by Vinaya HS on December 29, 2009
in Finance
Six months back, I’d complained that,
While one can request for a copy of one’s credit report while applying for credit, what about those who’re not inclined to avail credit right away. How then does one access one’s credit information report? What about those who’ve already availed credit facility? Surely, they’d like to know their credit scores too.
Here’s some great news — you can now apply for and obtain your credit information report from CIBIL. A quick extract reads,
You can now access your Credit Information Report (CIR) directly from CIBIL. As you may be aware, your CIBIL CIR is a factual record of your credit payment history compiled from information received from credit grantors. The purpose is to help credit grantors make informed lending decisions — quickly and objectively, and enable faster processing of your credit applications to help provide you speedier access to credit at better terms.
Read the sections under the menu heading “Your CIBIL Credit Report” for a thorough understanding. I plan to apply for and obtain my CIR in the coming week. Let me know if you’ve been able to obtain yours.
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.
by Vinaya HS on August 4, 2009
in Finance
I have had the unfortunate privilege of owning a HDFC Bank 3-in-1 Account (Savings, Demat — linked to Savings, and Trading). The Demat and Trading accounts were used for a grand total of two transactions. The Savings account saw a token amount being deposited, then saw the two transactions, and then saw a zero balance. To date, I have no idea why I opened this account. I closed the Trading account by handing over a simple letter at the base branch. The Demat account couldn’t be closed because it was linked to the Savings, which therefore needed to be closed first.
Here’s how you can close your HDFC Bank Savings Account:
- Reduce your account balance to zero.
- Take a photocopy/scan of your debit card (for backup and safety).
- Take a photocopy/scan of the first and last unused check leaves in your checkbook (for backup and safety).
- Go to your base branch (where you opened your account).
- Fill out an account closure form.
- You’ll be intimated of your account closure by post. If you don’t receive any intimation within a week or two, call customer care and confirm account closure (keep your Customer ID and Phone Banking PIN handy).
- Tear-up your unused check leaves, debit card, and any other leftovers.
Any balance leftover in the account after closure will be returned via. demand draft. Uncredited interest amount, if any, will be accounted for in this reimbursement.
Here’s a pictorial view of the end of my HDFC Bank Savings Account.
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.
by Vinaya HS on July 28, 2009
in Finance
I often get emails that read,
I want to invest in so-and-so financial instrument so that I can avoid paying income tax. Do you think this [financial instrument] is a good option? Alternatively, can you suggest other financial instruments that will further help me avoid paying income tax?
In my opinion, paying income tax and investing in a financial instrument ought to be independent and mutually exclusive actions. You should invest in a financial instrument only if it helps you achieve your financial goals — and no, “I want to avoid paying income tax” is not a financial goal.
Pay income tax. Define your financial goals. Invest in the right financial instruments; if a financial instrument does qualify for income tax deductions/exemptions, you just got the best of both worlds!
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.
by Vinaya HS on July 21, 2009
in Finance
If you’re filing your income tax returns on your own, an essential piece of data that you would need is the Assessing Officer’s Ward/Circle number. Thankfully, this information has been made publicly available by the Income Tax Department of India at Know Your Assessing Officer (use Internet Explorer to open this page).
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.
by Vinaya HS on June 30, 2009
in Finance
I think personal finance is a cycle of events and actions:
- Identify your Financial Goals.
- Outline a Strategy to achieve your Financial Goals
- Pick Financial Instruments that execute this Strategy.
- Monitor and take preventive/corrective actions when necessary.
Financial Goals => Strategy => Financial Instruments.
Any other sequence and the result is almost always financial disaster.
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.
by Vinaya HS on June 23, 2009
in Finance
Recently, at work, there was a restructuring of our salary components. Many concerns were raised when the outside consultants proposed that Basic pay be at least 50% of the Gross pay — it was finally fixed at 40%. I think we lost out. Here’s the math (all figures are per annum).
Suppose your Gross pay is Rs 500,000. At 50%, your Basic pay is Rs 500,000 x 50% = Rs 250,000. At 12%, your contribution to EPF is Rs 250,000 x 12% = Rs 30,000 (and which carries over fully as income tax savings). Your employer contributes an equal amount, taking your total contribution to EPF to Rs 60,000.
On the other hand,
At 40%, your Basic pay is Rs 500,000 x 40% = Rs 200,000. At 12%, your contribution to EPF is Rs 200,000 x 12% = Rs 24,000 (and which carries over fully as income tax savings). Your employer contributes an equal amount, taking your total contribution to EPF to Rs 48,000.
Observe closely. That’s a straight Rs 12,000 less in your automatic savings. You just saved your employer Rs 6,000. You also lost Rs 6,000 as part of your automatic income tax savings.
In general, the higher the Basic pay, the higher are these figures. Employer’s contribution to EPF is akin to free money. Why would you ever want to lose out on that?
And the gains? Rs 500 extra in your pocket each month.
Which option would you choose?
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.
by Vinaya HS on June 16, 2009
in Finance
A colleague recently asked,
I understand why we should pay income tax. But what is the need for filing income tax returns every year?
Short answer: You’re building a history about yourself — that you exist and earn.
This piece of history proves useful in a variety of situations — when you’re applying for a loan with a financial institution, when you’re applying for a visa for traveling to a different country, and such. The earlier you start building this history the better. You should continue to file your income tax returns irrespective of whether you pay income tax or not (say when you take a break for higher education and therefore aren’t earning).
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.
by Vinaya HS on May 26, 2009
in Finance
For most of us, filing our income tax returns involves paying someone else to do that for us. The most common reason: “Oh. But I don’t know how to.” Filing income tax returns is pretty straightforward — all it requires is a little bit of reading and the right documents. The software (another one) handles all the complexity.
Give it a shot this year. File your income tax returns on your own. The learning is priceless.
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.
by Vinaya HS on March 17, 2009
in Finance
This Sunday, a friend made an observation:
Life is only as simple as you make it to be.
I was thinking about this blog and was simultaneously brooding over my friend’s thought when it flashed to me:
Personal finance too is as simple as you make it to be. And personal finance is a big subset of life.
You could make your financial situation (and directly your life) complex by investing in esoteric financial schemes that you honestly don’t understand and then worrying about them 24 x 7 or you could make your financial situation (and again, directly your life) by investing in simple financial schemes that you truly understand and then peacefully sleep at night.
For example: You could complicate your life by combining life insurance and investment and investing in esoteric ULIPs or you could simplify your life by opting for a simple term plan combined with a Public Provident Fund account. Same objective; significantly different long-term effects on your health.
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.
by Vinaya HS on March 10, 2009
in Finance
To avoid last minute, hasty, and incorrect decisions.
Each April, we usually wait for our employer to send an email or notice asking us to declare the way we would like to structure our salary allowances (usually called flexible or variable benefits). We also usually procrastinate on this task till our employer sends a “last reminder” email or notice, then hastily plan out these allowances (most often copying what your colleague closest to you has done), and regret later in the year.
Instead, you can begin this activity right now. Today. You already know what your allowances were for this financial year and given the economic situation these probably will not change in the coming financial year. You also know what mistakes you made this year. Put together all these, spend some time this weekend, and plan out your salary allowances.
Don’t wait for that “last reminder” yet again.
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.
by Vinaya HS on March 3, 2009
in Finance
This is a guest post from Shilpa at Under the Rainbow. Though Shilpa claims that “she knows zilch about financial planning,” her post below proves the opposite. This story-style post on personal finance is the first of its kind on this blog and is the perfect complement to my posts on EPF.
In 1993, Mr. and Mrs. Parasher, aged 45 and 43 respectively, both government employees had just paid off their home loan. They had three children — a son studying in class eight and twin daughters studying in class five. Although Mr. Parasher was setting aside small amounts for retirement for some time, it was now that he thought is the right time to start serious retirement planning.
At that point, Mr. Parasher’s basic pay was about Rs 5,000 per month. 12% of his basic was being cut from his monthly gross towards EPF, his company was contributing an equal amount, with the total contributions being compounded at 8-9% every year (variable annually).
The first step Mr. Parasher took to secure his retired life was to voluntarily contribute to his EPF account over and above the standard 12%. He increased his contribution to EPF to about 18% (12% EPF + 6% VPF) of his basic. The company still contributed 12% of the basic. With time came promotions and salary hikes. He took advantage of this and gradually increased his VPF percentage.
In 2000, Mrs. Parasher took a voluntary retirement from service and that fetched her a sum of rupees seven lakhs. At that time, their son was pursuing Engineering degree and the daughters were still in school. The Parashers set aside this money for their daughters’ education and marriage.
Early last year, in 2008, Mr. Parasher retired. At that time, his basic pay was about Rs 25,000 per month and his VPF contribution was about 80% of the basic. He now draws a pension amount of over Rs 22,000 a month — good enough to lead a decent lifestyle.
VPF or Voluntary Provident Fund is not applicable only to pensionable jobs. Since the PF interest is compounded annually, it is a good idea to contribute over and above the EPF and transfer the account when you move across companies. You will have a sizable sum at the end of your work life.
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.
by Vinaya HS on February 24, 2009
in Finance
This post is the result of a conversation I recently had with a reader.
If your employer offers you the option to avail of Employees’ Provident Fund (EPF) facility as part of your salary package, I’d strongly recommend that you take up this option. Often, employers make salary offers which compare your salary package with and without the EPF option. The package without the EPF option is deceptively alluring since it always shows a higher monthly gross — but not necessarily net (which is not shown) — pay. You shouldn’t jump up and choose this option simply by looking at the illustrative (and often illusory) gross figures.
So, what do you gain by opting for the EPF facility?
- You contribute 12% of your monthly basic each month. Your employer also contributes an equal amount each month. That’s 24% of your monthly basic saved each month!
- The total contribution earns 8.50% per annum compounded (interest rates are decided each year though).
- Your annual contribution (i.e. 12% of your monthly basic x 12 months) automatically qualifies for income-tax exemption under Section 80C.
- When you change jobs, you can choose to withdraw the accumulated balance (takes a few months for the amount to be credited) or you can transfer the accumulated balance into the account opened by your new employer.
For me, the automatic savings each month is good enough a reason to opt for this facility. Over a period of few years, this can grow into quite a substantial sum. I doubt if I’d voluntarily save this much money!
What do you think? What has your experience been?
Update: February 25, 2008
Below is a continually updated list of EPF-related queries which are answered in leading financial magazines such as Outlook Money and Money Today.
From Money Today, March 05, 2009 — Page 06
Q: I have been working with an MNC for the past three years. Now, the company is shutting down and I am moving to a new job with a private firm. Should I withdraw the money from my provident fund or transfer the balance to my new account?
A: The taxability of the provident fund amount withdrawn depends on the duration for which the employee contributes to it. If he has worked for more than five years with the same company, the amount withdrawn from the provident fund is exempt from tax. If he has worked for less than five years, the entire amount withdrawn is taxable. As you have been with the firm for only three years, it is advisable to transfer the balance to your new employer. This will help consolidate your provident fund money and you will not have to pay any tax.
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.
by Vinaya HS on February 10, 2009
in Finance
Personal finance is a lifelong journey. You make mistakes, you learn from them. You make different mistakes, you learn from them. It’s not possible to not make mistakes; it is, however, possible to learn your lessons and apply them to improving your personal financial situation. And being a lifelong journey, you should adjust your financial plans as and when your personal situation changes. What’s good for you when you’re twenty-five certainly isn’t good for you when you’re touching forty. Your financial plans should and must change with you.
One more point. Though I write a lot about personal finance, my finances are far away from what’s ideal for me. In fact, most peoples’ personal finances are far from perfect. And that’s OK — so long as you’re working hard at getting them back on track. Because, remember, personal finance is a lifelong journey.
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.
by Vinaya HS on February 3, 2009
in Finance
What is financially right for one person need not be financially right for another person — that’s the beauty of personal finance. You shouldn’t invest in stocks just because your colleague sitting next to you executes trades all day long and brags about it. You shouldn’t buy a ULIP (Unit Linked Insurance Policy) for income-tax savings just because everyone else around you seems to be doing so. Do what is financially right for you. Keep this in mind and you’ll be financially healthy.
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.
by Vinaya HS on January 27, 2009
in Finance
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.
by Vinaya HS on January 20, 2009
in Finance
I completely forgot to do this, but you shouldn’t.
It’s a good habit to take a photocopy of all the receipts and documents that you are going to submit at your company as proofs of investment or expense for income tax savings. It’s one extra step, but worth it because:
- In case something goes wrong and your original receipts are lost, you have a ready backup.
- It’s good to have a complete set of receipts filed away along with your income tax returns.
Don’t make the mistake that I did. Make a photocopy before you submit.
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.
by Vinaya HS on January 13, 2009
in Finance
I have often heard the argument that the credit limit on a credit card serves the purpose of an emergency fund. This strategy by itself is both myopic and dangerous. However, what can make this strategy both farsighted and safe is if you have a real emergency fund with real cash in a savings account backing up your credit card. The credit card gives you the immediacy of funds in an emergency but immediately pushes you into credit card debt which you can now quickly get rid of by using the real cash balance in the savings account. The best of all worlds in my opinion.
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.
by Vinaya HS on January 6, 2009
in Finance
It’s January. Your employer’s asking you to submit receipts for all those tax-saving investments you promised you’d make way back in April last. You know that if you don’t submit these receipts you’re going to have to pay additional income tax. For no reason, you don’t want to pay income tax. You look around and see everyone making a mad and frantic last-minute dash for ULIPs, ULPPs, ELSS, return-guaranteed products (the latest craze), and other exotically structured products guaranteed to make you poor. Everyone’s asking you: “Have you made this year’s savings?” Your mind plays tricks on you; you finally join this race, make a really lame investment, and then regret forever.
Here’s my advise:
- Think long-term; not short-term.
- It’s sensible to pay additional income tax this one year rather than being stuck with lame investments that require you to fork out large sums every year.
- Your investments should be planned and should match your goals; last-minute tax-saving investments don’t do either.
- Run away whenever you hear someone say “tax saving.”
What’s 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 or use this form to submit your tip. And, as always, do spread the word if you find this useful.
by Vinaya HS on December 30, 2008
in Finance
I’d written about this before, but felt it important to bring up again.
According to the Reserve Bank of India’s Guidelines on Fair Practices Code for Lenders, Banks and Financial Institutions should convey in writing the main reason(s) which, in the opinion of the Bank or Financial Institution have led to rejection of the loan applications for all categories of loans irrespective of any threshold limits, including credit card applications.
We (my brother-in-law and I) once had a manager at the local State Bank of Mysore branch give us an once-over and simply shake his head when we’d been there to enquire about an education loan. Prior to that, a lady at the teller had said that “approving loans was at the manager’s discretion.” I so wish I had a print of this circular with me then.
What’s 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 or use this form to submit your tip. And, as always, do spread the word if you find this useful.
by Vinaya HS on December 23, 2008
in Finance
These should be on everyone’s personal finance agenda for 2009.
- Get OUT of “non-essential” (as in credit cards, personal loans, vehicle-beyond-what-I-can-really-afford loans) debt. DO whatever it takes to get out.
- Stay OUT of “non-essential” debt.
- BUILD an emergency fund.
- #1, #2, and #3 BEFORE anything else.
- DON’T save or invest in financial products and services that you DON’T understand. You’ve read the Master “Run Away From” List right?
Can you add to this list?
I can’t thank my friend V enough for keeping me OUT of a vehicle-beyond-what-I-could-really-afford loan a few years back. Then, I didn’t understand why; now, I do.
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 or use this form to submit your tip. And, as always, do spread the word if you find this useful.
