Set your own Budget Planning

Set your own Budget Planning

Hi, welcome to - "How is my Budget Planning today ? "

We all have a Budget or may not :)  But, we have an expense and less over savings or investing. We often like to watch the Government's Union Budget and finding the pros and cons for ourselves. If someone asking you, what's your budget planning today ? Then, it seems a different for us, even we ask ourselves. How many of us have a personal budget planning today ?

A Question with triumph !

Of course, most of us don't have the plan to initiate for the Personal opinion, on Budget Planning and also we haven't experience that on results. We are always discussing or gossiping about the Government's fiscal deficit and how we can see our self debt on finance ? Self Financial analysis also an important one and it should be primary than any other, to make Financial planning and be Financially free.

Why i need Budget Planning ?

• Track our Daily Income / Expense.
• Track our Needs and Wants.
• Plan for the Emergency required and unexpected one.
• Prepare for our personal Financial Goals and Retirement savings.
• Financially, we can grade our values.

How to set your own Budget Planning:

• Buy a new Note book (or) download the Expense manager app or related one.
• Input your daily income, expenses and savings.
• Track you monthly reports on Income, Savings and Expenses.
• Do it regularly - After completion of 3 months, you have a PQFR (Personal Quarterly Financial Report).
• Now, you can have an idea on your PQFR that,  what is your income, where your money spending and how is your savings or investing.
• You can do the same PQFR analysis for Half yearly, Annually.

(Image source: unsplash.com/@stilclassics )

Post Analysis:

On our Personal Quarterly Financial Report (PQFR), we can make or set our own budget planning like how much money need for the monthly fixed expenses, and how can we increase our savings, what is the opportunity lies for our secondary income.

Use, the Super Budget 50:30:20

• 50 % Needs of our total monthly income
• 30 % Wants...
• 20 % Savings / Investment...

Let's ready for your own Budget setup :)

Rich investing !

What's your Earning - A Personal Cash Flow Meter

What's your Earning  - A Personal Cash Flow Meter

Earning money, isn't an easy one ?

Absolutely, Earning money is an easy one, but it's hard to keep (grow) it. I mean that the Jobs and Earning money are easy on these techie days. Somebody have the value on their Dignity, Prosper and many of us have, earning more (Money) is a big value. Still, few one can make easy and more of them think that, it's hard to earn. Everyone of us, feeling that the rich one have more money and other's can't. But is it a right away to tell ?

Not always, many of us hurting their health to make wealth (Money). Even Apple's Steve Jobs had earned a lot and respect too, but the health was not support for him.

I am not telling you that, you have to earn more to be Rich (or) Financially Independent. The think is, how you utilize the earnings and to grow, while you have a little money or No job.

What you have Earned ?

As an individual, he earns ₹ 1,00,000 /- salary per month and spending ₹ 99,000 /- , then he actually earned just ₹ 1,000 /- ( 1,00,000 - 99,000 ). He is not earning ₹ 1,00,000 /- (Not keeping). If another one is earning ₹ 20,000 /- and saving a ₹ 5,000 /- at the end of the month, then his expense went as ₹ 15,000 /- and earn a way of ₹ 5,000 /- by saving. Your Earning money must grow is an important.

But, we socially dropping a word that a person earning  ₹ 1,00,000 /- is a wealthy one and who he earns just ₹ 20,000 /- and saving a ₹ 5,000 on that called as a Middle or lower class men :)

" If you born poor, it's not your fault. But if you die poor, it's your mistake"

- Bill Gates, American Business Magnate ( Microsoft Corporation)

"Earning in simple terms, that your Spending should be lower than your income and saving a some percent on that(income) to earn. "

This will help you to give an additional (or) secondary source of income.


Suppose, you have owned a Home to live and you want an another one. If your plan for the home is to Rent, then it's your choice and may create secondary income. Else, it's absolutely ridiculous. Many of us taking a loan for their second home and they are thinking that they are good on Saving Taxes. You have to be know truly that, you are spending your hard earned one for your second home. We must aware about the building depreciation, maintenance, insurance and taxes. Your second home may benefit for the Government to earn taxes or good for the House plumber for their maintenance fee :)

If you have a second home for rent, you should know the Rental yield which is satisfy or  not.


For Example:

Your Home Value:   ₹ 50,00,000 /-
Rent per year:          ₹ 1,50,000 /- ( 12,500 X 12 months, after cutting the maintenance)

The Rental yield is at 3 %  per annum


Suppose, if you are going to invest in a Bank FD - 1 Year, which gives 6 % p.a. instead of second home.  then,

your earned interest income ( 1 Year):  ₹ 3,00,000 /-   [ ₹ 25,000 X 12 months, before taxes ]

Which is more than your second home and Zero work here on FD.  You can now think about the other instruments which gives more than bank deposits.

Had you kept the Gold, in Jewels or any size of other type. is it earning for you ? It may appreciate on price in the market, while you sell. We also keep the gold in physical for so many years, without earning a single rupee. It's not an asset, but an expense. What's your earning yield on your physical gold ?


Suppose, if you are started a business with an investment of ₹ 5 Lacs and your monthly business expense at 2,000 and getting an income of ₹ 10,000 /- , then your monthly income cash flow from business is at ₹ 8,000 /- (10,000 - 2,000). If you sell that business in future for a particular value it may appreciate (more or less). Some times, may your customer or retailer not paying after getting the product from you. It will also make delay on your monthly cash flow. So, What you have got in your account on that period is meant an earned cash flow.

Investing a part of your income to grow regularly. Your regular cash flow meter is on your regular savings or investing. Keep it on systematic.  I recommend you, that you can try the Rich Dad Poor Dad's  CASH FLOW CLASSIC game (Web / Google playstore) - The game about investing. So, you can get a better idea on your income, savings, debt and understand about the Cash flow meter.

Start  your meter with postal savings, bank deposits, stocks, mutual funds, realty, or any regular cash flow offer...

RICH INVESTING 

The Sharp Knife cuts (hurts) your dream - Inflation

The Sharp Knife cuts (hurts) your dream -  INFLATION

Can anyone tell, 'Why your dreams never come true ? "  OR  Not always ?


I am always start with a caution and raising questions myself. Even starting an article with a question in this blog :-)

No need to worry (or) stop, but we have to ask question by ourselves, with a word, 'CAUTION'. We are having the fixed habits, but not having a flexible one.

• We go for the School Education
• We go for Graduation
• We go for Job
• We go for Wedding
• We go for Kids
• We go for teaching the above to our kids
• We go for Retirement

and finally, we felt bad that something we are not achieved (or) not happy with what we had / did.

Why... ?

On our school and graduation days, we have so many dreams and likes to get. Then, we think that we can get after our job (Day Job). But, that is the area, we don't have a flexible one. We go for a job, We Spend... Spend... Spend... on our money, not with our precious time ! The time is the matter that can take us to get our dreams and likes on Live. But, we felt badly and go with a fixed one. We have a dream like buying a fancy Car, Apartment, Foreign Trip, Giving a Rich Dinner for your friends. Then, What ?

We just spending, but not achieving for our dreams and likes. Because, we are getting a salary or a single income from our business(Self Employed). We also hanging with our Increment, Promotions, Bonus Pay checks. Even sometimes begging with our Employer(s). We have to understand primarily that the Increment, Promotions, Bonus are giving just for your time or work to the production. If the company make profit, they will do the above for your work or time. Not for you :) The Employer(s) also an individual, if he wants a robot (Automation) for his production, then he can. Really Not for you :) They no need to care about you always, but sometimes. They really need their growth of the company or Government. We think that we don't have a precious time, that's why the employer providing you the PF (Provident Fund), Medical, Insurance, Pension and Gratuity Benefits (We think). So, we also saving a little with our salary. But, we can't get our dreams with that little one. 

Of course, they are providing you some monetary benefits, but they could not save you from the Sharpe Knife.

The Sharp Knife - Inflation

Can you think again, why the Government or Employer giving you the monetary benefits like Increment, Promotion, PF, Bonus,etc ?  They just protecting your work and time from the sharp knife, called Inflation. They can survive ! If the employer is going as a defaulter, some one can undertake their business. Even the Government going on bad debt, they can print more currencies to protect them, then what about you ?  

Inflation just eats you and gaping you from the dreams and likes of yours.

"Inflation is an increase in the cost of living due to rising prices of daily needs. It also being decline in the purchasing power of your money”. 

Work and time for the production; Demand and supply for the inflation !

Usually on many occasions, we plan and save for our buying a Car, Home, but the cost of living (Inflation) rising and beating us. Then we go for the EMI, Loans, debt, etc. Finally, we entered into the Rat Trap, the knife hurts you more. And you too asking your kids to do the same, what you did !

We need a solution with the trap, A Flexible one like a Government (or) Employers' business. We mostly thinking that 'Taxes' are the enemy for us. Taxes is also a good one for us, to improve. Taxes is not a matter, so that we can do saving and investing for the best one. We have to save and invest regularly with a small amount, but take a plan that beats Inflation. May be your Goal (or) Dream is for a short term, 5 Years or 15 Years, you must create the wealth more than the Inflation is important.

• Don't hang yourself under the knife.

• Don't buy cheaper products on Insurance and Investing, and don't confuse with the two (Insurance and Investing) also.

• Try to learn and understand the investment products and its risky that beats the Sharp knife (Inflation).

Knife is not on your hands, but Life is :)

source: tradingeconomics.com

Adjusted Returns on Investment

Adjusted Returns on Investment

If someone asking you,  What is your monthly pay check or Salary ?

Then, we are hesitated to tell or show the exact numbers on salary, even after our deduction from salary :) . We are thinking about that we are protecting our income numbers !

That's not a matter, either showing the pay slip or not. But, on our Investment info, we have to be careful about the returns on numbers we earned it. We just enjoying to show this much returns i had on my investments or I had a profit of XXXXX from my investments. But, do you know what is your real returns received on your hand ?

Returns on Investment can by type of:

1. Inflation Adjusted
2. Tax Adjusted
3. Risk Adjusted

From the previous article, we have seen that about the difference between Real Rate and Nominal Rate of Return. It clearly indicates that we must aware about the Inflation, it hurts our retirement planning and Goal based investments.

For Example, 

If our Return is 10 % from the investment amount of Rs. 100 /- then our Nominal return amount would be Rs. 10 /- but it should be Adjusted by Inflation. If inflation @ 4 %, then our real rate of return is:

(1.10 / 1.04) - 1 X 100 = 5.76 %



Tax Adjusted:


It is the return earned after taxes paid. It also hurts you on paying taxes from your earned income or returns, so reducing the return ratio that comes to your hand.

Usually, Tax Adjusted Returns are lower than the Nominal Returns due to the tax have been paid.


For Example,


If we had a return of 10 % by an investment amount of Rs. 100 /- and the Tax implication at 30 % (Higher), then

Earned Interest Rate - 10 %
Tax to pay                 - 30  % of Rs. 10 =  Rs. 3 /-  [ i.e  10 X 30 / 100 = 3]

So, our Post Tax returns would be approx. 7 %

We can go through this below formula for Tax Adjusted Returns:


Tax Adjusted Returns (TAR):   Earned Interest Rate X (1 - Tax Rate)


10 % X ( 1 - 0.30) = 7 %


Why we need to do this calculation ?

When you are going to choose an investment product, we have so many products like Bank FDs, Bonds, Stocks, Mutual Funds, Realty, Gold, etc. We should aware about our Tax Status also to get the Real rate of return.

Suppose, A Bank FD pays you 8 % per annum and the Tax Free bond gives you 7 % p.a, and the Stock pays you 10 % Dividend yield for your investment amount of Rs. 100 /-


Post Tax Returns are:

Bank FD           -   5.6 %   (After Tax bracket of 30 % at higher)

Tax Free Bonds -  7 %    (Totally Tax Free)

Stocks               -   10 % (Dividend is free on investor's hand)


Tax Adjusted Returns are depend upon the investor's Tax Status. So we can compare the different type of investments and put our money on good-self.

Risk Adjusted:

It depends on how much risk we can make on our investments. Usually, Higher Risk indicates to High risk adjusted return, so he will be able to earn a higher return. The Risk Free rate of return is also followed, where the Risk Adjusted returns have the excess return. Excess Return is used to calculate as the excess of the investment return over this risk free rate. Technically in financial markets, there are two types of Risk Adjusted Ratio (measuring) are,

• Sharpe   Ratio
• Treynor Ratio

It really helps the investors' to pick up the investments based on Performance or Rank wise

Be clear on your Adjusted Returns next time :)

Great Investing on richinvesting.blogspot.com

Investment Returns - Real Rate vs Nominate Rate ?

Investment Returns - Real Rate vs Nominate Rate ?

Which one is better for my investment, Real Rate or Nominate Rate ?

Basically, the return on an investment defined on a Nominal Rate.

So, we have to know, what is a Nominal Rate of Return:


A Bank Fixed deposit gives you a 10 % interest (per annum) for your investment. Then, the nominal rate is also 10 % as it reflects the same. So, there is no need for any deduction from the interest bank pays you.

When the Nominal rate is adjusted with the inflation rate is known as, "Real Rate of Return".

The Real Rate of return helps the investor(s) to adjust with the inflation and getting to know the exact returns on your hand. Let us see the example,

A Bank FD gives you a 10 % interest (p.a) and the inflation rate is at 4 %, then the approximate real rate is:

  Nominal rate of return (or) Interest Rate - Inflation Rate

10 % - 4 % = 6 %  (An approximate real rate on easy calculation)

Effects of Real Rate of  Return:

• Usually, the Nominal rate is a Simple rate (Interest rate), which is always a Positive Rate. But, the Real rate can be Positive or Negative, due to the inflation adjustment. If Inflation rate is higher than the Nominal (or) Interest rate, then it will gives you a Negative rate of return. So as an investor, we should aware about the inflation rate and we cannot simply go with the bank what pays.

• The time value of money reflects the real rate of return. If an investment earns a nominal rate, that is the rate at which the money is being compounded. However, if inflation reduces the actual value of investment cash flows, the value of these returns are discounted by the Rate of inflation. So, we have an idea for the Real Rate of return with a formula,

((1 + Nominal Rate) / (1 + Inflation Rate))  -  1


Lets see,

Nominal Rate:   10 % (i.e FD interest rate)

Inflation Rate:    4 %


(1.10 / 1.04) - 1   =  5.76 %  (As we seen it earlier, approx: 6 %)


The Effect of Real Rate helps in Goal Based Investments, Insurance and Retirement Planning and we can now know the exact rate of amount receive on hands.


Great Investing !

Why Estate Planning should be mandatory ?

Why Estate Planning should be mandatory ?

Do you know about Investing Expenses ?

The expenses that can generate (or) produce an income, so that we can save / invest a part of money, would be deducted from our Regular Salary or Business income like as other expenses.

We daily saving / investing for our Goal based information. We regularly seeing what about our yield to date (YTD) on Returns. Our Dream goals are better and far more, it may be 20 years or 30 years or more than that. We depositing in a bank, mutual funds, stocks, realty, gold, etc. We are telling these investment instruments  will for the future of our Children. But, would you know, it's exactly fit for our kids or will settle as 100 percent for our kids ? We can't know. That's why we are talking about, ' The Estate Planning'. It's not just like a simple as we are thinking a Real Estate Property.

The Estate Planning:

“What makes greatness is starting something that lives after you.”

So, we should mandate ourselves to do for our Children (or) After us.

Estate Planning… refers to the Organized approach to managing the accumulated assets of a person in the interest of the intended beneficiaries.

We can have Enough Money...

We can have Big Goals...

We can have Better Wealth...

But, we should direct that above to whom you wish. Unfortunately, Nomination and Heirs are creating trouble after our absence. So, we most concentrate and plan of our Estate Planning. 

• During the Life time:

1. Joint Holding
2. Family Settlement
3. Trust
4. Gift
5. Power of Attorney

• After Death:

1. Will
2. Nomination

Will:

Will is defined as, the legal declaration of the intention of the testator with respect to his property, which he desires to be carried into effect after his death. 

The person who making the Will is the testator. His rights extend to what are legally his own and this Will comes into effect only after the death of the testator.

The person who is named in a Will to receive a portion of the deceased person's estate is known as a legatee.

The person named in the Will to administer the estate of the deceased person is termed as an Executor.

Nomination:

It is the right conferred upon the holder of an investment product to appoint the person entitled to receive the monies in case of the death.

A Nomination is seen as formal bequest authorized by the holder of the asset, though in the event of a dispute the nominee's position is reduced to being the trustee of the bequest, the final owners being decided according to the applicable laws of succession.

Note that: Only an individual can nominate. Nominee can be an individual, company or trust, depending on the terms of the investment or asset. Nomination can be appoint either at the time of starting an investment or any time, and it can be modified any number of times. 

The Purpose of the Nomination is simplification of payment process in the event of the death of the holder and not the equitable distribution of estate.

Joint Holding:

It will ease to enable specific family numbers, such as the spouse / partner or children, easily access assets through the simple method of Joint Holding. It means that the property is held by more than one person and can be accessed by the Joint holders subject to the mode of operations.

Usually Demat Accounts, Mutual Funds, Stocks, and Bank accounts can be held as Jointly. We should remember that if there is any legal contest among the heirs, joint holders right to the asset can be superseded by laws of succession as they may apply.

Family Settlement:

This is an instrument used to achieve peace and harmony in the family when there is a dispute or claims to the property that can lead to a long drawn out litigation. 

The main advantages of a family settlement are, Family arrangements are not treated as transfer and so there is no worry about Capital gains tax. It's also not treated as Gift. (Gifts are taxable sometimes as income from other source, subject to exemptions provided u/s 56(2)(vii) of the IT Act.)

Power of Attorney (POA):

POA is an instrument method by which a person may formally authorize another person to act on his behalf or as his agent on all matters or for a particular type of transactions. POA can have Donor and the Donee. Both the parties should have attained the majority, be competent to contract.

Usually, it helps on managing the sale of assets and related on Court dealings.

Mutuation:

When a property or asset acquired by a person from another one, on becoming the rightful owner of the asset should ensure that all the titles of the asset are correctly transferred to his name. 

It helps in updating the Revenue records to ensure proper revenue collection from the person who owned the asset or property.

So, we needed it as Mandatory ourselves for the Estate Planning same like Aadhaar (Unique Identification), PAN, Voter Id and GST (Goods and Service Tax). May be the Government will put mandate this in future.

There are so many legal counters in the court regarding this Estate Planning, due to non-appointed of Nomination, heirs, proper Will and other settlements.

How to E-file ITR 1 online ?

How to E-file ITR 1 online ?

What is ITR- 1 ?

The Income Tax Return (ITR) - 1 is a document or form that required to file by an individual whose total income for the Assessment year includes,

• Income from Salary or Pension (or)
• Income from House Property (or)
• Income from other sources.

ITR- 1 also known as 'Sahaj' meaning easy in Hindi Language.

The following individuals who cannot file this ITR- 1:

• If an individual's total income exceeds Rs. 50 Lakhs
• If agriculture income is more than Rs. 5000
• If you have any foreign assets
• If you have any taxable capital gains
• If income from more than one House property
• If you have income from Business or Profession.

For Filing a return ITR- 1, we can get this form from online or offline, filled the details required and send it to your nearest Income Tax Department's office.

Here, we are going to see, 'How to file the ITR - 1 form online ?

Step by Step:

1.  Go to https://incometaxindiaefiling.gov.in/    (or) Google it, 'incometaxindia efiling' and follow the link

2. If you are not registered, you can register yourself. Go to the link: https://incometaxindiaefiling.gov.in/e-Filing/Registration/RegistrationHome.html

[ It showing in the right side top of the page ]

You can select User Type, as an 'Individual' and continue...

Enter your PAN following with your surname, middle name, first name and date of birth. Kindly note while entering the PAN, your surname and the date of birth is mandatory.

After registering the required details, you should be go to the next page with the basic information of you, your address, email and mobile number. On completion of registration process, you have to be verify your mobile number and email by the authentication sent by the Income tax India E-filing website.

3. Now, you can login:  https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html

[ It showing in the right side top of the page ]

Enter you userid, i.e. your PAN and the password and fill with the captcha and login now.

Now, you can view a Dashboard for you. you can see some menus in the top. Click the  'e-file' menu  >  Prepare and Submit online ITR 

After clicking that, you can now see an info... ITR - 1 - Assessment year - 2017 -18

Structure of ITR - 1:

you can read the 'General instructions' under instructions of the ITR - 1 and there are 5 parts in the structure of ITR - 1 form.

• PART A GENERAL INFORMATION
• INCOME DETAILS
• TAX DETAILS
• TAXES PAID AND VERIFICATION
• 80 G 

Kindly read everything on all the 5 parts in the ITR - 1 and fill the details, whatever you required and want. On Data entry, you can click 'save draft' to avoid the loss of data entered. Don't be rush to click the 'Preview and Submit'. Fill it everything and finally you can preview the information you entered and submit there.

After submission / uploaded, you must e-verify your filed returns. You can have more option to verify

On Successful upload of Returns, you can use your Aadhaar OTP receiving on your mobile number to e-verify for the easiest way. You can have also other options like sending the ITR - V by post, EVC, validating through your bank account.

After Completion of the above process or not, you can just go the 'Dashboard' in the left side top of the page. In the Dashboard, you can check it out the returns / forms, any pending actions, cash transactions 2016.

If you have any comments related on this article, you can share your views here...

Great Investing !

Rich Investing - An Investment Thought to create Wealth