How is my Budget Planning today - April - June 2017 - PQFR

How is my Budget Planning today - April - June 2017 - PQFR

As we had discussed the 'Budget Planning' in the past two posts. Here now, i am keen to submit my PQFR (Personal Quarterly Financial Report) for the Quarter - April - June 2017.

Set your own Budget Planning

How to set a simple Budget Planning 2017

The report below created by me, is based on the Super Budget 50:30:20

On the report, my fixed expenses are vary due to Medical costs and grocery items on my relative appearance :)  kindly note that i mostly maintain the savings / investing above the Super Budget terms with 30 percent plus. I believe in savings / investing for my child and for the Retirement. So, it would insist me to Retire Early :-)

You can also do the PQFR yourself and go further with honest :)

If you interest to share any comments, i wish to listen for that

Rich Investing with PQFR !

SIP vs Lumpsum Investing - The better choice

SIP vs Lumpsum Investing - The better choice

Which one can you choose, Rented Home (or) Lease (or) Buy it ?

This is the choice we have for a home, as for the savings or investing, we had a plenty of investment products like Bank Savings and Deposits, Bonds, Mutual Funds, Stocks, Realty, gold, etc. But, it's all about how we started it. As a traditional background in our country, we mostly choose our choice like Regular small savings from our grandparents. The old method of savings or investing are a collection box called as Hundial, Postal small savings, Bank fixed deposits, buying a gold in a very small quantity, purchasing a piece of land for our children. Nowadays, it becomes more fashion as the investment method changes slightly with a Regular savings frequency mode and a bulky amount of deal at once. That is what we called earlier, Recurring deposits and Fixed deposits. Now it comes with the word, "Systematic investment plan (Recurring) and a Lump sum investing (Fixed deposit). So, now we are talking about the fashionable SIP and Lump sum investing.

SIP (Systematic Investment Plan):

'SIP' is nothing but drink something by taking in small, like 'he took a sip of the Red wine'  :)☺

Systematic Investment Plan (SIP) is an investment method that usually given by the mutual funds to its investors, to invest their money in a fixed amounts as periodically. This frequency mode may be weekly, monthly or quarterly. This SIP investment method is a disciplined strategy that the investors can make 'Rupee Cost Averaging', while the market price is low or high, it benefits the investors.

It is usually recommended for the small and retail investors who don't have the large amount of money to invest.

Lump sum investing:

It is an investment method with a Single (or) One time payment of investing. When you have a large amount of money on your hand to invest and if you couldn't able to invest regularly, then this is your better choice of investing at once.

It benefits the investors especially for the medium - to - large, who can utilize the market when it is low or Market crash.

It also gives the benefit of the Power of Compounding gets itself from the first day of investing, but you should be aware about the Market fundamentals and its movements like Economic factors.

Have you made Investment Insulation ?

Have you made Investment Insulation ?

'INVESTING' means the act of committing money or capital to an endeavor (a business, project, real estate, etc.) with the expectation of obtaining an additional income or profit. This is what the Investopedia describes.

Most of us while listening the word, 'Investing' is about thinking themselves, just putting some money on any Assets (Financial or Physical) and make a profit without knowing the importance of Financial Education. If somebody have ₹ 10,000 /- or ₹ 1,00,000 /- they simply buying an asset (Thinking that are Investing) without knowing the Risk of Investing.

Prevention is better than cure.

As for the Financial Education, Securing your assets whether financial or physical is mandatory. Securing your Assets / Investments is nothing but, it's an Investment Insulation. Investment Insulation protects your investments through the Insulation factors. It protects your daily financial life while your investments may make loss or No Earnings on investments.

We can also compare the Investment Insulation with the 'Net worth' of an individual.

Insulation Factors:

If you are looking to buy a Stock / Real Estate Property / Business (those are Risky), then ask yourself the Investment insulation before you buy.

Insulation Type	Factors / Benefits
Have you Sufficient Coverage of Insurance ?	Take Proper Term Insurance, Health and Accident Cover – Protects unexpected accident or loss, Health concerned
Have you made the Emergency Fund ?	Savings of 6-10 months of income – Loss of an income / job, Medical Expenses, other Emergency required
Have you  Monthly Saving / Investing ?	Recurring, Provident Fund, Mutual Fund Systematic Investment plan(SIP) – Financial Goal Planning like Child Education, Marriage and Retirement Corpus

And some other Factors are...

• Save Water - Protects our Legal Heir
• Consume Less - Electricity Power
• Planting Tree - Save Nature

That is what, Dev Ashish of Stable Investor tells that, 'Buying Health Insurance protects Your Wealth, not Health' based on these Investment Insulation.

Investment Insulation is not only for an individual, but it's a Social Obligation. 

How to Calculate Annualized Return on Investments

How to Calculate Annualized Return on Investments ?

Previously, we had discussed about the Absolute Return on Investment, to calculate how our Invested money performing and seen how it differ from in terms of rupees as Absolute. Here, we can see to calculate the Annualized Returns on our Investments.

Annualized Return can be computed as Percent (% p.a) per Annum. We can measure the returns by these method, is the better and accepted way to measuring the Investment Return. The basic purpose of Annualized Return is to standardize the investment period as though each investment was made only for One year. It helps to ease comparison of investments across Time periods.

Annualized Returns can be denoted as [ % p.a ], otherwise, it is usually an Absolute Non-annualized return. 


Annualized Return on Investment:

(Return on Investment / Original Investment) X 100 X (1 / Holding period of investment in years)

Or 

in simple terms,  ((End value - Beginning value) / Beginning value)  X 100 X (1 / Holding period of investment in years)

To annualize, the absolute rate of return is multiplied by the following factor:

• 365 / Number of days that the investment was held
• 12 / Number of months that the investment was held
• 1 / Number of years the investment was held

If Akhil invests the amount of Rs. 1 Lac in a 6 month bank FD (Fixed Deposit) that the interest rate gives 7 % p.a. Then, the annualized return,

He receives the maturity amount with the investment:   Rs. 1,03,440 /- (Invt: Rs. 1,00,000 plus interest - 3440 yearly compounded for the 6 months)

 

(If compounded half yearly,  then it will be Rs. 1,03,500 /-)

What exactly happened here...

The annualized interest rate gives 7 % p.a and the holding period is 6 months i.e. 1/2 years. So, the absolute return is 7 X 1/2 = 3.5 %

Actually, the return gives 3.44 %  but, the rate is calculated by adjusting the return for the fractional period.  In general, for an 'N' month deposit, interest earned equals to Investment amount X (rate) X (N/12).

Mostly, Annualized Returns can be viewed for the Bank Fixed Deposits, Mutual Funds to see the performance on Returns.

If you have any comments related on this post, kindly share here...


Rich Investing - An Investment Thought to create Wealth

How to Calculate Absolute Return on Investment

How to Calculate Absolute Return on Investment ?

Return on an Investment is a calculation to assess how the investment is performing. As every investment have a group of Inflows and Outflows. The Comparison of the inflows and outflows is the Return for the investor from making the investment.

Returns may be Positive (+) or Negative (-). A Positive denotes the profit on an investment and Negative gives the loss.

For eg:

• Akhil bought a Real estate property for Rs. 30 lakhs and sold it to Rs. 40 lakhs

• Suresh bought a 100 shares of XYZ Company with the amount of Rs. 20,000/- and sold all the stocks for Rs. 15,000/- 

The above example tells that Akhil had a profit of Rs. 10 lakhs i.e the return on investment is Rs. 10 lakhs. Suresh had a loss of Rs. 5,000/- from his stocks. So, it denotes the Negative Return on his investment. 

Measuring Investment Returns:

• Returns can be measured by comparing the amount of Inflows and Outflows for the investment made in Absolute Rupee Terms.
• Returns can be computing a rate of return by comparing the Inflows and Outflows.

On Absolute Rupee Terms, Akhil had a net return (Profit) of Rs. 10 lakhs, and Suresh had a Net return (Loss) of Rs. 5,000/-.  Here we are going to compute the rate of return by using the Absolute Term.

Absolute Return:

                                                             (Image Credit: licdn.com)

The Absolute Return on an investment can be computed:

(Return on Investment / Original Investment) X 100

Or 

in simple terms,  ((End value - Beginning value) / Beginning value)  X 100

So for the above example, Akhil had a profit of Rs. 10 lakhs,

Absolute Return =  ( 10,00,000 / 30,00,000 ) X 100  =  33.33 % 

Absolute Rate of Return for Akhil is:   33.33 %

Now, Suresh had a loss of Rs. 5,000/- and the absolute return is:  - 25 %

( 5,000 / 20,000) X 100  =    (25 %) i.e  net loss of     (-25 %)

If Suresh have sold his stocks for Rs. 28,000 /- with a Net return (Profit) of Rs. 8,000/- on his investment, then the Absolute Return is:

(8000 / 20,000) X 100 =  40 %

On this term, Akhil had a Rs. 10 lakhs profit on his hand with a Absolute Return: 33.33 % and Suresh had a profit of Rs. 8,000/- and the Absolute Return is: 40 %.  Comparing the two returns, it seems that Akhil had a higher amount of return in terms of Rupees, but he earns a lower rate of return(Absolute- 33.33 % ) than Suresh( Absolute - 40 %).

Absolute Rate of Return is a simple technique and formula for computing the exact returns on an investment, but it does not measure the investment on Holding period. Absolute returns can used to measure such as Sensex, Nifty about the performance of stock market for the period less than one year. For more than one year, we have to use Annualized, Holding period returns and CAGR(Compounded Annual Growth Rate).

If you have any comments related on this post, kindly share here...


Rich Investing - An Investment Thought to create Wealth

7 Ways to Invest Life like a Zen

7 Ways to Invest Life like a Zen

Investing is always like a Mantra. It focuses for a Long term in a silent way. I am not talking about the Speculation or a Short term, but for the Long term with a sip of Water. We know how the Buddha and Billgates created the Tremendous Empire. As they had a different goals to consider, but they had a life as a Zen. The Master Shunryu Suzuki said,

Zen is not some kind of excitement, but concentration on our usual everyday routine. 

For a Long term Investor too, there are few ways to invest his life like a habit of Zen.

1. Invest Regularly and Stick to Fit:
   The most basic of Zen thought tells 'Work your day with little things and without any connection. You may walk alone for five minutes a day, Helping others what you have, Learn a language daily for 10 minutes or save Rs. 10/- daily for your kid - This is the way, how Buddha and Billgates grown on their Duty. So, Invest Regularly with any amount, but stick to it (Fit).


2. Love the Investing:
   Always taste the richness what you had. If you fail on some thing, Love and Learn it. Smell the taste of your food, but not just eating out. If you are a regular tooth brusher with a right hand, try now with your left hand also. Market Crash and Interest Rates decline are the normal aspect of Investing. Just love, it will keep you Rich.


3. Financial Goal for what would you need (Need and Desire):  Do it yourself (DIY) and Do what you like. Prepare a goal and work for it 30 minutes daily. If you are not satisfied with your current job or not liking the environment around you ? Just forget it, do what you really like or need. Focus yourself, to make changes.


4. Long Term Investment and Worry free of Volatile: Life is not a Permanent, even look for the long term investment. So, we can protect from the Volatile. Every day is not a same day and we have ups and downs. If restricted on anything, just Introspect yourself and remove the obstacles. Live in a Present and forget about what you had in the past. As, we saying that the life is not a permanent. Enjoy Yourself !


5. Concentrated and Delayed Gratification:
    Do one thing at a time and make it a habit. Don't rush for the Multi-tasking. If you have a work, do it with concentration of 20-30 minutes. Try it yourself and feel the concentration. If you are going to clean the room - Just clean it, but not with watching TV too. If you are looking to invest in stocks, then valuate the stock with financial statements. But don't confuse with the others like speculative. Delayed concentration is a big thing for Investor's appreciation in the long term. So, be concentrated and work slowly.


6. Achievable Financial Goals: Proud yourself. Nature gives us a marvelous structure and life with peace. No need to waste it. The Nature protects everyone, even we are killing the Air and water. So, take a financial goal and must achievable. Don't worry about the Market or others' Returns, See your portfolio returns with your Goals.


7. Invest in What you know:
    Be Lazy; Don't take all things in your head. Say, 'No' and Do what you know. If you are not aware of anything, Learn it and then implement. Again be lazy, but wake up early in the morning. Because, you are going to love yourself. Invest your money and life in what you know and learnt.

“You should study not only that you become a mother when your child is born, but also that you become a child.”

– Dogen Zenji

Signing off here with Rich Investing :)

How to set a simple Budget Planning 2017

How to set  a simple Budget Planning 2017 ?:

Budget is a term which referred to, 'A Sum of money allocated for a particular purpose '.

Annual Budget of a Government every year is an exciting one for everyone, but it's a Pokey (Laggard) one for announcing their own personal budget. Before making (or) set a Budget plan, we have to understand why we need a Budget (or) Budget Planning ?

'Budget' allowing us to create a Plan for Spending of our money and also it helps to ensure that we have a enough money for the things we need.  A personal budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment.

Investopedia also refers the following 6 Reasons, why we need a Budget: 

1. It helps you keep your eye on the prize.
2. It ensures you don't spend money that you don't have.
3. It leads to a happy retirement.
4. It helps you prepare for emergencies.
5. It sheds light on bad spending habits.
6. It's better than counting sheep.

(Source:  http://www.investopedia.com/financial-edge/1109/6-reasons-why-you-need-a-budget.aspx )

Before making a Budget Planning, you should track yourself about the Income, Expenses and Savings / Investing. Then, how to track ?

• Take / Open a New Notebook (or) Use Expense Manager App - Write down your Daily Income (Mostly Salary  by month), Expenses and savings /Investing, if any.

• Calculate the Total at the end of month (Income, Expenses, Savings/Investing)

• Do it for the Next 3 Months.

• Now, you have a clear idea that you have a Personal Quarterly Financial Report(PQFR) :)  - Income, Expenses, Savings/Investing and Balance available if any.

• Track your individual objective expenses (Like Transportation, Food, Entertainment,etc), Income or Cash Flow, Savings/Investing for the last 3 month. And now set an Average expense price for every objective that what you had spent in the past. (Eg: Transportation - 1000/-, Entertainment - 1200/-, Eating out - 1000/- ,etc)

Set a Budget Planning:

• We are going to set a Budget Planning using Budget 50:30:20 Method.
• Calculate your Income / Salary / Cash flow after Deductions such as Taxes, Pension Contribution. - Now you have a Take Home pay
• Limit your Needs - Up to 50 % of your Take Home pay (Mandatory or Fixed Expenses)
• Limit your Wants -  Up to 30% of your Take Home pay (Day-to-Day Expenses or Flexible expenses) 
• Spend at least 20 % on Savings / Investing / Debt Repayments (Financial Plan,Loan)

Illustration:

Mr. 'X'  getting a Gross Salary of ₹ 3,00,000 per Annum. After deduction of 20% (Tax, NPS/EPF), his net salary arriving at ₹ 2,40,000 per annum. i.e., ₹ 20,000/- monthly.

Gross Salary - ₹ 3,00,000 / Year

Net Salary - ₹ 2,40,000 / Year (or) ₹ 20,000 / monthly

Monthly Expenses / Savings / Investing:

• Mandatory (Fixed) Expenses: (₹ 10,200/-) -  51 % of his Net Salary

·       

    ( Accommodation / Rent, Transportation,Food, Utilities(Phone,Internet,TV), Electricity Bill,  Insurance)

  

• Day-to-Day Spending (Flexible): (₹ 6000/-) - 30 % of his Net Salary

·        (  Entertainment, Hobbies,Outing and Eating, Shopping, Fitness) 

• Savings / Investing / Debt Repayments: (₹ 3800/-) -  19 % of his Net Salary

·       ( Retirement Fund, Emergency Fund, Car Loan, Foreign Trip)

Budget Value Analysis:

• Take an average expenses, income, savings/investing/debt repayments for every objective
• Divide the Monthly Expenses, income, savings/investing/debt repayments by the monthly income /Cash flow
• Take the value of every objective.
• Some analysis for you...

If Mandatory Expenses plus Day-to-Day spending (MED) / Net Salary  is,

•  <  0.75               - Good and Great !
•  >  0.75  <  0.85  - Be Cautious
•  >  0.85  <  1.00  - Bad / Worst
•  >  1.00               - You may Bankrupt :(

If Savings plus Investing (SI) / Net Salary  is,

•  > = 0.25         - Good and Great !
• < 0.25 > 0.10  - Try to increase the level
• < 0.10             - Your kid is awaiting for you / You may depend someone for your                                           Retirement.

You can use like the above for analysis with the every objective (Expenses,Saving,Investing). If you hard to calculate, use the Expense Manager and get it on !

Budget Planning with Rich Investing :)