8 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:

1) 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.

2) 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.

3) 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.

4) 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.

5) 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.

6) Budgeting could lead to deprivation:

Budgeting is not frugal living and foregoing all pleasures like a movie a month and an eat 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.

7) 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.

8) 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.]

Indian Three Wheeler Industry (Performance FY 2010-2011)

The 3 wheeler Market in India is over four decades old. Initially, only 3 seater passenger autos were introduced. In eighties, lower capacity cargo carriers were introduced – 0.5 Tons open body Pick-up van. Till late eighties, 3-Wheeler market was virtually ruled by Bajaj Auto Ltd (the only manufacturer). In late eighties - early nineties, new manufacturers developed higher capacity category by introducing 6 seaters & 0.75 Tons Cargo carrier. And late nineties saw a renewed interest in the 3-Wheeler market. Optimism about growing need of free mobility as well as the need for remote and efficient distribution of the goods and services was the key factors for the same.

But the growing consumer demands for safety, comfort and space led to the evolution of 4Wheeler in this segment in the form of Tata’s ACE in 0.75 T segment (year 2005). And it offered all the advantages over a 3W. The idea clicked and the market changed drastically. The advantages included car like driving, higher speed, larger cabin space, more balanced structure and stylish looks. The market changed radically and today 4W numbers are higher than 3W.

The 4W introduced ate into the market share of 0.75T 3W more than 0.5T 3W. But, smaller 3 Wheelers were still preferred in load segment as compared to large 3 W. The primary reason for this was the higher operating cost as result of lower mileage and higher maintenance cost of the newer 4 wheeler cargo loaders.

Classification:

In the three wheeler segment, the classification is broadly in terms of carriage (load) and passenger vehicles. Since the former does have a very limited capacity to carry goods and is not preferred by many, the three wheeler manufacturers are more into the passenger three wheelers. And the cargo/carriage segment is bifurcated into 0.75T and 0.5T. And the customer groups involve market load operators and the captive customers.

                                                 

The emergence of three wheelers as an effective mode of transportation has benefited millions of Indians. Three wheelers are not only used for carrying passengers but are also used as luggage carriers. In India the three wheelers usually run on diesel and petrol but of late in some of the cities CNG run three wheelers have also come up in large numbers. The three wheelers used for carrying passengers in India are usually referred as Auto-rickshaws. Most of the state governments in the country are supporting the operation of CNG run Auto-rickshaws and also three wheelers with four stroke engines as they produce lesser harmful emissions. It has been found that most of the three wheelers running on the roads of the country come with mileage of about 34-36 km per liter of petrol.

The three wheelers have successfully helped to overcome the dearth of jobs in the country. Numerous people could be seen driving auto-rickshaws on the roads of cities like Delhi, Mumbai, Kolkata, Hyderabad, Bangalore and many more. Due to their simple construction and limited amount of investment the three wheelers as a mode of conveyance and commercial mechanism has gained popularity. What's more, their maintenance is also quite simple. 

Majors concerns for the 3 wheeler industry:

Passenger Industry:

 4 W Impact-Bigger Aspirational Value Products (4W) have started impacting industry, Safety Norms- Can be exploited by 4 W Entrants and influence permission for 3 wheelers plying, New Permits-In Cities, almost closed. Permit Resale Cost is very high and thus is acquisition cost, No Organised Financers in Passenger Segment and Private Financers charging as much as 40% interest Rate, Rising Interest Rates and Ban on diesel as a fuel (In metro cities): Shifting Sales towards CNG and LPG.

Carriage/Cargo industry:

De-growing Industry- Industry de-grown by 40% YOY, 4 W Impact-Bigger Aspirational Value Products (4W) have started impacting industry(42% degrowth for 0.75 T), Safety Norms- Can be exploited by 4 W Entrants and influence permission for 3 wheelers plying, Interest Rates has almost doubled in last one year and Ban on diesel as a fuel: Shifting Sales towards CNG and LPG in 0.5 T Category.

All said and done, 3 wheeler still constitutes a considerable number and has its manufacturers glued to the business. Although petrol/CNG/LPG forms a major percentage share in cities, diesel 3 wheelers are rampant in remaining portions of the country.

Indian “DIESEL” 3 wheeler Sales figures for FY 2010-2011:

FY 2010-2011 performance of Diesel 3-wheeler Carriage/Load Segment

FY 2010-2011 performance of Diesel 3-wheeler Passenger Segment 

The overall Industry figure for Carriage+Passenger Diesel 3 wheeler sums up to 274233 units. Piaggio has emerged as an undoubted leader in this category.
 

India's first Automotive brand to cross 5,00,000 fans on Facebook!!!

Recently Mahindra Scorpio became the first Indian Brand to cross Half a Million fanbase in the social networking site - Facebook. This was no easy feat - the brand had grown affirmatively and now is 5,00,000 strong community on Facebook. The community grew from a meager 2,900 to 5,00,000 population in just 15 months! This depicts not only the craze for the brand but also the assuring brand loyalty over the period of time.

Mahindra has always been a pioneer in terms of online marketing and customer interaction. Facebook proved to be an excellent medium for the auto manufacturer to promote its brand and thus connect its fans online into a single forum. The reason for success of Scorpio online was the sense of "COMMUNITY" in it. The forum allowed the proud Scorpio owners to flaunt their machines and share their experiences. The Adventure Saga (in form of Mahindra Great Escape Rallies) even made it more glitzy and thus the Scorpio group became the 'Adda' of all SUV lovers. The most important contributions was from the Scorpio 'brethren' who contributed to the success of this phenomena.

 

The Brand had created a sect of its own. Many initiatives were taken to keep this fraternity alive. A coffee table book was released in 2010 which was filled with amazing adventures, unending acclaim and appreciation for the product. The book which was named 'The Legend of Scorpio' took the Brand building to a whole new level. It was one of a kind for any automotive brand in India and received rave laurels for the initiative by its fans.

  

The next initiative in the line was an online game which allowed the gamers to drive their machines in most difficult terrains with relative ease. The game not only highlighted the off-road nature of the vehicles (Scorpio & Bolero), but also involved the participants to spend more time with these brands.This attempt of Mahindra was a great success. It won two prestigious awards at the FICCI BAF Awards 2010 viz., 'Best Online Game and 'Best Producer (Game Developer)'. And just in three months time Mahindra had one million unique visitors registered with a total number of eight million plays..!

All these initiatives have surely upped the ante for the brand; but have came out successful in creating a loyal fanbase for itself. Kudos to the brand for this wonderful achievement.  

How to save more by spending smarter?

The willingness and the ability to save money is the secret of building wealth. So as to save money, you need to spend less than you actually earn. Though it looks very simple when you say, it is really difficult to implement. There are plenty of ways to help you start saving money even on the very tight budget. Saving money or spending less is all about the personality, belief system, values of a family.

Spending less and saving more are lifelong living skills that need time to develop. Unless and otherwise, you have a written financial goals, you will lose your focus and go after consumerism and materialism.

To save more, obviously you need to spend smarter. To spend smarter, you need to understand you own spending patterns. Consciously you need to track all your expenses on a daily or weekly basis. So that you will be able to find out what influences your spending pattern.

Spending money has got so many influencing factors. But all these influencers can be classified into five broad spending influencers.

1)      Emotions:

Your emotions play an important role in your spending pattern. The positive feelings like happy, fun, joy can influence you to spend more on entertainments and gifts. The negative feelings like envy, jealous, shame, stress, depression, frustration can influence you to spend more on smoking, drinking, buying things you actually don’t need, relaxation and healthcare.

           

2)      Traditional Thought:

This is because of you belief system and your thought process. I need to buy a silk saree every year for my wedding anniversary. I have to bust crackers for diwali. These are all the classic examples of how your traditional thoughts will influence your spending pattern.

3)      Society:

Society in which you live will have more influence on your spending. You have to buy a car as all your colleagues are coming to office in their own car. On the occasion of your kid’s birthday, you need to arrange gifts for all the classmates of your kid. You should be watching this movie, on a first day first show.

This influencer is caused by friends, colleagues, neighbours, relatives, and club members. Even at times, the advertisements and promotional offers like a discount sale can make you to spend more.

4)      Habits:

Habits formed when you are growing up can make us spend impulsively. Generally this will be for our sensual pleasures. Spending on movies, music, eating out, smoking, drinking are the best examples for this influencer.

5)      Commitments:

This includes paying off your debts and loans, commitments towards family like school fees, buying groceries and other provisions, paying rent, paying for medical insurance. You are committed to pay these expenses earlier.

By tracking and analyzing your each and every expense, you will be able to identify the influencers which made you to spend. 

Here are some strategies to overcome these influencers and spend smarter:

Control Your Emotions: 

Instead of spending money, you can control your emotions by doing something else like doing yoga or meditation, watching comedy shows on TV, going to temple or beach. You need to solve the root of the emotion. You have to do introspection and need to keep a balanced mind always. Balanced mind is a key for spending smarter.

Self Talk: 

You need to consciously change your thought patterns to come out of traditional thinking. “I don’t really need a saree for every wedding anniversary”. “I am not a kid; so I need not bust crackers on diwali”. These kinds of auto suggestions will change your thought process and you will be able to really prioritize things on which you spend.

You are unique: 

You were born original. Please don’t die a copy. There is no need to feel bad if you don’t get to spend or buy things like your friends or people around you. You are unique and special in your own way. You need to discuss with your family and friends about “How to live happily by achieving compromised spending patterns?”

Learn and unlearn Habits: 

The unwanted habits which make you spend more can be unlearned. Good habits which make you spend smarter can be learned. Habits can be learned and unlearned. But you need to know it is not a quick fix. It involves a process and a commitment.

A habit is an intersection of knowledge, skill, and desire. Knowledge is ‘what to do and the why’. That is we need to spend less to save more and become richer. Skill is ‘How to do’. That is ‘how we spend less and what are all the strategies to be applied for spending less’. Desire is the motivation, the want to do. What are we trying to achieve by spending less? How that is more important to us than spending more. In order to make something a habit in our lives, we have to have all three.

Unwanted Commitments: 

You can’t avoid certain commitments like groceries, schools fees. But definitely you can discontinue unwanted commitments like the club membership in which you are not actively participating and not getting any actual use out of it; the chits impulsively you have enrolled with a jewelry shop.

Money not spent is saved. These above strategies will only work if you truly have a desire for future financial success. You need to be disciplined and persistent in the course of implementing these strategies. The more you practice smart spending, wealthier you become.

(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.)

Enfield's ROYAL Voyage

One of the world's oldest motorcycle manufacturer, still redeems its cult status and has a tremendous fan following. It has a age old history in India too, when it used to sell its bikes to the Army (for obvious reasons the forces believed that the Bullet looked suitable for patrolling the country's border). The bikes were made in England and were imported to Indian soil. The show is now managed and owned by Eicher Motors in India and have a production unit in Chennai.

Recently the Chennai-based manufacturer has prompted to accelerate the production of its hugely-in-demand products such as the Classic 350 and Classic 500. The production is planned to double from 50,000 units to 1,00,000 units in lieu of the demand. Currently the demand easily outnumbers the production, and also claim a waiting period of even 12 months for some of its top running models. This has spurted Eicher to dynamically invest almost 300 crores in a greenfield project to expand exponentially. 

The company had grew 8.74% during the last financial year and had sold 54,475 units (which includes its 5 models which are sold in Indian market). The brand in a way has grown as a cult over the times and I wouldn't be wrong if I describe it as an "Indian Harley". They both share a common DNA - "Biking is a Religion". Both the bike manufacturers have binded their customers with the sense of brotherhood, community and of all the sheer pleasure of driving these machines.The message is clearly stated in its advertisements/galleries. One such example is -

It can be clearly seen in the photograph how a bunch of bikers gather together in the himalayan odyssey with one intention - what they call it as the 'Nirvana'. This is the kind of engagement the brand has with its customers. Royal Enfield organizes an adventure gathering of its customers called as "THE TRIP". This is one of the most sought after biking extravaganza on Indian terrain. A similar stuff is done by Harley for its HOGs (Harley Owners Groups) where it organizes events where its customers are invited to participate in anything from local chapter rides to pin stops, to state and national rallies. 

Royal Enfield has developed itself as a brand which is different in character and unique. Its products have grown to be known for its encompassing rugged styling, robust and durable engines. And I must commend the   company's effort in keeping the brand alive true to its tradition and also re-juvenate the sense of 'BIKING' among its owners. Kudos to the RE team and hope that its expansion plans go well (so that its fans need to wait less for their rides).

LinkedIn IPO: The way forward

As the usage of social media websites have shot up tremendously, the business paradigms are redefining the way it works. Among the years, the valuation of these networking sites has not only increased manifold but also led to evolution of multiple earning opportunities. This has led to excitement in the market and propelled a positive signal in the market.

There is enough buzz in the market about the recently launched LinkedIn IPO in the market. Although the loom of the yesteryears Dotcom Bubble still haunts investors, the IPO is attracting remarkable interest from its investors. In the first day LinkedIn had priced its IPO at $45 per share, giving the company a valuation of $4.5 billion! And at the end of the day, the stock had soared 109% to $94.5 and the final worth stood to humongous $8.9 billion.

The earnings of LinkedIn is primarily from its advertisements, subscriptions and the hiring tools that it provides to the recruiters. This is fueled by the large member base of around 100 million people.

LI would be the latest internet startup to go public this year. And assessing the response it has received, I’m sure will set a path for other companies such as Facebook, Twitter to pull up their own IPOs. Currently Facebook (which is world’s largest social-networking site) is valued at $79.4 billion (as evaluated at www.sharepost.com) and Twitter (famous micro-blogging site) is valued at $7.2 billion.

The IPO has flagged off both positive and negative thoughts in the market. While the heightened valuation has instated confidence among the web startups, this growth is also seen to be inflated and lots of analysts are skeptical about the future. But one thing is for sure – keeping the current growth/business model in mind, the IPO is surely rising to its potential.
image source: http://economictimes.indiatimes.com/markets/global-markets/linkedins-market-debut-heralds-the-next-dot-com-boom-20/articleshow/8476166.cms

The All New Verito!!!

Will the new Verito change the fate of the older sibling Logan? Is the car fresh enough to rejuvenate interest among the target group? Does it have the power to enable M&M make its mark in the much needed sedan market? Can it turn into a number churner?

Lot of questions to answer for this 'True' & 'Rational' car. A snapshot of the changes in the All new Logan, oops Verito -