Sunday, October 30, 2011

Plan & Make a Difference to Your Child’s Future

On a beautiful late spring afternoon, twenty five years ago, two young men graduated from the college. They were very much alike, these two young men. Both had been better than average students, both were smart and both were filled with ambitious dreams for the future.  Recently,these men returned to their college for their 25th reunion. They were still very much alike. Both were happily married. Both had a kid. And both had gone to work for the same industry and held similar positions in different companies.

But there was a difference. One of the men’s kid has completed M.S from a reputed university in USA and the other kid has completed a graduation from a local university. What made the difference?

Have you ever wondered, as I have, what makes this kind of difference in our kid’s career? It is a carefully thought out long-term planning for kid’s future.

As a responsible parent, you would not like to compromise on your child’s career, regardless of rising cost of education. You need a well developed investment plan that will allow you to meet all expenses for your child’s future.

Provision of Medical Expenses
Health care for mother and child will be a potentially handsome expense for new parents. New babies require regular checkups and immunizations even though if your child is in good health. So you need to make provision for these expenses well in advance even before the arrival of the baby.

Adding the newborn to your Mediclaim Policy
If you have an individual mediclaim policy, add the newborn as a member in that policy and get coverage. Do you have an employer provided mediclaim policy? Then, check if the terms and conditions allow you to add the newborn for coverage. If it allows, then add the newborn to that policy. If it doesn’t allow then take an individual mediclaim policy for your kid.

Increasing your Term insurance coverage
You need to check whether the existing insurance coverage is sufficient to support your child’s future or not in case of any mishappening to you.  If it is not sufficient then take term insurance policy for the gap.

Ongoing educational expenses
The educational expenses are skyrocketing year on year.  What your father has spent for your college education, is now you need to spend for your kid’s primary school education. So adequate provision in your monthly budget and a projection for cash flow with reference to school education expenses will be an important exercise for you

Financial Planning for Higher Education
It is going to be a biggest financial shock for you, if you have not properly planned for your kid’s higher education. Don’t delay this plan, start this plan as soon as the arrival of the newborn. Then you will have time on your side.

Assume your kid has completed today his/her schooling. Imagine how much you may need to spend for higher education at today’s costs. This cost is going to go up year on year because of inflation. So project this cost with inflation rate for the future. Now you will know how much exactly you may need for higher education in future when you kid is actually completed its schooling.

Other dreams for your child
Apart from the higher education, you may have some other dreams like buying a home for your kid, corpus setup for your kid’s future profession or business or corpus creation for wedding expenses. You need to follow the similar steps as mentioned in ‘Financial Planning for Higher education’ for these dreams also.

In case you don’t have time or knowledge to do this financial planning you can seek assistance from professional financial planners. They will save your time and make sure that you are achieving these financial goals for your kid.

Savings account for your child
You can open a savings account in the name of the minor. Whatever gifts, the kid receives by way of cheque or cash on the occasions like birthday can be saved there. Also this account can be used to motivate the kid to save from its pocket money.

The other investments which you make for your children’s future like mutual funds or shares need not be invested in the kid’s name. Banks, generally, will not give loans against shares or mutual funds held in the name of a minor. So, it can be invested in your name. As and when required it can be encashed to meet the necessary expenses for the kid. Banks, generally, will not give loans against shares or mutual funds held in the name of a minor.

(The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at 

Thursday, October 27, 2011

Follow these four rules to get rich!

Do you want to create wealth? Are you satisfied and happy as you are? 

Most of us would answer the first question as Yes, and the second as No, and if you are one of them then you are at the right place at the right time. My Hearty Congratulations! to you. Wallace D. Wattles said, “Every person who gets rich by creation opens a way for thousands to follow - and inspires them to do so."

Wealth creation is not the privilege of a few, but as Ralph Waldo Emerson pointed, “Man was born to be rich, or inevitably to grow rich, through the use of his faculties."
 Here come the 4 maxims to wealth creation as jacks out of the box:

1.  When young be a youngster, when old be mature.
"Don't let the opinions of the average man sway you. Dream and he thinks you're crazy. Succeed, and he thinks you're lucky. Acquire wealth, and he thinks you're greedy. Pay no attention. He simply doesn't understand." By Robert Allen

Some youngsters are easily influenced by the ideas, advice and experiences of others, like Vijay, 27 years old, believed in safe and secure investments in fixed deposits in banks and companies, just because his father lost heavily in the share market. However Rahul invested in mutual funds and created more wealth. 

Youngsters in their 20’s should invest in stocks and shares as they can afford to wait and benefit with compounding effect and lower taxes. Likewise an old person should play mature and responsible and invest in safe and secure investments like debt instruments and big cap mutual funds.

2) Know the depth of ocean before stepping in, and your investment risk:
Investment risk calculation of each portfolio helps judge risk. Your age, appetite for risk, and length of investment decides your investment portfolio. M.R. Kopmeyer said, The great road to wealth is to learn useful facts", how true it is that many investors had lost heavily in future stock selling in a bull market without much knowledge. A safer investment would have been multi cap mutual funds with wealth creation period of 10-15 years. However senior citizens should invest in big cap mutual funds with much lower allocation.

Wealth creation decisions should be long term, for it is futile to be swayed to sell units/shares in a rising market and miss on opportunities for further wealth creation. Follow the market trend and do as J. Paul Getty quotes, "Buy when everyone else is selling and hold until everyone else is buying"

3) Set an optimum leverage between debt for wealth creation and lifestyle assets.
"Abundance is not something we acquire. It is something we tune into." By Wayne Dyer

There is an urgent need for quick wealth creation to meet inflation demands, but we need lifestyle assets like car, TV, furniture and a house to live in. Unplanned debt can be a barrier to your wealth accumulation process. It is true with easy debt options available, there is a choice to borrow for lifestyle assets alone or for also for wealth creation investments like real estate. In addition, payment of EMI leaves youngsters with less capital to invest in wealth creation assets.    

In addition, leverage requires not investing in same type of assets like land and house, as price fluctuations could adversely affect all in that type of asset. Also investing on lifestyle comforts pay nothing in the long run.

4) No one created wealth by laying all eggs in one basket.
Variety is the spice of investment decisions too, helping in diversifying risks, and making it possible to offset the fall in value of one asset by profits in another. So having a diversified portfolio of real estate, gold, shares, mutual funds and house, and avoiding investment just in one asset class helps. In addition, portfolio diversification proves effective in tax saving, and better wealth creation.

Now finally you too are on the path to being a high networth person. How do you view yourself?
Do you quote George Claso, "Wealth is power. With wealth many things are possible." and end on a final note, with John Emmerling, "Study well what the billionaire does. It may make you a millionaire."

(The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at

Tuesday, October 25, 2011

Resurrection of the Truth

The Indian entry level sedan market has grown by a modest 6.1%. This year (till date - April to Sep), it has churned a volume of 1,14,377 units against a volume of 1,07,763 units. There weren't any major new launches in this space except the refurbishment of Tata's Indigo in form of Manza and the French Stallion - Logan was operated and renamed as Verito. Although everyone's desire still remained the much successful offering from Maruti Suzuki - 'Dzire'. Toyota also brought its most awaited 'made-for-india' product Etios, but couldn't offer anything revolutionary in terms of design/quality/value. Hyundai's Accent and Ford's Ikon are slowly being retired; but they are yet proving to be worth war-horses and are producing quite a decent figures in the Sales Charts. Major growth was seen from Southern and Western markets where the space grew by around 10.3% each.
The growth steeply increased from Cochin, Mumbai, Ahmedabad, Bangalore & Pune markets where the consumers found more value in a 3-box car at a lower price. The customers will to shell out a little more for an extra boot was well identified by OEM's and proved to be an attractive proposition.
Click to enlarge - April'11 to Sep'11 Sales figures

Even after the luke-warm response from the critiques, the Etios swept the show with 22,825 units with an average of 3800 units/month. The segment stalwarts Dzire & Indigo experienced significant downfall with a de-growth of 9.9% & 26.7% respectively.
But, one product clearly managed to steal the show - Mahindra's VERITO. Earlier known as Logan, analysts believed that the product had lived its life and Mahindra's bitter experience with Renault would again expedite in murdering the product. Even customers were sure that the boxy and stubborn looks of the Logan would catalyze the rejection. Then, one fine day we all hear about Mahindra-Renault divorce and were sure that it was the end of M&M's saga in the sedan space.
But the company's faith in the product motivated it to play a different game. Strategically we saw an increase in the number of media campaigns - "Logan loves India" which elucidated about Logan's segment-best mileage and interior space. Instantly it striked chord with value conscious customers and slowly gained acceptance. The numbers aroused some confidence in the OEM over the dying product.
Growth of over 100% was the proof of success for the product 
Now with rejigged independence, M&M immediately imparted some cosmetic changes such as inclusion of roof rails, sporty rear-chrome applique, side cladding and mahindra's insignia - front & rear created some buzz in the market and re-instated interest amongst the consumers.
The brand which was performing (rather surviving)at a level of 250-300 gained momentum and touched 1500 units/month within a span of six - nine months. This was the live example of how a capable product was ignored because of lack of right marketing and wrong pricing. M&M was competent enough to identify the glitch at the right time and act pro-actively. We are happy too that with the features that Verito has to offer vis-a-vis competition; it still has a long way to go.... 

Saturday, October 22, 2011

5 Signs to when you should sell Mutual Fund

When To Sell A Mutual Fund?

Start making the decision:
It is vital for an investor, to have long-term investment plans.  But he needs to constantly verify if these funds are helping him to achieve his financial objectives. You, as an investor need to keep track of how your investments in mutual funds are growing. Also you need to make sure that you do not suffer huge losses due to non-performance.
As an investor you need to learn not only when to buy but also when to sell a mutual fund.  Learning the principles of when to sell a mutual fund helps weed off investment in unprofitable mutual funds and build up a desirable and profitable portfolio of mutual fund investments.

Look at situations to sell mutual funds:

1) Chronic Under-performer:
Investor should stay invested for long tern in a risky asset class like equity. You should wait patiently for a minimum period of 5 years to watch your investments grow. Making comparisons between similar funds proves futile.
However you should make a note if your fund is continuously under performing. Comparing each of your funds with the respective fund benchmark index for various periods like 2 years, 3years and 5 years helps. You may need to move out of a continuous under performer and move in to a continuous performer.

2) Changes in objectives of your mutual fund:
Next, an investor like you, investing with definite financial objectives with allocation to different sectors and market capitalization may feel uneasy and suspicious with the change in the fund’s objectives that exposed you to greater risk or risk in other sectors also.
Fund takeovers, change of ownership and mergers change the level of risk in a mutual fund portfolio. So you as an investor may find your need, not met and may want to sell the fund. This was the reason why many investors, who invested in UTI Mastergrowth Fund, sold their funds when it changed to UTI Top 100 Fund.

3) Repositioning of a fund:
Though the fund has got an investment objective to invest in various market caps, so far the fund may be investing only in midcaps and positioned in the market as a large cap fund. But later, the fund may reposition the same fund as a multi cap fund and start investing in large cap stocks also. This change may not be a suitable one for an aggressive investor.
So as an investor, you need to be careful in watching the funds after investing. That too when a fund changes its positioning, you need to keep a close track of the same to prevent your investments from any adverse effect.

4) Appreciation in investment attained:
It is quite possible that your investment could have been shrewd and calculated and achieved the targeted appreciation ahead of time. I congratulate you, but would like to tell you that greediness may also make you lose on that foresighted gain.  Selling off your fund in full or part and investing in safer avenues like debt funds, fixed maturity plans and fixed deposits of companies and in banks would safeguard your money yet give you some small return.
Say you wanted to accumulate Rs.10 lacs for the higher education of your daughter/son in 5 years time. Your investments have appreciated to 10 lacs at the end of 4 year itself. It is better to change it immediately to safe and non-risky investments. If you leave the investments in the same fund, it may come down in value because of the subsequent market fall.
So when the goal value has been reached, one needs to protect the appreciation by moving out from the existing risky investments and moving in to a safer investment.

5) Rebalancing based on the asset allocation:
As an investor you need to maintain an overall asset allocation ratio and you need to stick to it to gain more. Sometimes your investments have appreciated and this has increased the percentage of your portfolio in equity and maybe reduced the percentage on debt and other safe avenues.
You need to realize this means that you are exposing more of your investment to the volatile equity market that was risky. This could surely be remedied with rebalancing. That is selling a portion of the over appreciated asset and reinvesting the same in the lesser appreciated asset.

Selling funds to Achieve:
I am sure you would have understood these principles of when to sell a mutual fund. This will assist you in taking better investment decisions and achieving your financial goals.

(The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at

Tuesday, October 18, 2011

Hero Motor Corp identifies the right Impulse!

The worlds numero uno motorcycle manufacturer proves again why it is 'The Hero'. I always dreamt of riding a dirt bike kinda motorcycle ; but couldn't imagined how would it practical on Indian roads. And Hero Motor Corp has brought the right product which emulates many features as of a motocross bike and yet falls under a reachable price point. The not so whacky looks seems decent and can trigger mass acceptance.
Looks are derived from Honda NXR and just meets the eye!
Hero has been a pioneer in introducing segment defining products. It had introduced us to the performance centric 150 cc segment (CBZ) and also to the first mini-super bike Karizma. Even Impulse will set a stage for on-off road bikes - which will suit perfectly for Indian conditions. The front 19' and rear 17' tyres seems to raise the overall height of the bike; but is quite ride-able. I however felt that the headlamps resembled that of Honda's Shine. The stance of the bike provides an amazing confidence to ride it in several angles which otherwise would have been unthinkable in other bikes. This will allow the riders to easily sneak through traffic.
The Rear is the most attractive portion with classy LED tail lamp treatment and high level exhaust 
The additional elements as solid knuckle guards, raised fenders, pull spokes, front telescopic suspension, raised front guard and the motocross seat adds to the oomph. The digital console justifies the features and provides ample info - additional "Service Due" indicator is quite innovative and useful. And the icing on the cake is the price - ex-showroom of Rs. 66,800 is a delight. The power of 13.2 PS with a 150 cc engine seems value for money. The competitive pricing is surely bound to create some stir in competitors.
Attractive looks with competitive price point and utility seems that HMC has a winner in hand
Will this be the new face of Hero Motor Corp? Could this de-thrown Pulsar as the king of 150 cc bikes? Will it revolutionize off-road biking concept in India? Can it bring the numbers flowing in? A lot of questions have arisen; and as the Indian Biker Population is seeking freshness we are hoping to see positive answers. 

Image Source: Zigwheels

Saturday, October 15, 2011

Need For Speed RUN: Race for your life!

Electronic Arts made gaming a worthy business. Any video game according to me is a piece of art and takes years to turn to fruition. It also involves tonnes of investment and time along with it. Similar to movie making, gaming is a lucrative business too. And EA has developed several game series to build upon the base story and thus develop, market, publish & distribute the franchised series. The business generated by the series would even put any Hollywood flick to shame. It has earned many followers of the racing phenomena and is growing larger by time.
One of the most awaited games of 2011
My personal favorite EA series has been the NFS - also the most successful racing video game series in the world! NFS franchise had sold over 100 million copies of the game way back in 2009 itself. The series has already successfully bought 18 versions of its game. I was thrilled to watch the trailer of the 19th edition - NFS Run.   The memories of Most Wanted can never be erased and any new edition of the series provoke the nostalgia. See the all new NFS Edition named Run which is to be released on 18th November 2011.

Wednesday, October 12, 2011

5 Steps to choose your Financial Advisor

The 5 Steps That Help Selecting The Best Financial Advisor

Preparing to start the choice:
 Satish grew concerned about how to manage his personal finance investments and asked his uncle, who is a very successful investor, if he knew a good financial advisor. His uncle knows a few each specializing in a particular type of financial consultation, and asked him about the type of consultation he required.

Then his uncle went to tell him that his first task lay in identifying his financial objective, whether he needed financial advice for goals like long-term financial portfolio, or tax planning, or providing for the higher education and marriage of his children. Uncle went on to tell him there were more than 50 type of specialists specializing in aspects like stocks, insurance, mutual funds, postal savings, financial planning, taxation and real estate and told him the five steps to select the best financial advisor.

1) Meeting and reviewing different financial advisors:
Once your financial objective and goals are set, your choice of a specialist would depend on whether you want one for your savings plans, tax advice and preparation, stock and equity portfolios, investment strategies, personal budgeting and debt management, retirement planning, estate planning, or insurance advice.
A search on the internet and referrals from friends, colleagues and relatives could help you find some appropriate financial advisors to look into your concern. Make sure that when the financial advisor suggests suitable financial plans, he also assures you to look into its maintenance, updating and implementation with periodic reviews of reports and correspondence.

2) Details about the financial advisor’s educational qualifications, certifications, and experience:
As all other dealings financial dealings too require the qualifications, certification and experience. So it is best to know and verify the advisor’s educational qualifications, certifications and experience. It pays to verify required certifications, like being licensed by IRDA to do insurance business and by by AMFI to deal in mutual funds in India. The extra qualifications like CFP add more value.

 In addition, the professional’s experience in the nature of business, and with sizable experience dealing with recession times plays a vital role in the choice of a financial advisor. The investment advisor’s past professional positions and his reasons for change will be able to tell how efficient he is, with a positive switch of revealing his good expertise.

3) Information of clients he has dealt with along with references:
I would say it is in your interest to not rely just on the positive talk of a financial advisor, and beware of his trying to belittle your ideas. Asking for a reference helps verifying his authenticity, honesty, integrity, and empathy and whether he specializes in the similar nature of business you expect of him. I would say if you are young, you would not benefit from a financial advisor dealing mainly in retirement and senior citizen plans.

Interviewing a number of clients would give you the best idea if the financial advisor can be relied upon confidently to meet your financial goals and objectives. In addition to this you may verify the testimonials given to him by his clients.

4) Verify his past records to judge his present and future behavior:
I would rather rely on written words like past documents than what he professes, and would say that a financial advisor’s past performance indicated well his present and future actions. I would also make sure that any disciplinary action for professional and ethic violation has been taken. I would also avoid financial advisors claiming very high performance, as they would highly risk my money.

5) The rate and method of compensation for services:
Now comes, the final stage of discussing and knowing your financial advisor’s compensation. Financial advisors have varied compensation methods for their services, charges could be hourly, a flat monthly fee, a percentage on the assets managed, and a commission on the financial products managed or could be based on the number of transactions.  Others could be a combination of 2 or more methods.

A word of caution in dealing with financial advisors charging on number of trades, or getting commission from the investment company, these fees or commissions can be profit motivated with no empathy to client needs.
You could always suggest changes in the fee structure, if not accepted you could always find a reasonable financial advisor to sign a compensation agreement with him.

The final note:
My best wishes for good financial dealings with financial advisors, but a word of caution, are ‘be selective, diligent and patient to understand well the philosophy of your investment and never be shy to ask questions and clarify doubts’.

(Ramalingam K, an MBA (Finance) and Certified Financial Planner, is founder & director of Holistic Investment Planners (P) Ltd (

Tuesday, October 11, 2011

All set to "Rapid"-Fire

We at Management Punditz are always excited to see developments in the Indian Auto Industry. And when it came to publish our 150th blog post, we wanted it to be special. So, what better subject - which according to us is the most important product in Skoda's strategy.

The C-segment sedan which is touted to be Octavia replacement has generated a lot of buzz around and is in news from quite a while. Lot of rumors were around that it will be named 'Lauretta', which we personally didn't like and are happy that the name 'Rapid' is retained in reality. The vehicle was unmasked internationally (for the first time) at the 8th anniversary of the famous 'Car N Bike' show - NDTV's flagship Auto Show. This was termed as the Birthday Gift to CNB by Skoda honcho Thomas Kuehl.

On first looks the car seems to be elegant and elite. Although the nose is 'Fabia'-ish, it doesn't seem to be totally inspired by the hatchback cousin (like in case of Vento & Dzire which denote just an extension of Polo & Swift). Even though the car takes its design cues from the concept 'Mission L' - its doesn't look all flashy (which we feel is a huge positive). The side profile is a lot like its sibling Vento but it seems lengthier. Even Thomas in the Demo termed the inner space of Rapid as equivalent of a "Compact Limousine". The rear resembles the family Skoda look and is pretty decent. In totality we agree to the Skoda's implementation of the design with its motto 'Simply Clever'. We believe that the buyer in this segment wants an executive-looking car, with a lot of room on the rear and be fitted with all the gadgetry. Going around with Thomas's word we are sure about the looks and the space, but will have to wait to know about the interior dynamics.

The C-segment has proved to be the most exciting segment this year. We saw the onset of segment shakers - VW Vento and the fluidic Hyundai Verna which overtook Honda City as the market leader since their launch. Even Ford tried to bring enthusiasm with its kinetic Fiesta. The point to be noticed here is that Verna & Vento have proved to be number churners and were the primary reason of growth for both the OEM's. In some months Vento outsold the smaller sibling Polo which exactly delineates its importance.

Sales Performance of C-segment cars for past 3 months
The market size of the segment is around 50,000 units per month and carries significant importance for any Auto Maker to define its brand. And seeing Skoda's strategy (1.6L petrol & 1.6L diesel) we are sure that they are going to "Rapid"Fire sales with its upcoming saloon. Another important decision by Skoda team to supply dealers with sufficient stock before the launch is extremely wise. With a mid-November launch Management Punditz is all excited to see the market response for Skoda's new offering.            

Monday, October 10, 2011

9 Ways to Be Credit Card Smart

Credit cards have turned into an integral part of modern living as they facilitating making purchases and paying bills without carrying cash. They make life easy and help maintain a record of our expenses and help us dispute charges for undelivered and defective things. In addition they enable us to earn reward points. However credit cards could make you overspend and get into debt. There are 9 ways that could help you to be credit card smart.

One can be very smart in playing a game only when he knows the rules of the game very well and follows the same diligently. Similarly to be smart with your credit card you need to know the rules of the credit card usage. Let me unbundle the same for you.

9 ways to be credit card smart:

1)  Do not have many credit cards: 
It is true that credit cards definitely help in emergencies and facilitate payments. But having too many credit cards could tempt us to overspend and get into credit card debt that could be difficult to recover from. In addition it is best to avail of reward points on one credit card, so that you could encash the points more quickly.

2) Cultivate and maintain an emergency fund:
Most of us believe that credit cards can definitely help in medical and unexpected emergencies, but it is unwise to consider it as a general rule. A much better alternative would be regular setting aside money as an emergency fund for such unexpected emergencies. This will prevent getting into credit card debt.

3) Repayment capacity should determine credit card spending:
It is right that using credit cards in place of cash helps. But this applies to purchases that we can afford only and also repay immediately. Spending more than what you can repay is highly undesirable and could get you into credit card debt. 

4) Avoid cash advance withdrawals:
It is best to live within your means and avoid making cash advance withdrawals even in emergencies. This is the worst thing you can do with a credit card. Having a smart spending plan will help you in not falling this trap

5) Avoid bank transfers without valid reasons:
Being credit card smart requires avoiding making balance transfers from one credit card to the other. This will avoid payment of balance transfer fees and getting into further credit card debt that could turn vicious. However transfer of bank transfers like taking advantage of lower interest rates could prove fruitful. 

6) Make full payments in time:
Being credit card smart requires you arranging for payment within a month or next billing date. Delay in repayment and minimum payment could affect your credit standing and make you also liable to pay high rates of interest that you could not afford. Not carrying any balance forward would relieve you of stress of getting into credit card debt.

7) Understand the credit card agreement fully:
Being credit card smart requires understanding fully the agreement and other terms and conditions for use of the credit card. This includes understanding transaction fees levied, interest rates, and when increased rates for credit would be charged. This would help take precautions to avoid getting into increased debt on credit cards.

8) Recognize the signs of credit card debt:
Many consider a credit card a boon and fail to realize that they are getting into credit card debt. It is best to understand and recognize signs like skipping a credit bill to pay another, avoiding credit card payment statements, and charging more than your repayment capacity by purchasing luxuries. Failing to cultivate and maintain an emergency fund could also be a cause. Once you recognize these signs you can turn credit card smart.

9) Never lend your credit card:
 Being credit smart requires not trusting others with your credit card even if they promise to pay back in time. It is unwise because you will be responsible for the debt and charges. It is quite possible that credit card companies did not allot them a credit card because of certain adverse circumstances. 

The last word:
I am sure you will agree that credit cards can be a boon only when you are credit card smart.

(The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at 

Friday, October 7, 2011

Workable Budget

How to create a workable budget that gives you money and life?

"Modern man drives a mortgaged car over a bond-financed highway on credit-card petrol."

Taking control of your cash inflow and outflow is the base for financial planning. Budgeting is important to gain control over your financial life, be prepared and avoid surprises, save for a major purchase, get out of debt and stay out of debt, expand your lifestyle, and to retire early.

Thiruvalluvar, a much celebrated Tamil poet emphasizes budgeting through his following lines:

Incomings may be scant; but yet, no failure there,
If in expenditure you rightly learn to spare. (Kural: 478)

Who prosperous lives and of enjoyment knows no bound,
His seeming wealth, departing, nowhere shall be found. (Kural: 479)

Most of us hesitate to make a budget because we think it is about cutting all the fun in life. Budgeting is not about cutting all the fun; it is about conscious allocation of funds. Once we start spending consciously, our mind will find out a whole new way of having fun within the budget.
Making Budget: A step by step guide

There is a saying, “God is in the details”. Detail every bit of your financials while creating a budget.

1)    1) Check your financial statements:
It could be your utility bills, d’mat account statement, other investment receipts, ITR, Form 16A, Form 16, bank statement, credit card statement etc. The idea is to make out the monthly average of income and expenses. Therefore the more details you can get the more relevant and accurate will the budget be.

2)    2) Listing out income from all sources:
It is very easy for us to list down the income from employment or self employment. Normally we will lose track of income from investments, rental income and other miscellaneous income. Also check is there any annual income. Don’t forget to record the incomes received by way of cash equivalents like meal voucher and credit card reward points.

3)    3) Finding out your total expenses:
We can easily list down the major expenses. But listing out the miscellaneous and petty expenses would be difficult. This is where the collected financial statements would help. Don’t forget the annual expenses like car insurance and property tax. Once you have recorded all the expenses then split them into fixed expenses and variable expenses. This classification will provide much more clarity.

Most people are surprised to learn that it may go for things that we do not need at all. Writing your expenditures down provides us with the unique opportunity to visualize and find out if any money goes for things that we do not need or want.

4)    4) Are you saving or over spending?
Now you have your total income as well as total expenses. Deduct the total expenses from the total income. You will know whether you are saving some money or doing over spending. If you are saving some money channelize that money into the priority areas such as clearing your credit card outstanding or any other loan to become debt free or retirement savings or children’s future plan. If you are on over spending, then you need to make some adjustments to expenses.

5)    5) Review your spending pattern:
On your expenses list, pay close attention to the variable expenses. This is where you can cut short a few expenses.

Every month we need to keep aside appropriate amount for the proportionate annual expenses.

You can find out the reasons for over spending. Most of the cases it would be emotional buying or unplanned shopping. Once you have pointed out the reasons for overspending, then find out the steps or precautions to be taken to rectify the same.

6)    6) Are you on the track? Check monthly:
Every month set aside an hour to compare the actual expenses with the budgeted expenses. If there is a negative deviation, find out the measures to control them.
Why your earlier budgeting attempts failed?

Budgeting is not a onetime activity. It is a continuous process. Normally we start budgeting with a genuine motive. But after a few months it may get off-tracked like our attempts on dieting or exercising. Therefore one needs to understand the behavioural aspects of budgeting.

1)    *Positive Approach:
Never focus on the negative aspects. Focus on the benefits of successful budgeting. What will you accomplish by creating a budget? It could be becoming debt free, some money for vacation, planning for retirement or children’s future.

2)    *Keep your enthusiasm alive:
Budgeting may over a period of time become routine and hence boring. Set a few short term goals like trying to repay the personal loan in 18 months instead of 36 months. If you achieve it reward yourself. Recognition could be a good motivating factor. Inform all your family members, friends and well wishers about your progress on budgeting. You can also join in some of the forums related to money management.

3)    *Have a realistic expectation:
One needs to keep realistic expectation on the outcome of the budget. Over expectation may demotivate you. Budgeting is not a magic. It is an art like singing and dancing. You will be able to progress it only over a period of time with constant practice.

If you have not done budgeting for yourself and family so far, then now is the right time to take action. The fact that you are reading this article shows you have decided to stop procrastinating, and have answered the ancient question, “If not now, when?” with “NOW!”.

(The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at

Thursday, October 6, 2011

The Greatest Pundit of all times!

Steve Jobs is no more... And he has left back a Vision, an Idea, a Thought on how Innovation can transform the rules of business. And 'Belief' is the key. We thank him for his defining work in digital age and would always miss his persona.

We found this New York Times article as a perfect description of Mr. Jobs and would like to dedicate in his fond memory -

The death was announced by Apple, the company Mr. Jobs and his high school friend Stephen Wozniak started in 1976 in a suburban California garage. A friend of the family said the cause was complications of pancreatic cancer.
Mr. Jobs had waged a long and public struggle with the disease, remaining the face of the company even as he underwent treatment, introducing new products for a global market in his trademark blue jeans even as he grew gaunt and frail.
He underwent surgery in 2004, received a liver transplant in 2009 and took three medical leaves of absence as Apple’s chief executive before stepping down in August and turning over the helm to Timothy D. Cook, the chief operating officer. When he left, he was still engaged in the company’s affairs, negotiating with another Silicon Valley executive only weeks earlier.
“I have always said that if there ever came a day when I could no longer meet my duties and expectations as Apple’s C.E.O., I would be the first to let you know,” Mr. Jobs said in a letter released by the company. “Unfortunately, that day has come.”
By then, having mastered digital technology and capitalized on his intuitive marketing sense, Mr. Jobs had largely come to define the personal computer industry and an array of digital consumer and entertainment businesses centered on the Internet. He had also become a very rich man, worth an estimated $8.3 billion.
Tributes to Mr. Jobs flowed quickly on Wednesday evening, in formal statements and in the flow of social networks, with President Obama, technology industry leaders and legions of Apple fans weighing in.
A Twitter user named Matt Galligan wrote: “R.I.P. Steve Jobs. You touched an ugly world of technology and made it beautiful.”
Eight years after founding Apple, Mr. Jobs led the team that designed the Macintosh computer, a breakthrough in making personal computers easier to use. After a 12-year separation from the company, prompted by a bitter falling-out with his chief executive, John Sculley, he returned in 1997 to oversee the creation of one innovative digital device after another — the iPod, the iPhone and the iPad. These transformed not only product categories like music players and cellphones but also entire industries, like music and mobile communications.
During his years outside Apple, he bought a tiny computer graphics spinoff from the director George Lucas and built a team of computer scientists, artists and animators that became Pixar Animation Studios.
Starting with “Toy Story” in 1995, Pixar produced a string of hit movies, won several Academy Awards for artistic and technological excellence, and made the full-length computer-animated film a mainstream art form enjoyed by children and adults worldwide.
Mr. Jobs was neither a hardware engineer nor a software programmer, nor did he think of himself as a manager. He considered himself a technology leader, choosing the best people possible, encouraging and prodding them, and making the final call on product design.
It was an executive style that had evolved. In his early years at Apple, his meddling in tiny details maddened colleagues, and his criticism could be caustic and even humiliating. But he grew to elicit extraordinary loyalty.
“He was the most passionate leader one could hope for, a motivating force without parallel,” wrote Steven Levy, author of the 1994 book “Insanely Great,” which chronicles the creation of the Mac. “Tom Sawyer could have picked up tricks from Steve Jobs.”
“Toy Story,” for example, took four years to make while Pixar struggled, yet Mr. Jobs never let up on his colleagues. “‘You need a lot more than vision — you need a stubbornness, tenacity, belief and patience to stay the course,” said Edwin Catmull, a computer scientist and a co-founder of Pixar. “In Steve’s case, he pushes right to the edge, to try to make the next big step forward.”
Mr. Jobs was the ultimate arbiter of Apple products, and his standards were exacting. Over the course of a year he tossed out two iPhone prototypes, for example, before approving the third, and began shipping it in June 2007.
To his understanding of technology he brought an immersion in popular culture. In his 20s, he dated Joan Baez; Ella Fitzgerald sang at his 30th birthday party. His worldview was shaped by the ’60s counterculture in the San Francisco Bay Area, where he had grown up, the adopted son of a Silicon Valley machinist. When he graduated from high school in Cupertino in 1972, he said, ”the very strong scent of the 1960s was still there.”
After dropping out of Reed College, a stronghold of liberal thought in Portland, Ore., in 1972, Mr. Jobs led a countercultural lifestyle himself. He told a reporter that taking LSD was one of the two or three most important things he had done in his life. He said there were things about him that people who had not tried psychedelics — even people who knew him well, including his wife — could never understand.
Decades later he flew around the world in his own corporate jet, but he maintained emotional ties to the period in which he grew up. He often felt like an outsider in the corporate world, he said. When discussing the Silicon Valley’s lasting contributions to humanity, he mentioned in the same breath the invention of the microchip and “The Whole Earth Catalog,” a 1960s counterculture publication.
Apple’s very name reflected his unconventionality. In an era when engineers and hobbyists tended to describe their machines with model numbers, he chose the name of a fruit, supposedly because of his dietary habits at the time.
Coming on the scene just as computing began to move beyond the walls of research laboratories and corporations in the 1970s, Mr. Jobs saw that computing was becoming personal — that it could do more than crunch numbers and solve scientific and business problems — and that it could even be a force for social and economic change. And at a time when hobbyist computers were boxy wooden affairs with metal chassis, he designed the Apple II as a sleek, low-slung plastic package intended for the den or the kitchen. He was offering not just products but a digital lifestyle.
He put much stock in the notion of “taste,” a word he used frequently. It was a sensibility that shone in products that looked like works of art and delighted users. Great products, he said, were a triumph of taste, of “trying to expose yourself to the best things humans have done and then trying to bring those things into what you are doing.”
Regis McKenna, a longtime Silicon Valley marketing executive to whom Mr. Jobs turned in the late 1970s to help shape the Apple brand, said Mr. Jobs’s genius lay in his ability to simplify complex, highly engineered products, “to strip away the excess layers of business, design and innovation until only the simple, elegant reality remained.”
Mr. Jobs’s own research and intuition, not focus groups, were his guide. When asked what market research went into the iPad, Mr. Jobs replied: “None. It’s not the consumers’ job to know what they want.”
Early Interests
Steven Paul Jobs was born in San Francisco on Feb. 24, 1955, and surrendered for adoption by his biological parents, Joanne Carole Schieble and Abdulfattah Jandali, a graduate student from Syria who became a political science professor. He was adopted by Paul and Clara Jobs.
The elder Mr. Jobs, who worked in finance and real estate before returning to his original trade as a machinist, moved his family down the San Francisco Peninsula to Mountain View and then to Los Altos in the 1960s.
Mr. Jobs developed an early interest in electronics. He was mentored by a neighbor, an electronics hobbyist, who built Heathkit do-it-yourself electronics projects. He was brash from an early age. As an eighth grader, after discovering that a crucial part was missing from a frequency counter he was assembling, he telephoned William Hewlett, the co-founder of Hewlett-Packard. Mr. Hewlett spoke with the boy for 20 minutes, prepared a bag of parts for him to pick up and offered him a job as a summer intern.
Mr. Jobs met Mr. Wozniak while attending Homestead High School in neighboring Cupertino. The two took an introductory electronics class there.
The spark that ignited their partnership was provided by Mr. Wozniak’s mother. Mr. Wozniak had graduated from high school and enrolled at the University of California, Berkeley, when she sent him an article from the October 1971 issue of Esquire magazine. The article, “Secrets of the Little Blue Box,” by Ron Rosenbaum, detailed an underground hobbyist culture of young men known as phone phreaks who were illicitly exploring the nation’s phone system.
Mr. Wozniak shared the article with Mr. Jobs, and the two set out to track down an elusive figure identified in the article as Captain Crunch. The man had taken the name from his discovery that a whistle that came in boxes of Cap’n Crunch cereal was tuned to a frequency that made it possible to make free long-distance calls simply by blowing the whistle next to a phone handset.
Captain Crunch was John Draper, a former Air Force electronic technician, and finding him took several weeks. Learning that the two young hobbyists were searching for him, Mr. Draper had arranged to come to Mr. Wozniak’s Berkeley dormitory room. Mr. Jobs, who was still in high school, had traveled to Berkeley for the meeting. When Mr. Draper arrived, he entered the room saying simply, “It is I!”
Based on information they gleaned from Mr. Draper, Mr. Wozniak and Mr. Jobs later collaborated on building and selling blue boxes, devices that were widely used for making free — and illegal — phone calls. They raised a total of $6,000 from the effort.
After enrolling at Reed College in 1972, Mr. Jobs left after one semester, but remained in Portland for another 18 months auditing classes. In a commencement address given at Stanford in 2005, he said he had decided to leave college because it was consuming all of his parents’ savings.
Leaving school, however, also freed his curiosity to follow his interests. “I didn’t have a dorm room,” he said in his Stanford speech, “so I slept on the floor in friends’ rooms, I returned Coke bottles for the 5-cent deposits to buy food with, and I would walk the seven miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on.”
He returned to Silicon Valley in 1974 and took a job there as a technician at Atari, the video game manufacturer. Still searching for his calling, he left after several months and traveled to India with a college friend, Daniel Kottke, who would later become an early Apple employee. Mr. Jobs returned to Atari that fall. In 1975, he and Mr. Wozniak, then working as an engineer at H.P., began attending meetings of the Homebrew Computer Club, a hobbyist group that met at the Stanford Linear Accelerator Center in Menlo Park, Calif. Personal computing had been pioneered at research laboratories adjacent to Stanford, and it was spreading to the outside world.
“What I remember is how intense he looked,” said Lee Felsenstein, a computer designer who was a Homebrew member. “He was everywhere, and he seemed to be trying to hear everything people had to say.”
Mr. Wozniak designed the original Apple I computer simply to show it off to his friends at the Homebrew. It was Mr. Jobs who had the inspiration that it could be a commercial product.
In early 1976, he and Mr. Wozniak, using their own money, began Apple with an initial investment of $1,300; they later gained the backing of a former Intel executive, A. C. Markkula, who lent them $250,000. Mr. Wozniak would be the technical half and Mr. Jobs the marketing half of the original Apple I Computer. Starting out in the Jobs family garage in Los Altos, they moved the company to a small office in Cupertino shortly thereafter.
In April 1977, Mr. Jobs and Mr. Wozniak introduced Apple II at the West Coast Computer Faire in San Francisco. It created a sensation. Faced with a gaggle of small and large competitors in the emerging computer market, Apple, with its Apple II, had figured out a way to straddle the business and consumer markets by building a computer that could be customized for specific applications.
Sales skyrocketed, from $2 million in 1977 to $600 million in 1981, the year the company went public. By 1983 Apple was in the Fortune 500. No company had ever joined the list so quickly.
The Apple III, introduced in May 1980, was intended to dominate the desktop computer market. I.B.M. would not introduce its original personal computer until 1981. But the Apple III had a host of technical problems, and Mr. Jobs shifted his focus to a new and ultimately short-lived project, an office workstation computer code-named Lisa.
An Apocalyptic Moment
By then Mr. Jobs had made his much-chronicled 1979 visit to Xerox’s research center in Palo Alto, where he saw the Alto, an experimental personal computer system that foreshadowed modern desktop computing. The Alto, controlled by a mouse pointing device, was one of the first computers to employ a graphical video display, which presented the user with a view of documents and programs, adopting the metaphor of an office desktop.
“It was one of those sort of apocalyptic moments,” Mr. Jobs said of his visit in a 1995 oral history interview for the Smithsonian Institution. “I remember within 10 minutes of seeing the graphical user interface stuff, just knowing that every computer would work this way someday. It was so obvious once you saw it. It didn’t require tremendous intellect. It was so clear.”
In 1981 he joined a small group of Apple engineers pursuing a separate project, a lower-cost system code-named Macintosh. The machine was introduced in January 1984 and trumpeted during the Super Bowl telecast by a 60-second commercial, directed by Ridley Scott, that linked I.B.M., then the dominant PC maker, with Orwell’s Big Brother.
A year earlier Mr. Jobs had lured Mr. Sculley to Apple to be its chief executive. A former Pepsi-Cola chief executive, Mr. Sculley was impressed by Mr. Jobs’s pitch: “Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?”
He went on to help Mr. Jobs introduce a number of new computer models, including an advanced version of the Apple II and later the Lisa and Macintosh desktop computers. Through them Mr. Jobs popularized the graphical user interface, which, based on a mouse pointing device, would become the standard way to control computers.
But when the Lisa failed commercially and early Macintosh sales proved disappointing, the two men became estranged and a power struggle ensued, and Mr. Jobs lost control of the Lisa project. The board ultimately stripped him of his operational role, taking control of the Lisa project away from him, and 1,200 Apple employees were laid off. He left Apple in 1985.
“I don’t wear the right kind of pants to run this company,” he told a small gathering of Apple employees before he left, according to a member of the original Macintosh development team. He was barefoot as he spoke, and wearing blue jeans.
That September he announced a new venture, NeXT Inc. The aim was to build a workstation computer for the higher-education market. The next year, the Texas industrialist H. Ross Perot invested $20 million in the effort. But it did not achieve Mr. Jobs’s goals.
Mr. Jobs also established a personal philanthropic foundation after leaving Apple but soon had a change of heart, deciding instead to spend much of his fortune — $10 million — on acquiring Pixar, a struggling graphics supercomputing company owned by the filmmaker George Lucas.
The purchase was a significant gamble; there was little market at the time for computer-animated movies. But that changed in 1995, when the company, with Walt Disney Pictures, released “Toy Story.” That film’s box-office receipts ultimately reached $362 million, and when Pixar went public in a record-breaking offering, Mr. Jobs emerged a billionaire. In 2006, the Walt Disney Company agreed to purchase Pixar for $7.4 billion. The sale made Mr. Jobs Disney’s largest single shareholder, with about 7 percent of the company’s stock.
His personal life also became more public. He had a number of well-publicized romantic relationships, including one with the folk singer Joan Baez, before marrying Laurene Powell. In 1996, a sister, the novelist Mona Simpson, threw a spotlight on her relationship with Mr. Jobs in the novel “A Regular Guy.” The two did not meet until they were adults. The novel centered on a Silicon Valley entrepreneur who bore a close resemblance to Mr. Jobs. It was not an entirely flattering portrait. Mr. Jobs said about a quarter of it was accurate.
“We’re family,” he said of Ms. Simpson in an interview with The New York Times Magazine. “She’s one of my best friends in the world. I call her and talk to her every couple of days.”
His wife and Ms. Simpson survive him, as do his three children with Ms. Powell, his daughters Eve Jobs and Erin Sienna Jobs and a son, Reed; another daughter, Lisa Brennan-Jobs, from a relationship with Chrisann Brennan; and another sister, Patti Jobs.
Return to Apple
Eventually, Mr. Jobs refocused NeXT from the education to the business market and dropped the hardware part of the company, deciding to sell just an operating system. Although NeXT never became a significant computer industry player, it had a huge impact: a young programmer, Tim Berners-Lee, used a NeXT machine to develop the first version of the World Wide Web at the Swiss physics research center CERN in 1990.
In 1996, after unsuccessful efforts to develop next-generation operating systems, Apple, with Gilbert Amelio now in command, acquired NeXT for $430 million. The next year, Mr. Jobs returned to Apple as an adviser. He became chief executive again in 2000.
Shortly after returning, Mr. Jobs publicly ended Apple’s long feud with its archrival Microsoft, which agreed to continue developing its Office software for the Macintosh and invested $150 million in Apple.
Once in control of Apple again, Mr. Jobs set out to reshape the consumer electronics industry. He pushed the company into the digital music business, introducing first iTunes and then the iPod MP3 player. The music arm grew rapidly, reaching almost 50 percent of the company’s revenue by June 2008.
In 2005, Mr. Jobs announced that he would end Apple’s business relationship with I.B.M. and Motorola and build Macintosh computers based on Intel microprocessors.
His fight with cancer was now publicly known. Apple had announced in 2004 that Mr. Jobs had a rare but curable form of pancreatic cancer and that he had undergone successful surgery. Four years later, questions about his health returned when he appeared at a company event looking gaunt. Afterward, he said he had suffered from a “common bug.” Privately, he said his cancer surgery had created digestive problems but insisted they were not life-threatening.
Apple began selling the iPhone in June 2007. Mr. Jobs’s goal was to sell 10 million of the handsets in 2008, equivalent to 1 percent of the global cellphone market. The company sold 11.6 million.
Although smartphones were already commonplace, the iPhone dispensed with a stylus and pioneered a touch-screen interface that quickly set the standard for the mobile computing market. Rolled out with much anticipation and fanfare, iPhone rocketed to popularity; by the end of 2010 the company had sold almost 90 million units.
Although Mr. Jobs took just a nominal $1 salary when he returned to Apple, his compensation became the source of a Silicon Valley scandal in 2006 over the backdating of millions of shares of stock options. But after a company investigation and one by the Securities and Exchange Commission, he was found not to have benefited financially from the backdating and no charges were brought.
The episode did little to taint Mr. Jobs’s standing in the business and technology world. As the gravity of his illness became known, and particularly after he announced he was stepping down, he was increasingly hailed for his genius and true achievement: his ability to blend product design and business market innovation by integrating consumer-oriented software, microelectronic components, industrial design and new business strategies in a way that has not been matched.
If he had a motto, it may have come from “The Whole Earth Catalog,” which he said had deeply influenced him as a young man. The book, he said in his commencement address at Stanford in 2005, ends with the admonition “Stay Hungry. Stay Foolish.”
“I have always wished that for myself,” he said.
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