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10 Family Budgeting Misconceptions demystified

Let’s put on our thinking cap!

Depositing our pay cheques in bank and using the credit and ATM card for spending seems easy. However keeping the track of your income and expenses, to get full value for your money is possible only with budgeting. Budgeting helps most of us to keep track of our income and spending and not overspend.

In practice 10 budgeting myths retard the savings of a lifetime. They are:

I earn a lot and need not budget:

This requires a change of perspective. Michel Jackson lived like a king but died awash in $400 million debt.  Budgeting by watching your spending pattern helps trace unnecessary     expenses on clothes or eating out, and help you save for a future or for a much wanted dream holiday.  So how much you earn has got less relevance. What is more important is budgeting. Proper budgeting can make a low income earner to retire richer and overspending can make a high income earner a pauper.

I hold a secure job and see no reason to save:

This does not hold well today with large corporations going in for labor layoff to save costs during recession. Small corporations also put you at a risk with the death of the owner or the company going into losses.

This insecurity demands caution to save for spending during such periods when you are caught unaware, with an emergency fund coming handy.

I am poor in calculations and cannot budget:

With useful tools like spreadsheet that help account for expenses and income earned make the budgeting much easier.  A look at the spending helps avoid unnecessary expenses to budget and save in future. If you are interested one can easily learn budgeting. So if you say ‘I don’t know how to make a budget’, it shows your level of interest and willingness to save for a secured future.

I am lucky; I will never be short of money:

However your ability in meeting high bills and other unpredictable expensive events like life threatening accidents, or a major surgery without experiencing shortage of money may not be always true.

So better save and be prepared to face unpredicted contingencies and then use the savings for something else that you may consider desirable.

I pay my bills promptly and do not need budgeting:

Congratulations I appreciate your credit worthiness, but going into negative balance is also quite easy. You may be self disciplined. It doesn’t mean that you need not make a budget. Preparing a budget makes you much more disciplined and spend consciously. So budgeting with saving helps avoid going into negative balance or overdraft.

Budgeting could lead to deprivation:

Budgeting is not frugal living and foregoing all pleasures like a movie a month and eating out once a week, but it just not allowing your earnings to be not overtaken by your expense.

Everyone is planning to save, planning to invest, but do we have a well thought out plan for spending. A smart spending plan only can lead you to save more.

There is no need to feel deprived with budgeting; it just means saving a percentage of your income spent unnecessarily to have a secured future.

I have small wants and find no need to save:

This need not be a stable attitude in human nature, with you wanting to take advantage of certain financial trends in the market like buying house or land at cheaper rates, or investing at higher rates towards building a bigger retirement corpus.  Hence budgeting helps to save when you do not want money for a time when you could profitably use it.

Your wants may be small but basic needs like food, shelter, and clothing are becoming costlier with inflation. Also you need to take into account your health care needs of the future.

I get rises, bonus and tax refunds and find no need to budget:

I think you have been lucky all these years, however these benefits are highly unpredictable and placing ones hopes fully on them is futile. It is better to budget and save than depend on unpredictable benefits like bonus, raise and tax refunds. The recent recession has taught us a lesson to all of us which we should not forget easily.

Budgeting and your future

Take charge of your future now. Budgeting is the first step towards controlling your financial destiny. Don’t let your unconscious spending habits decide your financial destiny.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.
Views expressed on this website are of individual writers and NOT of the website/blog-owner. Individuals are advised to exercise personal judgement before responding, using or contacting to any post/writer/organization.

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10 Commandments of Successful Investing

Guest Column: Expert-Speak

Let me unveil the 10 commandments of successful investing today. These commandments strictly followed can make you a successful investor; make you richer. The successful legendary investors like Benjamin Graham, Warren Buffet have followed these principles. So why not you?

1. Decide your investment strategy and stick to it: 

An investor may invest in SIP and when the market continues to fall he will discontinue his SIP. But market crash is the right time to continue your SIP. Because, during the market crash you will get more number of units and the averaging works out in your favour.

Another investor may decide 50:50 as his debt:equity asset allocation ratio. When the market goes up he may want to invest more in equity and hence he may change his asset allocation to 30:70. Actually when the market goes up one needs to reduce his equity exposure to bring the portfolio back to his predetermined asset allocation ratio.

Don’t change your strategies midway. You know what is best for you and this applies to deciding with foresight the ideal investment strategy for you. Once the strategy is set, do not fluctuate in your decision each time you decide to invest. This would only mean losses instead of profits.

2. Conduct your own research on stocks: 

It is not advisable to just depend on hear say and decisions of your neighbor, friend, relative or tips from the media or your stock broker and invest in stocks. It may seem easy but could amount to gamble. Being an informed investor, investing your hard-earned money needs you to ensure if the investment would meet your financial goal. This could be done through research from various sources.

3. Learn to overlook short-term fluctuations:

If you want to be a successful investor, you need to understand that it is futile to be affected by short-term fluctuations of the stock market. Investing in good and reputed portfolio ensures good quality of your investment and capital appreciation in the long run. The short-term volatility of the share market has nothing to do with the long-term performance of your investments and achieving your financial goals.

4. Resist investing in penny stock:

Some investors have a common misconception that it is better to invest in penny stock than in high value stocks. This is wrong as whether you buy stock at Rs.5 or 5000, you need to check the background of the company before looking at the price of the share.

5. Discard the losers and pamper the winners:

There is a tendency among investors to sell off appreciated stock and to hold on to depreciated stock in the hope that it would rise. It is wrong, as it is possible that the shares which are not doing well may continue to underperform and the shares that are doing well may continue to perform well in the future.

It is better to acknowledge you went wrong, swallow your pride and discard the loser stocks and lessen your losses. Your decision lies in deciding to suffer a one-time loss for future long-term gains.

6. Look before you leap:

Even good company shares bought at the wrong price can be a poor investment choice. So devise some strategies like SIP, asset allocation to avoid this mistake.

7. Adopt an open-minded investment strategy:

It may be advisable to consider investing in good companies, however it is wrong to overlook the point that small start-up companies can make profits as well. Even such companies with good strategies and growth plans could contribute to long-term capital appreciation. Always have an open mind in taking your investment decisions.

8. Base your investment strategy on the future: 

Investment decisions based on past happenings may not always be right. It is better to consider the happenings, but give more importance to the present and future prospects of the investment. An informed decision based on the fundamentals and mission of the company helps in long-term wealth creation.

9. Consider tax friendly investments:

Making investment decisions based on tax considerations may prove counter-productive. However minimizing taxes and maximizing returns after taxation would help. The long-term capital gain tax is nil. So if you invest for a time horizon of more than one year you will have better post tax return.

10. Adopt a long-term perspective:

Adopting a long-term prospective is advisable if you want to be a successful investor. If you want to get short-term results, then you will be able to cultivate only coriander leaves. If you want to grow a large banyan tree then you need to wait for years. So if you really want to be richer and create wealth, you need to be a long-term investor.

You could have seen a lot of success stories of people, who bought a good stock 10 or 15 years back and accumulated a good amount of wealth now because of the appreciation of those scripts. But have you ever heard of a person accumulating wealth by trading in the stock market or moving in and moving out of the market?

By trading in market you may make profits in a few transactions, but you will not be able to make profits forever. There is a lot of difference between making profit in a single transaction and being a successful investor forever.

Knowing Vs Doing

There is a huge difference between knowing what we should do and actually doing it. The knowledge piece appears quite sexy; being interested, learning something new, coming up with that cool idea. The doing part sounds comparatively like routine work, no matter how easy this work may be to do or how obvious that it should be done. Don’t fall into that “Knowing Vs Doing gap”.

Now you know the 10 commandments to successful investing; put it into practice to become richer.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.
Views expressed on this website are of individual writers and NOT of the website/blog-owner. Individuals are advised to exercise personal judgement before responding, using or contacting to any post/writer/organization.

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What Social Media? Pt.-IV

The outcome of the political struggle in Egypt is a strong evidence of how quick and powerful a message that touches the right chord with the target audience can  become on social media.

Welcome “Facebook Revolution“!

Hosni Mubarak may have dismissed the whole thing as a computer mumbo-jumbo but that itself became a major force leading to his ouster. After police and army started rounding up people and protesters went “missing“, people started using Facebook and age-old social networking medium aka Friday prayers to garner support for the movement.

The success of the Egyptian movement has also raised hopes in our countries like Libya, which is witnessing the most recent and arguably also the most violent movements in recent time. If Gaddafi and his likes think that they can push people aside and have their way, then they need look no further than Egypt for results.


Stop or I Will Tweet

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What Social Media? Pt.-III

We hear people sing praises of how social media has become the “Voice of Customer” and we can rely on it to know what the people are talking but the truth is: Global Internet penetration is still pegged at 28.7%. So how does even with a 100% usage rate of social media, micro-blogging, et al. be called the “voice of consumer”?

Is this the "Voice of Customers?"

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What Social Media? Pt.-II

While the management gurus may cry themselves hoarse over K.I.S.S (Keep It Short & Simple OR Keep It Simple Stupid), the fact is things are getting technical and complex around us by the minute. Ask what is the difference between a @ and a # many people will not be able to differentiate.

We just love all the mumbo-jumbo:

Source: noisetosignal.com

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What Social Media? Pt.-I

A funny take at all the running around like headless chicken about the power and opportunity of Social Media…

More to follow!

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Major Advertisers Sit on the Bench of This Year’s Super Bowl – ABC News

The following article appeared in: ABC News.

<Future of Advertising: Ads That Stare Back and Interact: Companies Use Social Networking, 3-D and More to Reach Consumers>

Major Advertisers Sit on the Bench of This Year’s Super Bowl – ABC News

For advertisers, the Super Bowl is still the biggest game of the year. But in today’s marketplace, the buzz isn’t surrounding the ads during the game, it’s the advertisers opting to sit on the bench instead that have programmers shivering on the sidelines.

For the first time in more than 20 years, Pepsi will not advertise during the game.

“That was a real problem for the Super Bowl because they are one of the biggest advertisers,” says Suzanne Vranica, advertising columnist for the Wall Street Journal. “The economy is wreaking havoc with a couple companies. And you’ve got a couple companies, big companies like FedEx and GM, who are long-time Super Bowl fanatics, that have pulled out because of the economy.”

Instead of paying an estimated $2.5 million to $2.7 million per Super Bowl commercial, big brands are using social networking to connect with consumers — hoping to click in a more personal way.

“Social networking is the newest thing for marketers,” says Vranica. “You’ve got 60 ads fighting for attention, so if you use social networking as a marketer and drum up some excitement, you’ll have people specifically watching out for your commercial that night.”

Instead of buying pricey ad time, Pepsi is launching a reported $20 million digital campaign to support charity projects initiated by consumers. Not to be outdone, Pepsi rival Coca-Cola, which is running two Super Bowl commercials, will partner with Facebook to incorporate charity into their message.

“Every company out there has some kind of cause,” says Vranica.

In addition to philanthropy, companies like Doritos and CareerBuilder.com are crowd sourcing their ads through social networking. All of this year’s Super Bowl advertisers have Twitter pages, and Facebook users were tapped to create Vitamin Water’s latest flavor and ad campaign.

Ads are beginning to get plastered everywhere.

“Ad clutter is a big problem, so advertisers are bending over backwards to find the most bizarre places to advertise,” says Vranica.

Elevators, cars, garages, crosswalks and even breakfasts like Eggo waffles are getting branded.

Advertisers also are producing viral videos that seem to be captured by amateur photographers but surreptitiously advertise a product. RayBan, for example, released a video of a tattoo lover who appears to get a permanent pair of sunglasses tattooed on his face.

Advertisers Go High-Tech to Reach Audiences

Trading football for futuristic, companies are trying 3-D advertising, too. This month, Visa was the first company ever to advertise in an outdoor space using 3D.

“3D ads are the next gimmick,” says Vranica. “You’ve got a lot of technology out there, and advertisers realize the space they play in is very crowded, so they’re looking for technology to make something new. So if you make it in 3D, how could you go wrong?”

Advertisers also are stretching the limits of technology with touch screens, holograms, and “augmented reality.”

“Interactive advertising is a big draw for marketers because it proves that people are engaging with your ad rather than sitting back,” says Vranica.

A fitness center ad at a bus stop in the Netherlands, for example, weighs people as they sit down. Sharpie markers encourages consumers to write on a virtual “eCast” on low-hanging electronic billboards, and the Mini Cabrio car’s “augmented reality” campaign allows users to hold up a Mini Cabrio convertible magazine ad to a webcam and watch as the computer screen displays a 3-D model of the car.

As for what everyone will be watching by next year’s Super Bowl, commercials could be similar to the high-tech personalized ads from Steven Spielberg‘s 2002 movie “Minority Report.” “Smart signs” from tech companies like Quividi and TruMedia are in test phase now and could scan consumers as they walk by, telling advertisers the age, height, even clothing size of potential customers.

Not every company is pinching pennies during the Super Bowl. Even at nearly $3 million for a 30 second spot, the game is sold out with commercials from big brands like Anheuser-Busch and Unilever, and lesser known companies like HoweAway.com and Boost Mobile, which both are making their Super Bowl ad debuts.

“There is no way in today’s universe with such audience fragmentation that you can reach 90 million people with one ad,” says Vranica. “That’s why you see companies that you’ve never heard of advertising in the Super Bowl. So $3 million for 30 seconds is actually a bargain because they could never reach that kind of audience.”

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