Thinking Of, Wanting To, and Actually Spending Money

by Vinaya HS on September 12, 2012

in Finance

I’m a big fan of the I Will Teach You To Be Rich blog. I’ve been following that blog since a couple of years mainly because the approach to money preached over there is very similar to my own thoughts and beliefs towards money. My policy on money is quite simple — “Don’t feel guilty (if there is such a thing) about wanting to earn more money and don’t feel guilty about wanting to spend more money especially on things that define you and that you value.” That to me is a rich life.

In the specific post that I linked to above, the author poses three simple questions for you to answer –

  1. Where do I think I’m spending my money?
  2. Where do I want to spend my money?
  3. Where am I actually spending my money?

My own answers to these are –

  1. On traveling — in style.
  2. On traveling — in style.
  3. On traveling — in style.

There. Perfect harmony. I don’t mind spending a mini-fortune (as measured by my earnings) in lieu of a wonderful travel experience. Goes without my saying that the mini-fortunes are first saved before they are spent. And if I’d saved all of the money that I’ve this far spent on and during travel, I’d have easily hit my ere-goal long back. I’m also quite lucky in that D has pretty much the same policy on money — else we’d be haggling on every little thing in this world.

But I wish I could answer the same three questions albeit with respect to “time”.

  1. Where do I think I’m spending my time?
  2. Where do I want to spend my time?
  3. Where am I actually spending my time?

My answers to these are in perfect discord.

How about you? What’s your money policy?


One of the key takeaways for me from the Art of Non-Conformity was to identify, to the extent possible, the motivation and agenda behind everyday transactions and especially so in virtual ones (such as what’s my motivation and agenda when you read what I write over here).

I gave this some introspection and then thought let me openly pen down my motivation and agenda behind Capital Advisor –

  • To share my experiences as I traverse through my own personal finance journey (long time readers would remember that I originally started — more than seven years ago — by writing about my social experiences)

  • To share my knowledge, thoughts, and perspectives about personal finance

  • To help you learn about and manage your personal finances better and to help you avoid pitfalls on your personal finance journey

  • To build a community (tribe?) that can collectively learn from each other (your insightful comments provide a solid foundation)

  • To build a small passive income stream from the advertising links that appear on the site

  • What you will never read on Capital Advisor is random stuff written by a small army of staff writers or sponsored/paid content from financial institutions. That’s my guarantee.

Over to you now. How many of the above points do you agree with?


Are Those PAYBACK-points Worth It?

by Vinaya HS on May 9, 2012

in Finance

I’ve no idea when I signed-up for earning them, but my debit card is somehow linked to earning Payback-points. Out of the blue, one fine morning, I saw an email that said I had 6,800+ points linked to my Payback-account. Wow! I don’t know for how long the points had accumulated but I must have spent a fair bit to earn these many points! And I don’t even have one of those physical Payback cards.

Image of Payback gift item for 6800 points
I then checked the rewards catalog and found this particular item on the right redeemable for almost the exact number of points I had accumulated. D wasn’t interested in any of the other items on offer and hence I got to pick this bag. Delivery of the bag was prompt and in reality the bag indeed turned out to be an excellent choice. So, the points were worth it. But I didn’t spend any money that I normally wouldn’t spend just to earn points and get this bag. All of my monthly debit transactions are planned and happen on a single debit card. So, the points accumulated were only for spending money that I knew I’d be spending and which I’d saved-up in advance.

But of late, I’ve seen Payback-ads prompting you to spend your money at particular retail outlets within a particular time frame with a promise of earning 5-times the normal points. That’s a strict no-no in my book. I don’t and I won’t encourage you to spend money this way. No matter the amount of points earned or the tempting gift items on offer. These special spending schemes aren’t worth it.

Instead, I encourage you to sign-up for loyalty/reward points, plan your purchases out in advance, save-up for these purchases, and then let the points accumulate whenever you make that purchase. It’s OK if you have to wait a while to accumulate more points to get a particular gift item. But it’s definitely NOT OK to spend money that you don’t have just to accumulate more points to get a particular gift item. And finally, please don’t ever purchase points for cash!


I was looking at a colorful and eye-catching full-page ad for Videocon’s 3D-enabled d2h (direct-2-home) service when I caught this fine print:

  • Standard cable length is 12 meters.

  • Free Lifetime Warranty shall mean and be valid for 5-years from the date of activation.

I wonder if that standard cable length measurement has some statistical backing to it (say, the median cable length for all Videocon d2h installations done this far is 12 meters). Perhaps the P & L has an “Income from Cables” line-item? No comments at all on the “free lifetime warranty” marketing scam. As someone who’s serious about their personal finances, these are gotchas that you need to keep an eye out for.

Totally lame.

Nothing new though.


Our Choices. Our Consequences. Our Happiness.

by Vinaya HS on June 8, 2011

in Finance

Here’s a recent conversation I had with an ex-colleague.

How’s your job/work going?

Pretty good.

D’s also working right?

Yeah. In fact, her division at Company L was recently taken over by Company N.

[The conversation then revolved around family life...]

Then both of you must be really busy with your careers?

No. Not at all.

It’s exactly the other way around. For us, work fits around our personal lives. For example: I said NO to BIG Company I (which really was a stone’s throw away from L) and BIG Company S before saying YES to Company M and D’s been with Company L since she started her career.

A short commute, work from home when necessary, wear what we want to work, independent contributor-type roles, and good reporting managers (we’re both honestly lucky in this aspect), that’s what we get at both Company M and Company L.

He he he…same old specifications. Good to know you’re able to get/enjoy what you want.

Her last statement left me thinking. These work-environment-factors are what we need — not want. We wouldn’t be at our productive best otherwise. We wouldn’t be happy otherwise. I’ve worn formals at a previous job and if I hadn’t quit when I did, I’d be having a dual-personality by now. (And I’ve always wondered why we can’t be who we want to be in our own motherland.) But our choices certainly do have their consequences. For example: D easily makes 30% less that what she’d make elsewhere. But she couldn’t even dream of trading these work-environment-factors for money. Neither would I — not even for a BIG-brand on my resume.

And we’re perfectly OK with all these because: We make our choices. We face their consequences. We enjoy our happiness.

Time and again, I find that these are the pillars that support us.


The iPhone 4 Temptation!

by Vinaya HS on June 6, 2011

in Finance

It’s irresistibly tempting.

My head spins non-stop with how-can-I afford-this thoughts.

Since the iPhone 4 launched [in India], I’ve had these financially-destructive thoughts:

  • Dip — no, make that dive — into my emergency fund. In a weird way this does count as an emergency because my present phone, a Nokia E52, has had its share of knocks and the outside panel is hanging on by a bare thread.

  • Stop contributing to my financial independence/financial freedom fund for a couple of months. It’s just a couple of months right? How bad can that be? And isn’t the whole point of earning to enjoy your today?

  • Take a bridge loan from D — at exorbitant micro-finance interest rates!

  • Raise cash by selling a bunch of stuff that I own such as my old Acer laptop, my iPod Touch, my digital camera, my wireless printer, etc.

My mind tells me to throw every personal financial rule out! In fact, when the ads came out I fell for their trick — I was so blind that I didn’t realize that one needs to pay the phone’s cost upfront and recover this cost through the 24-month bill discounts. Luckily for me, D was specially vigilant and made me re-read the ad.

Marketing at its brilliance.

And thankfully, I haven’t executed any of these destructive ideas.


Can We Really Switch to a Frugal Lifestyle?

by Vinaya HS on May 31, 2011

in Finance

This question’s been plaguing my mind from the past couple of months and especially after I wrote about how I make my budget work. Because, I don’t recollect a single month when I have managed to beat my budget — ever. I’ve always overspent but never underspent. I’ve always thought that when the chips are down, we’ll be able to cut-down on this or cut-down on that.

For example:

I like to think that in a crunch, we’ll be able to cut-down on our petrol bills (easily our biggest expense each month), we’ll be able to fire our cook, we’ll be able to give up 3G on our cellphones, we’ll be able to eat-out less, and so on. But can we really do all these in reality without feeling deprived?

Here’s the magnitude of the problem:

The Swift’s clocked 48,000 kilometers @ 10 kilometers per liter (and in 27-months). And if we fire our cook (who additionally doubles up as our maid too — lucky us!), our lives will be very very intimately tied to our wall clock. And frustratingly, though I have Skype Out credit through work, I more often than not dial long-distance simply because it’s convenient.

I honestly don’t know the answers.

But as a first step, here’s what I’m planning to do:

  • Make a complete list of all our recurring monthly expenses.
  • See which ones we really can live without — classic absolutely need to have vs. nice to haves.
  • Get rid of all expenses that aren’t absolutely need to haves.

I think that will be a great start.

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What’s Your Personal Inflation Index?

by Vinaya HS on May 20, 2011

in Finance

To me, “inflation” is simple.

If last year, I was spending Rs 25,000 per month on an average and this year, if I am spending Rs 30,000 per month on an average, then my expenses have inflated by 20 percent — and that’s my Personal Inflation Index.


Then, it really doesn’t matter to you one bit what the inflation indices at the national level are. You’d really really stand out if you were consuming the same basket of goods — and in the same proportion — as what goes into determining the national inflation indices. Of what relevance then is an 8% — or whatever percent quoted by [insert your favorite media house here] — national inflation index (WPI, CPI, et al.), when your personal expenses have gone up by 20% over the course of a year? Would you then be happy if your equity investments — the favored panacea for all inflation-related-worries — were earning a mere 15% per annum?

You obviously wouldn’t.

So, the next time you hear/read the word “inflation” stop listening/reading. Instead, focus all your energy on how best you can cut down your expenses so that your personal inflation index is at its minimum.

In my MBA classes, the answer to every other question was “inflation.” I doubt if anyone actually understood that term. No wonder then that this term is over-hyped!

What do you think?


How to Improve the Sodexo Coupon System?

by Vinaya HS on May 10, 2011

in Finance

At work, I have the option to opt for Sodexo Meal Coupons. The income-tax benefits on these food coupons are good enough a reason to opt for this facility. But the physical-voucher form of these coupons really needs to change — especially when you have card-based equivalents for competition.

It’s a pain to use these physical coupons at merchant outlets. I’ve lost track of the number of times I’ve patiently waited in queues at retail grocery stores while people ahead in the queue fumble around with these coupons. Once you’re done fumbling around with these coupons, it’s the cashier’s turn to do the fumbling. Count, re-count, discover that the store can’t (or won’t) give you back cash for coupons in excess of the billed amount and other hassles that simply aren’t worth your time and energy.

If I were at Sodexo, I’d immediately switch to issuing card-equivalents. Imagine the cost-savings from printing charges that avoided (and the number of trees saved). Imagine the cost-savings from collection, storage, and other overhead charges avoided. And as one merchant exasperatedly told me: “Settlements would happen in a day and not in twenty days!”

Everyone in the Sodexo ecosystem would be much better off.

D’s office on the other hand issues the convenient card-based equivalent. The card is reloaded in the first week of each month.

Very cleverly, I’ve entered into a your-card-for-my-coupons swap agreement with her. I’ve swapped her card for the physical Sodexo vouchers which I get from my office in the first week of each month and which she then gives to her mom/dad. Her mom/dad luckily has the time, patience, and energy to use them for grocery shopping. Everyone’s happy in this ecosystem.

That said, I’m not sure if the Sodexo Group would read this post and implement my suggestion. But, What do you think?


You already know that I’ve made an extremely stupid mistake due to which I’m now looking at an income tax liability in the upper five figures! This means I’ll simply be unable to meet all of my financial goals over the next three months (because I really won’t have much to call as a salary). Since I know that I can’t meet all my goals, I’ll need to prioritize as to which ones I need to continue through this tough period and which ones I can postpone.

But, before all that, let’s see what my current set of goals are.

Short-term goals (for me these are less than a year away)

  • Contribute Rs Z into my Travel and Living fund each month.

Medium-term goals (for me these are between one year and three years away)

  • Contribute Rs M each month into my Swift-replacement fund. Period: April, 2010 through March, 2013. (I do a SIP into a Conservative Allocation Mutual Fund for this purpose.)

Long-term goals (for me these are more than three years away)

Goals listed, here’s my thinking.

If I add up my monthly contributions into the Swift-repair fund, the Swift-replacement fund, and the Travel and Living Fund, their sum is more or less equal to the additional income tax that I’d be paying each month up to March. Since these goals aren’t that critical and can be stopped/postponed, I will stop/postpone them. What a lucky coincidence!

PS: I know that I’ve said that Travel is my #1 goal — but I guess paying income tax takes precedence!

For the next three months, I will, however, continue to contribute into my emergency fund and into my Financial Independence portfolio since these are critical goals and can’t be compromised upon.

All this just because I made one stupid mistake!

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On my way to work, I was running my finances through my head and had this thought.

Total up all your expenses (household expenses, personal expenses, EMIs, monthly savings for annual expenses, and anything else that you treat as an expense) in the past month. Divide this figure by the number of days in that month. That’s your Daily Cash Burn Rate (DCBR).

In short,

DCBR = Total Expenses in Month M   ÷   No. of Days in Month M

Mine was frightening — I wish I could disclose the actual figure — and an eye-opener. It’s time for some fiscal prudence.

How about you?

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Continuing yesterday’s thoughts,

Why does it cost thousands of rupees to simply allocate your premium amount? I can understand a one-time nominal fee, but why each year? Why does this fee change between years (in the example below, between Years 1 and 2)? You haven’t changed. The insurance company hasn’t changed. The policy hasn’t changed. So why should the premium allocation fee?


What do you think?


Five Money Rules I Wish I Knew Out Of College

by Vinaya HS on June 16, 2010

in Finance

I wish I knew these rules out of college.

  1. Spend less than you earn. And don’t spend money that’s not yours to begin with (credit cards and consumption/lifestyle-oriented loans).
  2. The value of an emergency fund.
  3. How to set a financial goal.
  4. Compounding through debt (Public Provident Fund) and equity (rock solid index funds).
  5. The value of assigning a nominee.

In hindsight, what money rules do you wish you knew out of college?


With a new financial year just around the corner, I thought I’d reflect back and list the financial mistakes that I made in the past year.

1. I let my independent health insurance lapse.

I’ve written time and again about the importance of having independent health insurance — one that’s not provided by your employer. However, I let my own health insurance policy lapse. Given the recent change in my life, this is actually an opportunity for me to reevaluate my health insurance needs.

2. I relied on my credit card more than was necessary.

It’s well known that I am not a fan of credit card usage. I do use my credit card every now and then for travel-related expenses. But I fell into their lure and used it for routine expenses too — and brought back headaches of keeping track of due dates and payments.

3. I couldn’t explore pension/retirement plans.

I simply didn’t find the time — and that’s a terrible excuse! Every year counts and I just lost one. To compound my woes, I had to pay additional income tax (and consequently have lesser take home pay in February and March) because I didn’t meet my declared investment targets.

4. I didn’t take a single step towards becoming debt-free.

Do I need to say more? I’m kicking myself and taking serious steps to be debt-free by December 31, 2010. You’ll read more about this in an upcoming post.

5. I made a few major purchases without budgeting and saving for them.

Sure, I’m using these, but they were bought on the spur of the moment resulting in a drain on my cash flow. I’d have been better off budgeting and saving for these expenses.

That’s my list. What about you? What mistakes did you make?


The Truth Always Lies In the Calculations

by Vinaya HS on March 10, 2010

in Finance

Do you want to know what the impact on your income tax payable will be when the new income tax rules come into effect? Do you want to know what the impact on your home loan tenure will be if you decide to prepay a certain amount? Do you want to know what the EMI on that personal loan you’ve been contemplating will be? Do you want to know what the penalty for preclosing your vehicle loan two years into the loan tenure will be? Do you want to understand how that seemingly interest-free offer on that shiny new LCD TV works?

In general, the impact of any financial decision or financial choice you make is best understood by running the numbers. Because, the truth always lies in the calculations.

What do you think?

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A close friend and I were exchanging notes on our respective financial situations when we realized that almost everyone in our immediate circle of friends has a similar financial mindset. We listed some of the common financial principles found amongst this group and these include (in no particular order):

  • Cash first; no credit — as far as possible.
  • Acceptance of our financial reality.
  • No symbols/pretensions of “social status.”
  • Save for a rainy day.
  • Loans only as a last resort.
  • Make financial mistakes; learn from them.
  • Family and friendship first; money next.

I could go on with this list, but the more important takeaway is the undeniable fact that “the company you keep affects your financial situation and thinking to a great extent.”

What has your experience been?

Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.


Adding two more to the list this January.

It really is in your best interests to run away when you’re face-to-face with any of these.

How many of these have you run away from so far?

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Tweets on 2008-12-29

by Vinaya HS on December 29, 2008

in Finance

The more I read about and observe the economy, the stronger is my belief that you should,

THINK hard about and then WORK on developing an alternate skill or two (something that’s not directly related to the type of work you’re doing right now). The skill that you value so much right now will be a commodity/out of demand before you realize it.

A few advantages:

  • More marketable skills — across industries/sectors.
  • Additional/Alternate sources of income — so critical these days right?

What do you think? If you’ve already worked on this, I’d love to hear a comment from you.


Since I often ask you guys to run away from a lot of financial products/services/agents/institutions, I thought I’d make a quick list of items that I have so far asked you to run away from.

It really is in your best interests to run away when you’re face-to-face with any of these.


Of late, I have been thinking about working towards having a “single source of financial truth.” Let me explain what I mean. There are four financial categories which I would like to track every month. These are:

  1. Income,
  2. Expenses,
  3. Savings, and
  4. Investments

More often than not, cash flows into and out of these categories happen from multiple bank accounts, which steadily grow in number as you shift jobs but retain these bank accounts for no readily explainable reason. The result: You have no clue what’s happening where. Your income’s being credited into Account A, your EMIs are being debited from Account B, your investments are happening from both Accounts A and B, you’re worried about delayed transfers from Account A to Account B, and so on. That’s the problem when you have multiple sources of financial truths. Trying to consolidate them into a single source of truth is close to impossible. There’s a side effect too: You end up with too many PINs and too many passwords and you end up remembering none.

Here’s my idea for a single source of financial truth.

A savings account that is not related to your employment and from which you conduct transactions across the four financial categories every month. At the end of every month, you review this account’s statement and you have a clear idea of your financial dealings.

I’d like this savings account to have zero to low minimum balance requirements, low operation and maintenance charges, a debit card with sufficient withdrawal limits, check book, internet banking, and third-party transfer (NEFT/RTGS) facilities, Electronic Clearing Services (ECS), and mobile alerts.

Explains why I’ve been on an account closing mission, trying to eliminate all sources of financial clutter and mess.

What do you think? Do you have better ideas? Which bank would you recommend for such a savings account?