for it, I <span class="blsp-spelling-corrected" id="SPELLING_ERROR_8">don't</span> have it. It is a wrong time to talk of equity, but for me the India growth story is intact for the next 20 years <span class="blsp-spelling-corrected" id="SPELLING_ERROR_9">at least</span>. The present crash is only a short term regularly recurring <span class="blsp-spelling-corrected" id="SPELLING_ERROR_10">phenomenon</span>. My <span class="blsp-spelling-corrected" id="SPELLING_ERROR_11">experience</span> shows that 30 lacs invested in mutual funds gave 30,000 per month <span class="blsp-spelling-corrected" id="SPELLING_ERROR_12">dividend</span> income(apart from capital appreciation) before the January 2008 crash. This figure should help in planning. This is the big picture. One follows this path at his own comfortable pace to reach the desired destination.<br /><br />At this stage the power of over draft will act as a booster. The 5 lac overdraft limit which you have will earn for you in the following ways:<br /><ul><li>The OD facility should be attached to salary account. Withdraw 1 lac and invest in mutual fund. Salary gets credited thereby reducing the loan on which interest has to be paid to bank. For monthly <span class="blsp-spelling-corrected" id="SPELLING_ERROR_13">expenses</span> draw when needed. Payments by credit cards come up at the end of month. Bank charges interest for <strong>days of actual OD availed</strong>. Interest saved is money earned. Earnings on 1 lac invested extra.</li><li>We always keep some cash balance in our bank accounts for emergencies and needs in immediate future. This amount is sleeping as it would <span class="blsp-spelling-corrected" id="SPELLING_ERROR_14">seldom</span> be <span class="blsp-spelling-corrected" id="SPELLING_ERROR_15">eligible</span> for any interest earning. Once the account is overdrawn, money is available when required, but you pay for actual withdrawal. Any payments <span class="blsp-spelling-corrected" id="SPELLING_ERROR_16">received</span> in between start <strong>earning bank leading rate</strong>, from the moment of deposit the same principle applies- interest saved is money earned.</li><li><strong>Timing the share market</strong> is next to impossible. Whenever the market undergoes a major correction, you can use the OD limit to make investment and repay the loan from <span class="blsp-spelling-corrected" id="SPELLING_ERROR_17">receivables</span>. In the longer run you will earn a respectable amount from this source.</li><li>For greater flexibility keep <strong><span class="blsp-spelling-corrected" id="SPELLING_ERROR_19">increasing</span> your fixed deposits</strong> (with OD limits) as this will also help in <span class="blsp-spelling-corrected" id="SPELLING_ERROR_20">balancing</span> the portfolio through investments in debt.</li></ul><p>By now it should be apparent that investments in mutual funds is like having an orchid of wonderful fruit trees. The more care you take of it, better the returns. Replace old trees from time to time. Money requirement will keep changing, but the returns from mutual funds will keep flowing in. This would ensure a comfortable old age. Mutual funds are the real money plants in our life.</p>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com2tag:blogger.com,1999:blog-995887811957120667.post-52395842989126910942008-06-30T18:35:00.000+05:302008-07-01T11:18:55.052+05:30Golden Sunset ResortsYes we are talking about two resorts in one. Golden Resorts for Senior Citizens only, Sunset Resorts for others. Senior Citizen also consist of two groups-Group 1 <span class="blsp-spelling-error" id="SPELLING_ERROR_0">upto</span> 70 years and Group 2 above 70 years. In fact Group 2 includes all senior citizens who feel like over 70 years irrespective of their actual age. Group 1 would like to enjoy their new found freedom to the hilt, hence stay in cities and towns and laterally paint the CITY RED.<br /><br /><br /><br />It is wonderful to realise that more and more parents have planned for their retirement and independent life. They have surplus income and created a ''nuclear family'' of their own. But unfortunately this phase lasts only till their health permits. Finally they also need support for their balance life span. This is the only reason for creating two groups which ultimately merge into one. At this stage Working Couples/<span class="blsp-spelling-error" id="SPELLING_ERROR_1">NRI</span> children are totally at a loss as to how to look after their parents. This is where the Golden Resort comes in.<br /><br /><br /><br />Old Homes, run by charity or government is not a viable option. Customer (senior citizen) would like the surroundings and services to be up to the standards he can afford to pay. Since this customer can pay well, a resort can definitely be built for them. Cost of land would be the biggest huddle which can be managed if the resort is situated away from the city. Only ground floor level construction is required hence prefabricated or local material can be used provided it protects the 'customer' from the elements. My suggestions have to keep in mind that this resort is for group 2 SC who have already lost all fascination/interest for city life.<br /><br /><br /><br />What role does Sunset Resorts play in this scheme of things? Apart from improving the financial viability of the twin project, it also serves a very vital need. Children, relatives and friends of resident senior citizens, local and <span class="blsp-spelling-error" id="SPELLING_ERROR_2">NRI</span>, can enjoy a vacation at Sunset Resort and also bring untold happiness to the resident of the Golden Resort. In fact Sunset Resort should be planned as a health resort for all. I would not be surprised if <span class="blsp-spelling-error" id="SPELLING_ERROR_3">maxium</span> business of Sunset Resorts came from relatives and residents of Golden Resorts.<br /><br /><br /><br />Lots of exclusive schemes for senior citizens are coming in the market. These schemes are proving to be very popular and waiting list for entry is getting longer. The focus of existing schemes is outright purchase of property by the senior citizen which in turn is sold to another senior citizen once the owner proceeds on his heavenly journey. Indian psyche is not comfortable in selling the existing property and ultimately leaving cash for the children. Also a big chunk of 'surplus income' of <span class="blsp-spelling-error" id="SPELLING_ERROR_4">SCs</span> comes from investments income. <span class="blsp-spelling-error" id="SPELLING_ERROR_5">Mortage</span> schemes are yet to catch on. Readjusting this income may not be a practical option. In my module these issues do not arise as no capital expenses are involved only running expenses. You can simply check out of the resort with no hassle's of 'selling the property' in existing schemes, whenever better options come in the market.<br /><br /><br /><br />This project has prospects of growing as a chain. For promoters of my scheme the icing on the cake is the land itself. All cities/towns are expanding outwards. This expansion would reach the resort in some time frame. Land utilisation can be re-engineered to book the potential profits and in the meanwhile serve the society in their hour of need. The entire scheme can be <span class="blsp-spelling-corrected" id="SPELLING_ERROR_6">replicated</span> at a new location.BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com1tag:blogger.com,1999:blog-995887811957120667.post-62763343335589513492008-06-27T20:34:00.000+05:302008-06-29T12:45:09.383+05:30Achiever's NestWorking couples have a very tough choice to make-- To be or not to be <span class="blsp-spelling-error" id="SPELLING_ERROR_0">DINKS</span>. This is unfair just because joint family support is no longer available to most of them. I am surprised some entrepreneur has not <span class="blsp-spelling-error" id="SPELLING_ERROR_1">encashed</span> this major demand as yet. I am not <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">referring</span> to day schools/centres which are not a pleasant experience for majority of kids. Why not give the kids a place they would love to spend unlimited fun time, PRODUCTIVELY.<br /><br />Basic Concept: To <span class="blsp-spelling-corrected" id="SPELLING_ERROR_3">replicate</span> the joint family system minus its negative features. Children get brothers, sisters and other relatives which their parents cannot afford. Discipline is maintained within a club like <span class="blsp-spelling-error" id="SPELLING_ERROR_4">envi</span><span class="blsp-spelling-error">orment</span>. <span class="blsp-spelling-corrected" id="SPELLING_ERROR_5">Academic</span> needs of the child are fulfilled as well as creative and fun <span class="blsp-spelling-corrected" id="SPELLING_ERROR_6">opportunities</span> provided in plenty. Child grows in a safe and protected atmosphere with no one looking over his/her shoulder all the time. In short working couples have money to spend on their children but cannot give them what they need most-TIME. We have to not only give these children a home away from home, but also any emotional surroundings which nurture achievers. Yes, a <span class="blsp-spelling-corrected" id="SPELLING_ERROR_7">truly</span> a Achiever's Nest. The best joint family system were producing.<br /><br /><strong>Let us visualise such a place together:</strong><br /><br /><ul><li>The target group should be 5years to 15years. (flexible) </li><li>Instead of <span class="blsp-spelling-corrected" id="SPELLING_ERROR_8">ayahs</span> and servants, we can employ children from lower middle class families who seek salesperson jobs in small shops. They already have experience of looking after siblings at home</li><li>Groups of 6 kids (3 boys n 3 girls) are formed as a unit. Each unit given <span class="blsp-spelling-corrected" id="SPELLING_ERROR_9">separate</span> name/identity. This will fill the gap of brothers n sisters in <span class="blsp-spelling-corrected" id="SPELLING_ERROR_10">today's</span> nuclear family. Each unit would be like cousins of other units.</li><li>Common <span class="blsp-spelling-corrected" id="SPELLING_ERROR_11">dormitory</span> layout for resting, <span class="blsp-spelling-corrected" id="SPELLING_ERROR_12">studding</span> and playing. Separate rooms provided for music and drama classes.</li><li>Arrangements for assisting in home work and if necessary <span class="blsp-spelling-error" id="SPELLING_ERROR_13">tutions</span> can be made.</li><li>Option for hobby classes and foreign languages would be a good idea.</li><li>Install <span class="blsp-spelling-corrected" id="SPELLING_ERROR_14">video</span> cameras so that parents and other relatives can see the child enjoying him/her self and also speak to him/her if they so desire</li><li>Build a rain dance enclosure as children love water.<br /><strong></strong></li></ul><p><strong></strong> </p><p><strong>Revenue streams:</strong></p><ol><li>Basic fee plus extra for activities opted</li><li>Looking after children for short duration when parents have to attend to urgent commitments.</li><li>Allowing non-resident children for attending hobby/foreign language/<span class="blsp-spelling-corrected" id="SPELLING_ERROR_15">tuition</span> classes.(depending on space availability)</li><li>Taking in children of parents doing night shifts as the space is not being utilised and such parents would prefer a safe place rather then leaving children alone or with friends.</li><li>Renting rain dance facility to families on <span class="blsp-spelling-corrected" id="SPELLING_ERROR_16">Sundays</span>/holidays and slots when resident children have gone home.</li></ol><p>In conclusion, what I have started above is only a bare outline. It can be developed with creativity, as i have done for my satisfaction. The concept has potential to spread as a chain, locally and nationally. The Working Couple is doing a great job single <span class="blsp-spelling-error" id="SPELLING_ERROR_17">handedly</span> against all odds. They deserve all the help we can give so that they decide not to be <span class="blsp-spelling-error" id="SPELLING_ERROR_18">DINKS</span>. I wish I had the financial strength to implement my idea.</p>BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com2tag:blogger.com,1999:blog-995887811957120667.post-65609361494185851382008-06-24T12:50:00.000+05:302008-06-27T20:30:32.185+05:30Greening the Family TreePresent trent of opting for nuclear family to earlier joint family has thrown up a new peculiar situation. I tried to remember the names and birthday of my grandparents but got stuck. I could recall the names of my father and mother's parents, but not their birthdays. I had no clue about my grandparents parents. I clearly recall whenever in the past we assembled for family functions, stories about someone from the past were always recited. Surely I am not the only one who cannot recall the names of our great-grandparents.<br /><br />Today I have two grandchildren. My grandchildren already have a PAN card, Passport and Bank account in their names. They would be 1 year and 2 year old in July 2008. Suddenly a brainwave struck me. The bank account could be used among other functions for greening the family tree.<br /><br />Since I know the names and birthdays of my and my wife's parents the process can be set rolling. On the birthday of our parents I have started the ritual to deposit a fixed amount in the bank account of my grandchildren. This among other objectives, will ensure that my children and their children will always remember the names and birthday of our parents. Our names and the names of parents of our baburanis can be added when our grandchildren have their children. The family tree will start growing as time goes on.<br /><br />Yes, the most obvious benefit apart from greening the family tree is meeting the financial needs of the child as he grows up. I personally feel this arrangement also meets a very private need which coming generations need but hesitate to accept. The importance of relegious belief in our lives. Let us see the similarities one by one:<br /><br />We have not met the Gods and Goddessess who love us as family,only seen photo/idol as shown to us by elders. Same holds true for our Great-Grandparents. Someone we trust atleast vouches for them hence it becomes easier to relate and accept their bonafides. It is accepted by everyone that parents may have issues with their children, but when it comes to grandchildren only one emotion remains- LOVE nothing else matters.<br /><br />The money credit in pass-book on thes special days (birthdays of G-GP) is similar to getting prasad in the temple after praying. This symbolises the responce we seek from the almighty.<br /><br />If God responds to our call for help, How can we doubt our own Great-grandparents will not? Longer the Tree, more potent the responce.<br /><br />Remembering our Great-Grandparents will get us the same PROTECTION and BLESSINGS which we look up to Gods to provide.<br /><br />I felt so happy to remember the birthdays in order to make the deposit, I can visualise how thrilled my grandchildren would be, once they reach the age of understanding what is happening.<br /><br />The entire concept has so many other facets it can be discussed at length.BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com1tag:blogger.com,1999:blog-995887811957120667.post-26780108952316006362008-06-22T13:05:00.000+05:302008-06-22T13:10:19.833+05:30Hi ThereThis is my first post. In fact, this is the first time I am really using the Internet. Will get my bearings and start blogging soon. What about? This that and everything. I have a lot of crazy ideas which I hope somebody someday will be able to convert to reality. Until then, as my blog title says, this is all loud thinking. Anybody listening?BabaJainhttp://www.blogger.com/profile/01219154493169078892noreply@blogger.com0