tip tuesdays

Tip Tuesdays: Choose An STP When You Have A Lumpsum To Invest And An SIP When You Don’t

by Vinaya HS on August 31, 2010

in Finance

When I consolidated my finances and started my investments in mutual funds, I opted for a Systematic Investment Plan (SIP) but the SIP-debits came from a lumpsum that I already had in my savings account. I think a better option would have been to park the lumpsum in a Systematic Transfer Plan (STP) and from there route the debits into the mutual fund(s) of my choice.

The SIP would be a better choice when you don’t already have a lumpsum to invest but instead rely on other regular sources of income such as your salary for the investment amount.

What do you think?

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.

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Tip Tuesdays: How To Spread Your “Risk of Trust” When Buying Term Life Insurance

by Vinaya HS on August 24, 2010

in Finance

When it comes to buying term life insurance, most discussions that I have had with friends and readers and that I have read online lead to a single question: “Can I really trust the insurance company to honor its commitment at the time of payout given that quite a bunch of them have a high claims rejection ratio?”

At the same time, most want to play it safe and stick with LIC given its sovereign guarantee (which, in my opinion and given the the state of world finance in general, isn’t something that you can honestly count upon).

A safe way out then would be to spread your “risk of trust.”

Suppose you’re looking for a cover of Rs 1 crore through term life insurance. Buy coverage of Rs 50 lacs from the insurer that you trust most and coverage of Rs 25 lacs each from two other insurers who you trust to a lesser extent. You get the same cover in total but you’ve also mitigated the risk to an extent.

What do you think?

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.

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Tip Tuesdays: Is Your Bonus Pay Mentioned On Your Salary Offer?

August 17, 2010

If your organization has a policy of paying out a bonus (sometimes called as performance-based pay or simply variable pay), you need to ensure that your salary offer mentions this fact. While most salary offers do mention this fact, you need to watch out especially when you’re given a salary increment — your increment letter [...]

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Tip Tuesdays: Why You Should Cover For Your Household Expenses A Month In Advance?

August 10, 2010

I’ve previously written about how to cover for your household expenses in advance especially if you’re not paid on the last working day of the month. This technique also proves useful in a few other situations: When there is a delay — for whatever reason, be it salary processing, bank holidays, and such — from [...]

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Tip Tuesdays: A Method For Repaying Your Credit Card Debt

August 3, 2010

If you find yourself drowning in credit card debt and have no idea on how you’re ever going to repay all that debt, you can try the Dead on Last Payment technique. The method focuses on quick psychological wins — definitely what you need when you’re swamped with credit card debt. Let me know if [...]

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Tip Tuesdays: What You Should Do With Those Redeemable Vehicle Parking Coupons

July 27, 2010

At Central, I kept the [same day only] redeemable vehicle parking coupon in my pocket and conveniently forgot to produce it during billing. A couple of days later, at Reliance Timeout, I made it a point to keep the coupon along with the cash in my wallet and since I pay for most things with [...]

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Tip Tuesdays: Restaurant Tipping — Does Your Bill Already Levy A Service Charge?

July 20, 2010

At Pizza Hut, we were about to leave a service tip when D observed that the bill already had levied a 10% service charge. How a service establishment can fix a fixed service charge is beyond my understanding. Do service charges scale linearly with the size of the group being served? Would you leave a [...]

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Tip Tuesdays: Financial Clutter — Keep It Or Close It?

July 13, 2010

Continuing yesterday’s thoughts, you have only two options when dealing with financial clutter. Keep it, or Close it. What you decide really depends on your personal situation. But make that decision right now — else you’ll never get rid of that clutter. Tip Tuesdays is my initiative to share practical personal finance tips — every [...]

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Tip Tuesdays: Track Your Expenses On The Back Of That ATM Transaction Receipt

July 6, 2010

Here’s a tip that I read about some time back, implemented it in my own life, and found it to work. When you withdraw cash from an ATM, don’t throw the transaction receipt. Instead, keep it in your wallet and each time you spend the cash that you withdrew, note down the expense on the [...]

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Tip Tuesdays: Drive Free, Retire Rich — A Strategy For Buying Your Next Car?

June 29, 2010

What do you think of this strategy for buying your next car? I won’t get a chance to try this out at least until I close the loan on my present car. Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip [...]

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Tip Tuesdays: It’s Not Worth Complicating The Situation Just So That You Can Avoid Paying Some Income Tax

June 22, 2010

In an article on taxation, Outlook Money — June 16, 2010, suggests: Buy your car in your spouse’s name. Then lease it to your company, which in turn can let you use it as an employer-provided vehicle. [Due to certain deductions, you reduce the amount of income tax that you need to pay.] I’ve also [...]

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Tip Tuesdays: Married And Working Couples Can Plan And Claim LTA In Four Successive Years

June 15, 2010

Here’s an interesting tip I read in Outlook Money, June 16, 2010: A married and working couple can plan and claim Leave Travel Allowance (LTA) in all four years of a prescribed block. The husband can claim LTA in two out of four years and the wife in the other two. Have you done this [...]

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Tip Tuesdays: Can I Pay My Credit Card Dues Even Before I Receive a Statement From My Bank?

June 1, 2010

Reader Gopal asks, I can see my total credit card dues over the Internet. Can I pay off these dues even before I receive a statement from my bank? Sure. You can. In fact, I follow this policy [and I'd advise you to] — each time I use my credit card, I wait for the [...]

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Tip Tuesdays: How to Save for Your Next Car After You Have Cleared the Loan on Your Present Car

May 4, 2010

The only debt I have is my car loan and one of my short-term financial goals this year is to get rid of this debt (I’m debt averse; D’s obsessively debt averse). That said, I do have a long-term financial goal where I want to fully pay for my next car in cash. How do [...]

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Tip Tuesdays: Deposit Your Credit Card Payment Checks Well Before the Payment Due Date

April 27, 2010

Because, The Payment Due Date is the last date by which the bank should receive clear funds post processing towards card payment, failing which, future transactions may not be honored and late payment charges and charges on revolving credit plus service tax will be levied as applicable. Tip Tuesdays is my initiative to share practical [...]

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Tip Tuesdays: What Does a Negative Free Cash Flow Indicate?

April 20, 2010

You’re trying to spend/save/invest money that you don’t have. Given this definition of free cash flow, a negative value can mean: Your income is too low, or Your expenses are too high, or Your goals (and hence savings/investments) are unrealistic. Cut-back first on #2 and then on #3. Even better — increase #1. Tip Tuesdays [...]

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Tip Tuesdays: Savings Are for Short-Term Goals; Investments Are for Medium and Long-Term Goals

April 13, 2010

Keep this one rule in mind and you won’t go wrong in planning for and meeting your goals. Don’t invest for short-term goals and don’t save for medium and long-term goals. That said, here’s how I define short, medium, and long-term. Short-term: Less than or equal to one-year Medium-term: Greater than one-year but less than [...]

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Tip Tuesdays: How to Cover Household Expenses If You’re Not Paid On the Last Working Day of a Month?

April 6, 2010

Though most of us are paid our salary on the last working day of a month, there are many who only receive their salary by the end of the first week of a month. But your household expenses don’t wait till you receive your salary. If you belong to the latter group, here’s a good [...]

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Tip Tuesdays: How to Set a Financial Goal?

March 30, 2010

Here’s a real example for one of my financial goals. Goal #1: Eliminate car loan debt I want to eliminate my car loan debt by December 31, 2010. Achieving this goal will make me debt-free! To achieve this goal, I will: a. Save 1 EMI payment (i.e. Rs X) and an additional amount of Rs [...]

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Tip Tuesdays: Understand the Cash Outflow of a Financial Instrument Before You Invest In It

March 9, 2010

It’s March and I’ve seen a good number of people blindly investing in a financial instrument (usually Unit Linked Investment Plans) at the very last minute for the sole reason that it saves them from paying a certain amount of income tax. What’s forgotten in the heat of the moment is the cash outflow that [...]

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