Author: sanildan

Someone can be wealthy and terribly unhappy. Someone may be wealthy without liquid money to spend when in need!

FOUR TYPES OF WEALTH OWNERS

GROUP -1- CRISIS STATE INCOME
If your income is less then expenses, you are in a state of financial crisis. To survive, you have the following options:
Increase income suddenly- This is almost impossible unless you get in to crime! Cut down expenses- This can be done almost immediately, particularly, the nonessential. Borrow if you have assets like Gold or Bank deposits from private parties or NBFC or Banks Sell assets- if you have assets!
[Some assets are impossible to sell on short term basis

GROUP -1- STRATEGY
• Take up income generating job
• Switch over to high income job
• Encourage spouse to take up full/part time job
• Do not use any credit card
• Try selling some assets.
The objective of strategy is to end up with at least 10 % of your income as savings

GROUP -2- SURVIVAL STATE INCOME
This is the financial state wherein an individual survives as good as on day to day basis. At the end of
day or end of the month, if his/her savings are much less than 10% of the income, it can be
considered a survival state.
The best option available for the individual is to cut non-essential expenses and increase savings to
10% or higher.

GROUP -2- STRATEGY
-Evaluate expenses and look at ,what expenses can be curtailed or totally stopped.
-Explore getting higher paying job
-Encourage spouse to take up full/ part time job
-The objective in to reach income state of at least 10% savings of the income

GROUP -3- WEALTH CREATION STATE OF INCOME
This is a healthy financial state wherein an individual save 10-20% of the total income. The individual can now focus on creating long term wealth for self and family by deploying the saved amount in appropriate assets. This book is meant for those who are in this wealth creation state.

GROUP -3- STRATEGY
This group needs to study investment avenues and carefully plan investments.
It is worthwhile spending Rs-1000-3000 per year on the following
– Attend investment /personal finance training courses
– Read few books and journals on investments
– Subscribe to a personal finance online journals.
– Subscribe to Finance newspapers
– Consult CA’s and CFP’s
– You need to have a software or tracking mechanism for all your investments and wealth.
[There are many online software are available FREE.

Example : Money ControlORValueresearch Online

Remember!
• Do not make investment decision simply based on advice given by friends, relatives and
colleagues.
• Do not make investment decisions based on newspaper headlines
(Examples: “SENSEX ZOOMS PAST 11000!, INVESTORS DANCE IN DALAL STREET!AMBANI ADDS 50,000 CRORES WEALTH!]           • Do not take an investment decision because someone else made great success.

GROUP -4- WEALTHY/RICH INCOME
If your savings are more than 20% of income, and if it runs in to millions, you have the potential to be among top 5-10% of the Indian population in terms of wealth. In such an income state, you need to plan and manage your wealth with professional help. Wealth management has to be done by allocating or reallocating wealth under different asset classes based on the growth potential at different phases of your life while looking at various economic opportunities that come up.

GROUP -4-STRATEGY
*You need to have a software or tracking mechanism for all your investments and wealth.
*You must have the services of CA on annual retainer basis
– to file your Income Tax returns and
– take care of wealth tax and capital gains tax.
-You must have proper book keeping for audit purpose.
*You may need services of a CFP to plan your investments and wealth.
* You may need the services of a good lawyer to protect by drafting various finance documents.
*You need to study and plan your investment decisions carefully while taking in to account return on investments and tax implications.
*Need to have a clearly laid up asset allocation plan in term of real estate /equity /debt/ tax saving investment etc.
*You need to protect your asset with the help of various insurance plan

INCOME /WEALTH PARADOX

Income and wealth are paradoxical at times as shown in these examples. And, a person can figure in
any of above matrix based on his income vs wealth.

Example 1: HIGH WEALTH IS NOT A GUARANTEE FOR HIGH INCOME!

Thereis a lady who has inherited Rs20crores worth of plot in the middle of the city after her husband’s death but she lives on monthly pension of Rs 10,000/- .She finds it difficult to pay property tax and go for medical treatment

EXAMPLE 2: HIGH INCOME IS NO GURANTEE FOR WEALTH OR ABILITY TO MEET EMERGENCIES.

This young man passed out of leading institute and he is on salary bracket of 20 lakhs PA .He has no assets and even his fancy car is on EMI. He lives in posh locality with monthly rent of Rs. 70,000 /. He is newly married and lives life to fullest and has less Rs 1 lac bank balance. He has life insurance worth Rs 5 lacs and medical insurance of Rs 2 lacs.
What if he meets a deadly road accident? How will his wife handle it? What if he dies suddenly? What will he leave behind? And what will his wife do?

WEALTH LIQUIDITY
Wealth can be broadly classified as liquid /semi liquid /poorly liquid. These classifications are not” cast in stone”, but few variations and exceptions are possible.

LIQUID
• Cash in SB A/c
• Cash in Hand

SEMI LIQUID
• PPF
• Gold/ Silver
• Insurance Policies
• Bank FD/ Liquid fund

LOW LIQUIDITY
• Houses/ Plots
• Agri land/Comm bldg

FLUCTUATION
• Mutual Fund
• Shares

This blog is written by Simon Daniel, a double postgraduate in management sciences, Ex CEO and Director of leading Companies with 35 years track record .He has established two successful start ups too. In Quora [www.quora.com] , he went on to become World No.1 writer in Personal finance advice and investing advice topics, being called a “personal finance guru”
He is the author of highly acclaimed book titled:
ALL ABOUT MONEY BECOME MONEY SMART!
The book is a comprehensive guide to saving, investing, spending, borrowing and protecting-thefive key financial literacy competencies essential for all people.
Book is sold in all leading online stores in India and globally. It is sold through Author’s website Simon Daniel And All So Amazon or Flipkart

BEWARE OF SMOOTH TALKING AND FANCY ADVERTISMENT!

Mutual fund mis selling is done by MF Companies or agents. Let us look at few popular mis selling of
mutual funds

1)  NEW MUTUAL FUND NFO
This is nothing but a great marketing gimmick. Existing Mutual funds have many schemes targeted at various types of equities and debt instruments. Either it could be market cap based [large cap, Mid cap etc] Or it could be sector based [Banking, FMCG etc] or it could be any other sector or thematic. With this new NFO , the investors lose huge amount of their money in terms of commission to agents and Distributors. It could be as high as 5-6% of the money invested. Further, typical NFO being closed ended, your money gets locked for longer duration too.

2)  EQUITY FUNDS ARE SHOWN WITH GREAT RETURNS IN THREE YEARS
MF houses bring out huge advertisements in popular journals great performance of the fund in 1 -2 years. This is very misleading. After a bear market, equity markets may show good returns in the short period of 1-2 years. And, there is no guarantee that such returns can be sustained for longer period.All equity related investments are for 5-7 or even 10 years.Short term success is no indication of its ability to sustain long term success.

3)  PUSHING SMALL CAP, MIDCAP OR SECTOR FUNDS
All funds which operate in certain market caps like SMALL or MID or certain sectors like FMCG, INFRA etc go through cycles in the market.The performance may be attractive in the short run, but, will it sustain for longer duration of 7-10 years? Can you hold for long periods? And, it is not for those who are in 50 years plus bracket as the short term risks are high.

4)  DIVIDEND ANNOUNCEMENT
Dividends have no meaning in mutual funds, as the mutual fund is for long term appreciation. The dividend declared is nothing but returning back some of your own appreciated amount .Further, after paying IT on dividends, what you get less than the appreciated amount.Such dividends are not sustainable in a depressed market. You can go in for SWP in case you want regular income from MF , which is more tax efficient too.

5)  INVESTING IN ELSS BEYOND RS.1.50 LACS
ELSS is one of the instruments to save IT, but, up to Rs 1.50 lacs only.Beyond that it may appreciate, but, your money gets locked up for three years plus.You can as well go in for more suitable funds which do not have such lock in period.Example- Multi cap funds.
If anyone trying to push ELSS beyond Rs 1.50 lacs, say NO.

6)  PERSUADING TO SHIFT FROM ONE FUND TO ANOTHER
To achieve short term success, few agents of Managers may ask you to shift from one fund to another. While doing that the following need to be kept in mind.
-Have you looked at tax implication? You may end up with IT payments if not held for at least one year and some IT if held beyond one year too.
-What about the agent’s commission for each new application?

7)  PUTTING MULTIPLE APPLICATIONS FOR SAME FUND
Please remember that for each new application there is a minimum commission that you need to shell out. Multiple applications mean multiple payments.

8)  SUGGESTING MF INVESTMENTS WITH OUT LOOKING AT YOUR PROFILE
Mutual funds are great investment vehicle, but the following must be kept in mind.We do not give same food for all people with any age or health profile.Similarly, same MF can not be offered to all.
-Risk profile of the investor. [Both risk taking ability and risk aversion]
-Age of the investor, as some schemes are not suitable if you are older
-Goal of the investor- like retirement, tax saving, children’s education etc
-Minimum holding period may vary from 5-7 years to get decent returns.

9)  OVER SELLING MIP MUTUAL FUNDS
MIP[Monthly Income Plan ] is nothing but a Hybrid fund with 25-60% equity content. If the equity content is less, the price fluctuation would be low and if it is high, the price fluctuation would be high.
There is nothing like “income” from MIP funds.The payment outflow is nothing but returning back your own money either as dividend or SWP route.
Some agents push for STP with MIP SWP.This will result in multiple commissions for the same transaction if routed through an agent.

10)  OFFER TO DEPOSIT YOUR MUTUAL FUND APPLICATIONS
Some agents and Banks offer “free “deposit of your MF application with the MF office. Please remember, there is nothing free and you end up paying commission on short term or even long basis.This could work out to be millions at the end of 20-30 years!

This blog is written by Simon Daniel, a double postgraduate in management sciences, Ex CEO and Director of leading Companies with 35 years track record .He has established two successful start ups too. In Quora [www.quora.com] , he went on to become World No.1 writer in Personal finance advice and investing advice topics, being called a “personal finance guru”
He is the author of highly acclaimed book titled:
ALL ABOUT MONEY BECOME MONEY SMART!
The book is a comprehensive guide to saving, investing, spending, borrowing and protecting-thefive key financial literacy competencies essential for all people.
Book is sold in all leading online stores in India and globally. It is sold through Author’s website Simon Daniel And All So Amazon or Flipkart

[Courtesy from internet]

Insurance products are aggressively sold to customers.
The initial commission that the agent gets is pretty high and Insurance company gets long term income from you. Because of these the following happen.
-They deliberately discourage taking of Term insurance by investors on which agents get very little
commission.
-Insurance agents often resort to gimmicks and outright lies to sell the products.
-Insurance Companies keep strong clauses in the policy document to prevent exit by customers. You may end up losing all or most parts of the premium paid if you exist early. If take a wrong step, you will continue with the wrong track for decades.

The loss that you incur on 30-year period may run into Rs.50lacs to One crore on account of stupid
Insurance product decision.
Hence, checking and evaluating Insurance product is essential before you write your first cheque.
-Do you really need an insurance policy?
-What are the different options?
-Which one gives the best offer in terms of coverage and least premium?
-What are the exit clauses and penalties?
Here are the few tips to spot misspelling of insurance policies

1.Selling short term policies
Basically life Insurance products are for long term . If anyone tries to sell it as for 4-5 years coverage with great investment vehicle, be on the alert! it could work out to be a risky proposition.

2.Beware of cooked up illustration
Insurance Companies have standard illustrations to describe the product. If the data is cooked up the agent, it may show fantastic returns in short run. Which is grossly untrue.

3.Do not allow agents to fill up application
Very often,agents ask you to simply put in your signature and they fill up the rest. This could work out dangerous for you.And, you will realize only after decades!

4.In Healthcare policy, make ‘honest’ declarations
To sell the healthcare policy agents often fill up wrong data. It could be false medical claim or hiding some information. If you are not honest, your claim will get rejected and agent can do nothing.

5.Do not buy another policy unnecessarily
If you call up the agent with one product he may try to push another product too .Be clear as to which policy you want and for covering what.

6.Do not fall for rewards and gifts
Do not fall prey to gifts and rewards offered by the Insurance agents. These could be baits to trap you with something bad and something big at later stage.

7.Do not entertain imposters
There are many imposters who call claiming to represent IRDAI or similar agencies. Do not entertain the calls and offers. If you wish you can call insurance company directly.

8.Single premium plans
Very Often, ULIPs are sold as single premium insurance product to senior citizens. Your insurance coverage is very little and too much amount gets adjusted as premium for coverage Net result is that ,the end returns that you get from invested money would be far less than other investment options.

9.Guaranteed return promise
Except fixed income securities, ‘guaranteed returns’ cannot be promised for any insurance or related product. Do not fall for such sales talk. Except Fixed Income products, there are no “guaranteed returns “ for any product.

10. Banks and Insurance products
Banks are for banking needs. Insurance is for personal and asset coverage. Please do not mix these two. Do not try buying any mutual fund or insurance through your Bankers. It may end up with mis sell or you may end up paying huge commission to banks on long term basis.

This blog is written by Simon Daniel, a double postgraduate in management sciences, Ex CEO and Director of leading Companies with 35 years track record .He has established two successful start ups too. In Quora [www.quora.com] , he went on to become World No.1 writer in Personal finance advice and investing advice topics, being called a “personal finance guru”
He is the author of highly acclaimed book titled:
ALL ABOUT MONEY BECOME MONEY SMART!
The book is a comprehensive guide to saving, investing, spending, borrowing and protecting-thefive key financial literacy competencies essential for all people.
Book is sold in all leading online stores in India and globally. It is sold through Author’s website Simon Daniel And All So Amazon or Flipkart

Many Banks are notorious for mis selling of various products to customers. Some could be deliberate and many others are based on ignorance. Young officers simply follow instructions of seniors without realizing the financial impact that it will have on their customers. If you make a financial advice or sell a finance product without taking in to consideration, the following factors, it can be termed a “mis-sell”.
-Age of the investor
-Financial goal of the investor along with time frame
-Risk profile of the investor [ Risk attitude and Risk capacity]
-Tax and other implications
If I have an old diabetic patient, will I offer fruit juice laden with sugar and ice? NO. Similarly, I cannot offer finance products with out taking in to consideration above mentioned factors.

PUSHING BALANCED FUNDS

PUSHING FIXED DEPOSIT & ULIP

PUSHING ULIP instead of TERM INSURANCE

PUSHING GOLD COINS INSTEAD OF GOLD BONDS

PUSHING ULIP & INSISTING OF FD WHILE GIVING BANK LOCKERS

PUSHING LIFE COVER OR THE PRODUCTS WHILE SELLING VEHICLE LOAN

This blog is written by Simon Daniel, a double postgraduate in management sciences, Ex CEO and Director of leading Companies with 35 years track record .He has established two successful start ups too. In Quora [www.quora.com] , he went on to become World No.1 writer in Personal finance advice and investing advice topics, being called a “personal finance guru”
He is the author of highly acclaimed book titled:
ALL ABOUT MONEY BECOME MONEY SMART!
The book is a comprehensive guide to saving, investing, spending, borrowing and protecting-thefive key financial literacy competencies essential for all people.
Book is sold in all leading online stores in India and globally. It is sold through Author’s website Simon Daniel And All So Amazon or Flipkart

What is real income?
Real income refers to the income of an individual after taking into consideration the effects of inflation on purchasing power, For example if you receive salary income goes up by 10% and the inflation for the year is 7% then the real income only increases by 3%, conversely if you receive 7% salary increase and the inflation was 9% then the real income shrank by 2%

Inflation and CPI [Consumer Price Index]
Inflation is the rate at which the general level of prices of goods and services are rising and consequently the purchasing power of currency is falling. The CPI measures the average cost of basket of goods – food items, medicines and medical care, clothing, transportation, entertainment, education etc, which is published on monthly basis.

WHAT ARE THE EFFECTS OF INFLATION ON LIFE AND INVESTMENTS?

Inflation is the sustained increase in the general price level of goods and services in an economy over a period of time. When the general price last rises, each unit of the currency buys fewer goods and services. Consequently, inflation reflects on the purchasing power of a unit of money -a loss of real value in the medium of exchange and unit of account within the economy. One can get consumer price index over time from which one can understand the rate of inflation.

WHAT ARE THE EFFECTS OF INFLATION ON YOUR SAVINGS AND RETURN ON INVESTMENTS?

Let us look at three Scenarios of Inflation vs Return on investments.
• If inflation is 7 % and return on your investment is 7 % the inflation adjusted return is zero.
You have retained value of your capital.
• If inflation is 9 % and return on your investment is 8 % the inflation adjusted return is 1 %,
though you got a higher return.
• If the inflation is 4 % and return in your investment is 7 % the inflation adjusted return is +3
%, meaning you have added wealth.

WHAT STRATEGIES CAN YOU DEPLOY TO BEAT INFLATION?
The key to beat inflation is to plan investments in instruments which will grow faster than inflation. However, each of these have its advantages and disadvantages. Each has different risk vs return profile. Unless you evaluate each one in the context of your strength and weakness, you must not opt for it.

[A] DIVERSIFY – PORTFOLIO / GEOGRAPHY / ASSET CLASS
One of the best ways to protect against inflation is to diversify investments. Geographically for real estate, asset class wise (gold / equity / real estate) or portfolio (Multi cap / Mid Cap/Small cap].All asset classes do not grow similarly. Hence diversification is an important strategy to beat inflation

[B] IMPROVE CURRENT INCOME
Earn current income greater than current inflation. If current inflation is 6%, you need to get yearly salary increase greater than 6%. This can be done by the following methods.
*Perform better at the current job and be eligible to earn higher than inflation wages
*Shift to a better performing company to earn wages higher than inflation
*Take up a higher position which can pay better
*Shift geographical location, ie: a place where better wages are possible
*Learn new skill levels or add education to improve chances to increase income
*opt for multiple sources of income

[C]INVEST IN SIX INFLATING BEATING AVENUES/ASSETS.

1)  REAL ESTATE INVESTMENTS
Real estate is considered a good hedge against inflation on long term basis-7-10 years. If it is an income generating real estate like rented house or shop, it is even better.

2)  START A BUSINESS
If successful, most businesses will give returns much higher than inflation. All businesses have inherent risks associated with it. You need to have the following among many other,
-High commercial skills- Purchasing, marketing, Sales and so on.
-Ability build partnerships and relationships, meaning high EQ skills.
-Leadership and managerial skills
-Emotional stability, particularly mental balance to withstand failures and long waiting.
-Capital or ability to raise capitaletc
With great demand of skills, technical understanding and emotional maturity, all are not ciut out for this.

3)  INVEST IN EQUITY
If you can not own a business, the next best things to do is to own equities which in effect means “owning business” in a little or micro way.You get appreciation of invested money on long term basis and get regular dividend income along with the Directors of the Company. Investing in equities (growth stocks) is one of the best ways to stay ahead of inflation. Over the past 10 years NIFTY has returned close to 17% a year compared to 5- 7% average inflation rate.
But investing directly in shares is risky for 90% of the people as this requires similar skills like starting a business. If you are not cut out to start a business, you are certainly not cut out to directly invest in shares.

4)  INVEST IN MUTUAL FUNDS
For all small investors and large investors who do not have time or expert advice, it is advisable to go for mutual fund route. Investing in mutual fund is as good as owning shares of leading, successful Companies.The only difference being, your investments are handled by a professional fund Manager.Invariably, this fund manager is far more qualified and experienced than you.If you apply for a fund managers job, you may not even get called for interview.But, you are able to get services of such a smart guy! To reduce risk, you can opt for SIP route, instead of lumpsum investments.

5)  GOLD INVESTMENTS
Gold is considered an ideal hedge against inflation. Gold will not give recurring income like dividends from shares, but on long term basis [10-20 Years] gold can beat inflation, subject to you selecting right type of Gold. I am not talking about Gold ornaments, but, Non Physical gold including E Gold.

6)  INFLATION ADJUSTED BONDS
RBI has issued IIBs (inflation indexed bonds). These bonds protect the principal against inflation. This is a good idea if you trust only RBI and are not interested in learning about other inflating instruments. Essentially, there are six opportunities to get income or generate wealth faster than inflation. It is important to note that your age, life goals and risk appetite will decide the asset class mix. It is similar to recommending food to people of different ages and levels of health. If you are on the wrong side of 50 and diabetic, I will suggest less sugar and fat. Similarly, I will recommend less of equity and high equity based mutual funds.

SIX INFLATION BEATING INSTRUMENTS

Every return on investment must be looked at through the prism of ‘’inflation adjustment’’                   

THE ART OF WEALTH CREATION IS CONSISTENLYY ADDING HIGHEST” INFLATION
ADJUSTED RETURN “TO INVESTMENTS MADE.

This blog is written by Simon Daniel, a double postgraduate in management sciences, Ex CEO and Director of leading Companies with 35 years track record .He has established two successful start ups too. In Quora [www.quora.com] , he went on to become World No.1 writer in Personal finance advice and investing advice topics, being called a “personal finance guru”
He is the author of highly acclaimed book titled:
ALL ABOUT MONEY BECOME MONEY SMART!
The book is a comprehensive guide to saving, investing, spending, borrowing and protecting-thefive key financial literacy competencies essential for all people.
Book is sold in all leading online stores in India and globally. It is sold through Author’s website Simon Daniel And All So Amazon or Flipkart

Who does not want to be wealthy? But only few can reach levels of financial freedom and truly feel the power of financial wealth. Let us look at what is holding us back from financial success.
These are the personal and emotional hurdles that are standing in our way, blocking our journey
towards higher financial success.

1st hurdle -YOUR LACK OF FINANCIAL LITERACY

The first hurdle towards financial success is your lack of financial education. You cannot delegate
basic financial education. You have to take change yourself.
To improve your body muscles, you cannot ask someone else to do exercise in your behalf. You need to learn different types of exercises and learn the science and art of muscle building. You need to undergo the exercises and learn by trial and error. At best, you can learn the steps from a trainer or pick up few tips from books. But,you need to sweat it out.
To learn financial literacy, you can learn steps from books like this. But you need to develop the skill
through your commitment and experiential learning process. Even if you involve experts, you need
to put the final signature.
First step to cross the hurdle- Learn the steps and take charge of your financial life!

2nd hurdle YOUR PSYCHOLOGICAL STATE OF BLAMING FAMILY AND PARENTS

I have seen some people blaming dead parents, family and friends for every failure in adult life.
Blaming for adult problems like poverty, inability to get stable job , alcoholism, sexual infidelity, credit card addiction, personal loan taking , emotional imbalance etc on parents is irrational and takes away the responsibility from your shoulders! I do not want to disregard the negative impact particular background or advantages of a privileged background on the lives of people. People with certain privileged background will have greater exposure to financial information than others. Adults can make whole lot of intelligent choices which can help one to overcome initial disadvantages and move forward. It is too late in life to blame parents, family and friends for all the current miseries in life.

3rd Hurdle – NEVER DEVOTING TIME TO FINANCIAL PLANNING

Unless you accept the importance of financial planning you will never devote time for it or you will keep procrastinating it. Financial planning is very serious for your life.Like a studious student you need to sit quietly and think.You need to use a calculator or laptop to plan your numbers for the next 10 – 20 years. Look at where you are now and where you wish to reach.How will you achieve it? You can take the help of professionals to plan your financial future.If you are willing to pay few thousand rupees for your medical health, why not pay similar amount to plan your life?

4th hurdle -BLAMING ON CURRENT INCOME AND CURRENT EMPLOYER

Very often people blame their financial short term inability to earn higher income for their current
state.
Each person has to realize that there is no state of “satisfied income”. If you earn Rs.5 lac PA, you
can be satisfied and with no debt and if you earn Rs 20 lacs PA, you can be dissatisfied and live in
serious debt.
Most often, it is not the level of income, but, with what you do with your current income. It has to do with how much you spend and how much you save and where do you choose to invest.
Let us compare the life and financial status of two brothers –Ram and Shyam, both have identical
background, spouses and family size. But their income, savings and investments vary.

TYPES OF INVESTMETS CAN MAKE US RICH OR POOR

Through Ram earned 20% lesser income compared to Shyam, at the end of 20years he was 75%
richer than Shyam, because he made wiser investment choices.

KEY LESSON                                                                                                                                                                                Each person’s life and wealth is determined by the financial choices that we make today.                                              DON’T NOT BLAME OTHERS FOR THE POOR CHOICES THAT WE MAKE TODAY.

This blog is written by Simon Daniel, a double postgraduate in management sciences, Ex CEO and Director of leading Companies with 35 years track record .He has established two successful start ups too. In Quora [www.quora.com] , he went on to become World No.1 writer in Personal finance advice and investing advice topics, being called a “personal finance guru”
He is the author of highly acclaimed book titled:
ALL ABOUT MONEY BECOME MONEY SMART!
The book is a comprehensive guide to saving, investing, spending, borrowing and protecting-thefive key financial literacy competencies essential for all people.
Book is sold in all leading online stores in India and globally. It is sold through Author’s website Simon Daniel And All So Amazon or Flipkart

Each person gets income from different sources at varying proportion. The highest contributor of
income to the kitty is called Primary income source. Then comes Secondary sources, followed by
Tertiary sources.

PRIMARY SOURCES
Salaries for those employed people irrespective of rank or position.
Consultation fees for Doctors, Physiotherapists or Radiologist
Professional fees of Chartered Accountants, Company secretaries and lawyers.
Service fees like Architects, Engineers and Laboratory service
Service fees of personal services like Barbers, beauticians and tailors
Wages like paid to Electricians, Plumbers and workers
Trading income like commodity traders, shop keepers and owners of department stores
Commissions or brokerages earned by Insurance agents, Real estate broker and share brokers
Primary income is generally 60-95% of the total income.

SECONDARY INCOME
A Doctor can earn a salary by working in a Hospital and in the evening, he may do private practice and earn consultation fees.
A person can earn salary by working in an office, but can add additional income by selling mutual fund or insurance products or working as a property broker.
The additional income earned is called secondary income.
The secondary income could be less than 50% of the total income.

TERTIARY INCOME
If a person can add further income by investing in other sources as follows:
-Income from interest on deposits with Banks and Companies.
-Income from rental properties- residential or commercial
-Income from business as a sleeping partner or as an investor
-Earns income from Company shares through dividends.
– Income by being a blog writer or conducting classes in an institute during weekends.
The tertiary income could be less than 20% of the total income.

FOURTH /FIFTH INCOME SOURCE
There are many smart people who gets income from fourth or fifth source.                                                                        The sources of income and its contribution to overall kitty will vary from person to person.

DERISKING INCOME SOURCES
A person can reduce his income risk by adding more sources of income over time. As one progresses
in age, one should try to reduce risk by depending on only one source of income. An example could
be as follows.

DEVELOPING ALTERNATE SOURCES OF INCOME
Developing alternate sources of income depends on many factors: If you are working at a senior level in corporates, developing such sources will be difficult, either because under contract you can not do any other activity or you are too “famous” to do anything else.In this case, you can take up part time teaching jobs, silent partnership in firms etc If your spouse is educated, he/she can developed to do part time or even full time jobs. Developing alternate source will depend on variety of factors which includes education level, skill set, physical energy level, legality , the place that you stay and so on.

HOW MUCH INCOME DO YOU NEED?
This is to be answered by each person as it involves personal expectations, habits, place that you live, how many members of the family, Whether you have own house or rented and financial commitment for members of the family .What one person thinks as luxury may be looked at “essential” for another person. Example- AC at home is a luxury for one person whereas another person looks at it as “essential”. Getting a bottled water by a person in a Metro is considered essential whereas a person located in a small town looks at as luxury. For most people sources of income are fixed, whereas the avenues for spending are many. One can even discover new avenues to spend. Let us look at types of expenses for a middle-class home.

IMPORTANT TIPS
• Saved income as Deposits and investments in appreciating assets are not expenses.
• Investments in to non-appreciating expenses must be treated as expenses.
Example: Loan interest paid for housing loan can not entirely treated as an expense. But, loan
interest paid for a car has to be treated as 100% expense as the value of asset falls over time.
However, both expenses must figure in monthly calculations for monthly budget assessment

This blog is written by Simon Daniel, a double postgraduate in management sciences, Ex CEO and Director of leading Companies with 35 years track record .He has established two successful start ups too. In Quora [www.quora.com] , he went on to become World No.1 writer in Personal finance advice and investing advice topics, being called a “personal finance guru”
He is the author of highly acclaimed book titled:
ALL ABOUT MONEY BECOME MONEY SMART!
The book is a comprehensive guide to saving, investing, spending, borrowing and protecting-thefive key financial literacy competencies essential for all people.
Book is sold in all leading online stores in India and globally. It is sold through Author’s website Simon Daniel And All So Amazon or Flipkart

BECOME MONEY SMART!

Development financial literacy in an going continuous journey. First step towards financial literacy development starts with realization of own inadequacies related financial decision making skills. If an individual is able to accept that he/she needs skills development and show eagerness to learn, he/she will search for sources to develop these skills. It could be books, journals or even training from experts. Financial literacy cannot work without certain degree of emotional balance in an individual.

SOURCES OF FINANCIAL LITERACY DEVELOPMENT                                                                                        Let us look at various sources for developing our financial literacy to make us fitter, stronger and sharper. Sources that will make us money smart.

FINANCIAL PRODUCTS BROKERS / ADVISORS
These could be insurance agents and distributors and agents selling Mutual Fund products. They may be operating in both online and offline space.

STRENGTHS
They could be good source of information and support for those who have less knowledge about various finance products. Usually they are situated in neighborhood and may be known to common friends.

WEAKNESSES
• Most of the brokers, agents and advisors have an inherent Interest to push financial products of the firm that they represent which may not be the most suitable for your needs. It could be due to their lack of knowledge about other financial products or non-availability of such products in their basket or profit motive.
• Very often, they push or promotes products on which they get higher commission, often sacrificing suitability of the product.
• They deliberately or otherwise overlook other more suitable investment opportunities available to the investor.

Example –An insurance agent may try hard selling a high commission laden” endowment insurance scheme” and may not discuss with you about low commission laden “Term insurance”.

CHARTERED ACCOUNTANTS
They are qualified and trained in accounting, taxation and finances. They usually have good understanding of related laws too.

STRENGTHS
Generally, they have good understanding of various financial products and its implication on the point of view of appreciation and taxation.
Because they are qualified, they can quickly learn about new finance products too.

WEAKNESSES
*Most often they are linked to annual income tax returns and their primary concern is proper filing of IT returns.
• They have only an indirect “understanding “ about various finance products.
• Investments decisions often have to be taken many times during the year and it can not be linked or tied down to annual IT returns. They cannot participate on continuous basis.

REAL ESTATE BROKERS
Real estate brokers play major role while buying and selling of properties in cities and small towns. They can provide useful information about properties consist of current rates and probable development of the region in future. And, also legality of the asset.

STRENGTHS:                                                                                                                                                                      knowledge of the geographical location and history of the seller or the location are themajor strength that they offer. They can quickly gauge the customer needs /background and make multiple offers or options.

WEAKNESSES:
It is rare to find 100% honest real estate brokers .Often they peddle in lies, half truths and less them needed information to force a sale. They wish to see sale taking place fast and then, there is tearing hurry to collect commission

CERTIFIED FINACIAL PLANNERS[CFPs]
These are qualified professionals handling personal finance of individuals. They have passed qualifying examination from Finance Planning Standards Board of India and carry title CFP.Normally they give an integrated financial planning for individuals: Financial planning needs analysis, Investment planning in terms of assets and products, Retirement planning, Real estate planning, Mutual fund planning, Insurance planning, Taxation, Estate or will
arrangement etc.

STRENGTHS
-They are well qualified and have minimum standards of subject knowledge.
-Usually they have ethical standards.

WEAKNESSES
-They charge on hourly basis or annual basis which could vary from Rs 5000 -Rs 50,000 for an individual, which will work out to be expensive for those in low income bracket.
-They do not spend time in educating an individual and hence, unless you are well versed in various finance products, you will be forced to follow advice blindly. You need to have high level of financial literacy to take part in the planning process and take most apt decisions.

BOOKS ON INVESTING AND PERSONAL FINANCE
Books are an excellent source of information and guidance for those seeking to become financially literate or those searching for higher knowledge in this area.

Some of the “must read” books are as follows:
• THE INTELLIGENT INVESTOR
Benjamin Graham.
• SECURITY ANALYSIS
Benjamin Graham.
• THE LITTLE BOOK OF COMMON SENSE INVESTING
John Bogle
• ONCE UP ON WALLSTREET
Peter Lynch
• A RANDOM WALK DOWN WALL STREET
Burton Malkiel
• COMMONSTOCK AND UNCOMMON PROFITS
Philip Fisher
• HOW TO MAKE MONEY IN STOCKS
William ‘O’ Neil
*ONE UP ON WALL STREET
Pater Lynch
• THE WARREN BUFFET WAY
Robert Hagstrom
• BUFFETOLOGY
Mary Buffet
• IRRATIONAL EXUBERENCE
Robert Shiller
• THE MOST IMPORTATNT THING
Howard Marks
• THE ALCHEMY OF FINANCE
Gorge Soros
• RICH DAD POOR DAD
Robert Kiyosaki
• EXTRAORDINARY POPULAR DELUSIONS AND MADNESS OF CROWDS
Charley Mackey
*The Richest Man in Babylon
George Clason

PRINT MAGAZINES
*MONEY by OUTLOOK
– Money today – India group
– Money life
– Dalal street investment journal
– Captial Market
– WEALTH by Economic Tiimes

ONLINE JOURNALS

Money Control
Valueresearch Online
Economictimes
Capitalmaster

TELEVISION SHOWS
-CNBC
– ET
– PROFIT TODAY

NEWS PAPERS
– ECONOMIC TIMES
– FINANCE EXPRESS
– BUSINESS STANDARD

WARNING
*Never depend on single or few sources for your financial literacy development.
*Check out with multiple journals, books and people.
* Keep a “healthy disrespect” for each opinion. Meaning, check and recheck.
*When events and data changes, you must change. Nothing is permanent.

This blog is written by Simon Daniel, a double postgraduate in management sciences, Ex CEO and Director of leading Companies with 35 years track record .He has established two successful start ups too. In Quora [www.quora.com] , he went on to become World No.1 writer in Personal finance advice and investing advice topics, being called a “personal finance guru”
He is the author of highly acclaimed book titled:
ALL ABOUT MONEY BECOME MONEY SMART!
The book is a comprehensive guide to saving, investing, spending, borrowing and protecting-thefive key financial literacy competencies essential for all people.
Book is sold in all leading online stores in India and globally. It is sold through Author’s website Simon Daniel And All So Amazon or Flipkart

HERE ARE SOME CLUES TO HELP YOU SPOT FINANCIAL SCAMS

1)  PHANTOM RICHES
A scamster may dangle the prospect of wealth, enticing you with something you want but can not have it like this promise- “your investment of Rs100,000 will produce Rs5,000 very month for 50 years”. If it sounds too good to be true it probably is!. You must view all promises skeptically. Specially, every promise which has annual return above 9 % on invested amount.

2)  EXPERT CRFEDENTIALS
A scamster might build credibility by claiming to be reputable expert.” Believe me, as Director of a reputed firm, i will never sell any investment that does not produce 20% returns”. “As a Director , I do not get involved in amounts less than Rs 5 lacs!”

3)  FAMOUS PEOPLE BOUGHT IT
Any time a financial sale person tells you that Cousins of Amitabh Bachan and Rahul Dravid have brought these along with few members of the local “temple committee “-run with your money!. If the investments do not making sense on its merits, don’t be fooled in to thinking that a bunch of smart and well connected people have already vetted it and forked out their cash!

4)  TIT FOR TAT OFFER
A scamster might offer you a small favour in return for big favour. “I will give you a discount on my commission if you buy now -50% off on my commission or price. Such heavy inducements are always a red flag.

5)  ONLY FEW POSITIONS ARE LEFT , ONLY FEW PIECES ARE LEFT
Be on the lookout for anyone creating a false sense of urgency by claiming :
-Limited supply of product/plots
– Limited days
– Limited positions
Reality is usually other ways around. If it is truly scarce, you do not have to ”push” to sell.

6)  SIGNS OF A PONZI SCAM
– Investments returns are abnormally high
– Company makes impossible claims and guarantees like “double your money back” in six months
– Company makes it difficult to withdraw your money by having such clauses.

7)  SIGNS OF PYRAMID SCHEMES
-The emphasis is on to recruit new distributors, new agents etc and not product marketing
-The business has very high “start-up cost” .Or it could be high “signing amount”.
-The company will not buy back “unsold” inventory.

8)  IT SCAM
You get a phone call from someone claiming to be an I.T officer, claiming that you have an unpaid income tax. If you do not make immediate payment, the caller says “you will be arrested or face law suit in court. Or You pay —— amount through me to settle the matter.”. Another vesion is asking you to pay ————amount to get immediate IT refund.

9)  CHARITY SCAM
Following tragedy [death of husband or child], you receive an appeal from someone claiming to represent a charitable organisation who ask you for a donation. You are in emotionally weak moment and will offer to donate amount in the memory of the departed soul.

10)  INTERNATIONAL LOTTERY SCAM
You will receive SMS or Email or direct call saying that your Mobile has won an international lottery held at London held by a WALMART group or some big Company name. The amount is too big to be true. It may turn out to be half a million US $ or 20,000 UK pounds. Everything about them will be foreign sounding-the address and thenames.Also, they may tell you that if details are not given fast, the money gets surrendered as per UK laws. They want you to share your bank account details.Once you share your account details, you would know , who won the lottery!.

11)  INHERITANCE SCAM (NIGERIAN EMAIL SCAM]
You will receive Email from someone with a link, who claims to represent a rich old lady who recently died. Four million dollars can be shared by 50:50 if you help to take the money out of such and such African county. They want you to shares bank details and you need to make initial payment for legal fees for dealing with RBI or some thing like that. There are many bulk email and Mobile sending companies in big metro cities. They peddle in these at very low rates. Such emails directories are available for various types of people groups. Suppose, you want to target Credit Card users from class -2 cities, it can be done.

12)  CREDIT AND DEBIT CARD SCAMS
Scamsters do not need your credit/debit card to take out your money. In more than 90% cases, they steal the card details and then start spending using your card. They get the card details either from you directly or from unsecured websites. Or from online shopping activities or installing spyware in your computers operated from remote location. This scam is pretty common these days. Another variant of this scam is to call you on your Mobile , claiming to represent your bank and collect details like PIN or three digits behind each card.

FAMOUS INVESTMENT SCAMS OF INDIA
This is only to give you a flavour of kind of scams that has happened in India .Certainly it is not a complete list.

1)  PLANTATION SCAM
In the early 1990’s there were number of plantation companies who swindled thousands of crores
from gullible people. A few names are given below:
Golden trees plantation, Chennai.
Anubhav tree plantation, Chennai
Golden forest plantation, Punjab
Their” modus operandi” are similar. Each investor was offered “trees on ownership”- like Teak, Eucalyptus, “Maanijam” etc. People were offered astronomical returns for few thousand rupee investments. The application forms were distributed using channels which were used to operate for  stock market and Company deposits. Stock brokers who distributed or canvassed for these schemes were offered abnormal commissions. And, there were advertisements in leading newspapers about this great investment opportunity. Special emphasis was given on the news that Agricultural income as Tax exempt.                                                                                                                      Money and trees disappeared one fine day !.

2)  GOAT, EMU AND RABBIT FARMING SCAM
In the scams, investors were offered a share in the farm breeding goat, emu or rabbit farms situated in some remote area. Strategy was similar to Plantation scam. Wonderful brochures with great financial forecasts were circulated. Agriculture and livestock farming were sold as “tax free“investments. The net result is that lacs of people lost their hard-earned money.
Not were excreta was left behind!

3)  PEARL AGRO SCAM[PACL]
This was a Rs.45,000crores scam wherein lakhs of people have been swindled. They collected money from investors across the country like a pyramid scheme, promising agricultural land. Money was also collected as fixed deposits with attractive interest rates for investors and commission for agents. They appointed various Insurance agents, ladies and retired as collection agents. Total land involved is estimated at 1, 85, 00,000 acres. Even after 10-15 years cases are going as in various courts. But, most investors have lost or are likely to lose thier money.

4)  SAHARA INDIA PARIWAR SCAM
They collected around Rs.25,000crores money through fully convertible debentures and other deposits. The money was diverted to various projects like Infrastructure, Real estate, Airlines, Housing etc. The big boss is still in jail. From what I read, even supreme court is finding it difficult to collect money.! But, large number of investing public lost money.

5)  SARADHA CHIT FUND SCAM
Close to 20lakhs investors mostly from West Bengal were swindled for around Rs.30,000 crores plus .200 companies were floated and these scams were operated thoroughly 16,000 employees . The money collected was used in various investments like reality, exports, Media, Automobile parts and so on. There is political slugfest between different political parties on this. But, for most investors’ money is gone!

6)  SOLAR POWER PANEL SCAM IN KERALA
This is the scam which resulted in the exit of a CM. The scam involved, promising partnership in a business of selling solar panels to save energy bills. Huge returns were promised to investors who invested in to franchisee position of Solar Manufacturing Company. They speciality targeted “well to do” people with black money as potential partners. Because of this strategy, vast majority of those who got cheated did not come for want forward to register even a police complaint.

7)  HARSHAD MEHTA SCAM
This scam happened in 1991-92 period. Harshad Mehta and his associates diverted Rs.5000 crores from the banks to stock brokers. He artificially jacked up prices of certain shares in which he had taken strong position in advance. The shares that were kept us security was based on ballooned prices. When the scam got exposed, the stock market crashed , along with it security value of banks also crashed. Few Banks had to close down due to this scam.

8)  KETAN PARIKH SECURITIES SCAM
Ketan conned many public sector banks and stock exchange let Allahabad and Kolkata and brought shares in fictitious names. He manipulated shares prices to reach astronomical levels. when the scam got exposed the stock market crashed, so were few banks. He cultivated good relationship with celebrities like Amitabh Bachan, Famous producer/ Diamond trader Bharat Shah etc. He manipulated shares of select companies (known as K-10 shares). Shares of Zee telefilms was manipulated to go from Rs 120/- to Rs10,000/- without any fundamental change its finances. Large number of innocent (stupid?) investors who bought shares at high levels, lost everything.

9)  SATYAM SCAM
It is one of the biggest corporate scandals involving publicly listed Satyam computer services Ltd. Ramalinga Raju, the MD of the company manipulated balance sheets and P/L of the Company to the extent of Rs. 2000 crores. This is like Rs 30,000 crores these days. He diverted money from wellestablished I.T firm to his real estate firms illegally. The diverted money was used in various real estate projects that he started. His real estate ventures were known as MAYTAS, opposite of SATYAM.When the scam was exposed, the share prices of Satyam crashed from 542/- to Rs.6.30 per share. Millions of shareholders who had invested in to this Company lost 99% of their wealth. Raju
went to jail which is no consolation for people who lost everything.

10)  ROOP BANSALI SCAM
Roop Bhansali was running a chain of financial firms- CRB capital markets, CRB mutual funds and many others. He collected few thousand of crores from public by offering the attractive returns for fixed deposits and debentures. Many of the firms that he operated were in fictitious names.After collecting money, it was further diverted to the “paper companies” owned and operated by his friends and relatives. Once the scam got exposed most of investor’s money was gone.

11)  NSEL SCAM
This is a Rs 6000crores scam involving commodities exchange. This scam was mastermind by Jignesh shah through various group companies and commodity exchange firms and brokers. Number of shell Companies were used for diverting gullible investors’ money.

12)  STOCK GURU SCAM
This is a Rs.500crores fraud involving two lakhs people. It was operated by a couple team. They promised 20% return on investment every month. Means ,on Rs 1lakh investment Rs20,000/- return every month. To gain confidence, they kept giving return for few months, then the investors would increase greed and invest higher amount. Suddenly, the couple vanished. They changed names and identity and continued with similar type of cheating else where .They are arrested and case is going on, but investors lost most of the money.

This blog is written by Simon Daniel, a double postgraduate in management sciences, Ex CEO and Director of leading Companies with 35 years track record .He has established two successful start ups too. In Quora [www.quora.com] , he went on to become World No.1 writer in Personal finance advice and investing advice topics, being called a “personal finance guru”
He is the author of highly acclaimed book titled:
ALL ABOUT MONEY BECOME MONEY SMART!
The book is a comprehensive guide to saving, investing, spending, borrowing and protecting-thefive key financial literacy competencies essential for all people.
Book is sold in all leading online stores in India and globally. It is sold through Author’s website Simon Daniel And All So Amazon or Flipkart