Morning Breeze

Morning breeze blew the yellow flowers

On the street, over the path

Millions walk and trample these flowers

Still they lay, with their iconic beauty

Lest they are badly crushed

Their beauty is ruptured

Mixing with the dust and soil

It talks about their turmoil

But, no one heard its pray

Was it waiting for someone, who may

Pick it up, and put it in vase

Alas! it is crumbled and dead

No more beauty, nothing to be said...

Mystical Life

Discomfort of life may seem to be tough and challenging yet they come up with a new lesson to learn and to make our life worth living.
Today while returning from my friends place, I saw two kids chit-chatting. Scorching sun, unbeatable heat had no affect on these kids. They were happy because they have learnt the art of adjusting with what they had rather craving for those that they may wish to but hard to get.
I reached home. This was just a sight that I may often see. But it had an empathetic impact over me. Reason being, due to regular power cut, the battery back-up of the inverter could not support and I had to live with discomfort for an hour till the power supply was resumed.
I got irritated but the moment I recalled those two boys, their sun tanned body with bare feet, my thinking drifted away from the discomfort to the life of adjustment. I filled a glass of chilled water from the earthen pot and sipped it. The newspaper enticed me and my mind was deeply engrossed into the published news.
Angry and discomfort you can bear only shift your thought.
May be this is the simple art of living...living with peace and comfort even when there is discomfort.

Happy Reading!!!

How to overcome common budgeting errors

Many of you manage to come up with a decent budget, but may end up looking to be just that - budgets! The reality turns out to be far from what you chalked out initially. This typically happens due to an oversight that renders your work useless. Here are a few tips on how to build a realistic budget:

Anything that can go wrong will go wrong

Murphy's Law fits into many aspects of life, it somehow fits the budgeting aspect to the 'T'. Many people don't set aside money for items like medical emergencies, car damages and home maintenance. These may be irregular costs, but they are not necessarily unexpected. Almost all cars and homes eventually need overhauling. The amount of repairs depends upon age, quality of construction and maintenance; it may do us good if we set aside a certain nominal percentage out of the net earnings on a monthly basis to cater solely for such contingent expenses.

Drawing inferences from past

The only way to build a realistic budget is to draw regular and appropriate inferences from the past expenditures on an itemized basis. The amount spent on each of the items may not vary drastically on a month-to-month basis unless they are seasonal / based on occasions. In fact, there are trends that one needs to keep in mind whilst building the budget. One could provision for purchasing apparels, sweets, household items / durables a little higher during festive season. Similarly, the electricity bill could possibly run high during summer due to increased usage of AC / fan.

Save first, spend later

Most of us would have thought that this should have been written the other way round. However, a more effective way of ensuring that you buy only what you need and do not end up in a cash crunch, is to set aside a percentage of money as savings and use the rest for buying essentials and utilities. Moreover, by strictly adhering to this principle, you will put your money to work and build a decent corpus for your financial goals.

Emergency fund

Typically one should hold at least 3 months of household expenses in easily accessible avenues; this could be your savings bank or flexi-fixed deposits, or for the emergency fund. The emergency fund may not always necessarily cater to medical emergency; this fund could come in handy for other reasons like job loss / transition, and other unexpected and unavoidable expenses

Include the fun element

Although, going out for luncheons, inviting friends over could be an occasional thing, it becomes important to provisions for these aspects as well. However, if you do not keep a tab on these, it could burn a big hole in your budget and turn it topsy-turvy.

Remember your investment commitments

Your premium payment on the insurance may be due only during a particular month of the year; however, one has to realize that this has to be planned out of the net earnings. One usually plans for the typical ongoing expenses: groceries, utilities and fuel, but forgets yearly expenses such as insurance premiums, property taxes etc

Trying to keep up with peers

Peer pressure seems to be affecting every aspect of life, specially the lifestyle that we maintain. If your friend bought a new smart phone, you would want to buy one on par or even better than that to indulge in the experience of using one too. There are also many other ways in which one could end up spending more than one actually earns. This is the easiest and most common means of getting into a debt trap! Remember that buying only what you need actually makes you stand out in the crowd.

Not being motivated

Sticking to a budget would require more or less the same willpower as one would while dieting or doing regular exercise. One should self-motivate by awarding oneself if the budget is successfully implemented. The reward could be in the form of extra self-indulgence, however, remember the whole point of building an effective budget is to put your money to best use and not to indulge in frivolous expenses.

Hope this helps you to start-off on the path to build an effective budget sans loopholes. And come the end of the year, your adherence to the budget should make you proud!

Financial Planner - Our Need

Want to here your opinion. Feel free to text me at neeru.kumari1@gmail.com

We say 'Financial Planning' is not rocket science but plain and simple common sense. It is deciding what are the goals, how much is needed for each of them and then making choices from various options for the best way of achieving these goals with least possible risk. So you can ask if it's so simple, why have a financial planner - why not simply do this yourself. Well, the answer to this is yes, you can. In fact, you are your own best planner, after all who else will be as motivated to get the best out of your money and achieve your goals? But the constraints that come up are time and knowledge. You need time to monitor your portfolio frequently, track the markets, keep a close watch on the economy and political scenario, interpret changes in policies, follow world indices, understand and evaluate the new options coming in almost every day; AND do your regular job. More, you need to have the knowledge and training to understand markets, governments, economies and products; and deduce and react to its changes appropriately and timely. With markets and economies world over becoming more and more global and inter connected, something happening in a far away corner of the world can have major consequences on investments here. Further, besides threats there are equally a myriad of investments and options opening up for Indian investors across geographical boundaries that you need to be aware of and evaluate. While there is a mass of data and information out there courtesy real and purported experts, it is a quite a task to decipher this information correctly and use only what is relevant to you. So in these times of outsourcing doesn't it make sense to have a professional do this for you? You have a qualified and experienced person to looking out for your financial interests and time to do other stuff in your life. Finally, often a certain amount of emotional distance and detachment is required while taking some financial decisions specially like realizing it is time to get out of an investment which you often put off since having developed sentiments towards it. Or not getting swayed or pressurized by marketing hype or crowd mentality or mass panic. And there is always the stick that is sometimes required to be wielded to force you to buy adequate insurance cover, write a will, organize the bank accounts or set nomination details properly and stop procrastinating. So get a financial planner - to take your money worries away and leave you free to enjoy life with a sense of relief that your money is being well looked after.

People are trading more out of fear

There is too much fear. There is not any announcement and if you look at the rollover numbers, the fears about rollovers not happening are a little big exaggerated and Asset Advisers find that is okay. They may be short buy say 5-7% from what is the 3-month average, typically stock futures get rolled somewhere around 75-80%.

Yesterday it was about 60% and typically on the last day about 10-15% additionally gets rolled over. So instead of 80%, we may do 75% but that is not like the end of the world kind of portrayal which is being spoken about all over.

These fears of huge sell-offs at the close are vastly exaggerated. The market certainly is not showing any signs of that. We do not have any leader stocks really tanking there is no front running and there is no major fearful unloading.

There is not too much built up position from retail side which is typically the weak holding. So, all these fears are exaggerated, people are trading more out of fear and there seems to be a lack of volume which is really leading to little bit of volatility. You might have some bit of increased volatility but it is nowhere near what is being bruited about and what is being feared.

Rapid GDP growth- best antidote for poverty

Rapid GDP growth is the best antidote for poverty. That is the big message that comes blaring out of the poverty data for 2009-10. Record GDP growth of 8.5% per year between 2004-05 and 2009-10 has reduced poverty at a record rate of 1.5 percentage points per year, double the 0.7 percentage points per year in the preceding 11 years.

There can be no better refutation of the leftist myth that fast growth has benefited only a small rich coterie while bypassing the poor.

Unfortunately, the good news has been drowned out by quasi-illiterate screams from politicians and sections of the media that the data has been fudged. The allegation is false. The data has not been fudged, and should be cause for celebration.

The government has adopted the Tendulkar Committee's poverty line, which is close to the World Bank poverty line of $1.25 in purchasing power parity terms. Critics howl that the Indian poverty line is unrealistic, but the World Bank poverty line has been accepted in global comparisons for decades.

China's official poverty line after its 1978 reforms was two-third of the World Bank poverty line. Nobody called it fudge or said it was impossible to live on so little. China estimated that it reduced the number of poor people from 250 million in 1978 to 29 million in 2001, a reduction of 221 million over 21 years. This was widely lauded, and Indian leftists complained that India's poverty reduction was glacial in comparison.

Not any more. Based on the Tendulkar line, India has reduced the number of poor by 52 million within five years. At this pace, India will in 21 years reduce the number of poor by 218 million, virtually matching China's performance of 221 million.

Earlier, thanks to slower GDP growth, the absolute number of poor in India fell very little on a consistent basis. But once India's GDP growth accelerated to 8% per year, matching China's growth between 1978 and 2001, India reduced poverty as fast as China. Caveat: the poverty lines in India and China are not identical, so the comparison may not be exact. Still, the fact remains that fast growth in both countries has been poverty-reducing.

We can certainly criticize India (as Amartya Sen and Jean Dreze did recently) for achieving less in most social indicators than not just China but even south Asian neighbors like Bangladesh. Thanks to misdirected subsidies and a refusal to discipline corrupt, absentee staff, the Indian government has achieved less on the social side than Bangladesh, let alone China.

Record GDP growth has produced record revenues for the government to use in improving social sectors.

Indeed, economist Lant Pritchett calls India a flailing state. "In police, tax collection, education, health, power, water supply - in nearly every routine service - there is rampant absenteeism, indifference, incompetence and corruption. In many parts of India, in many sectors, the everyday actions of the field-level agents of the state - policemen, engineers, teachers, health workers - are increasingly beyond the control of the administration at the national or state level."

Nevertheless, this should not divert attention from the big picture: record GDP growth in India has produced record poverty reduction, just as it did in China. This message has got totally lost in the debate over statistical fudging, for two reasons.

First, the Planning Commission last year gave the Supreme Court a poverty line estimate of roughly 32 a day. But the poverty data released last week placed the poverty line at 28.62 a day. Many politicians and journalists - including those of prestigious foreign newspapers - jumped to the false conclusion that the government had revised the poverty line downward. Reading this torrent of criticism from my current perch in the US, I too was misled into thinking that the poverty line had been revised downward, and repeated that error in my last Swaminomics column ( Poverty has truly fallen: it's no statistical fudge, STOI, March 25, 2012).

But the Planning Commission has clarified that the estimate of 32 a day given to the Supreme Court referred to 2011, whereas the 29.62 a day referred to 2009-10. The difference relates entirely to inflation - there has been no downward revision of the poverty line.

However, the government has indeed made a separate downward revision - of the poverty headcount ratio. Last year, Abhijit Sen and Montek Singh Ahluwalia of the Planning Commission said the 2009-10 NSS survey showed 32% of the population falling below the poverty line. This led to widespread moans that poverty was not falling fast enough despite record growth.

Less than a year later, the Planning Commission now says that the poverty ratio was actually 29.8%, implying a poverty decline much sharper than provisionally estimated last year. The revision has converted a modest performance into a stellar one. If the Planning Commission had simply waited for the final data and not misled the public with its provisional estimate last year, the final data would have carried greater credibility, and the skeptical public would have been more willing to celebrate the performance as stellar.

This mood will pass. Let us wait for the next survey data, for 2011-12. That will surely show a substantial further decline in poverty. Then we can really celebrate, with full conviction and no barbs about fudging.

Budget Impact on Insurance Sector

In Budget 2012, initially there was no significant declaration for the insurance sector. But there are some alterations which may change the whole scenario of insurance policies.

Except for pension plans, all regular-premium life insurance policies issued after April 1 will have to offer a minimum protection cover of 10 times the annual premium, else it will not be eligible for tax benefits under Section 80C and 10 (10D). This mandated cover amount was 5 times the annual premium till now. According to norms of Section 80C, life insurance premium up to 1 lakh is eligible for tax deduction and Section 10 (10D) exempts maturity proceeds from tax.

Due to this change, Unit-Linked Insurance Plan (ULIPS) and Endowment Plans both will be affected. However, expert says that most term plans will fulfill the new requirement. “This is a welcome move as it will ensure minimum life cover to the policyholders. The new requirement will ensure that they have some protection over a longer period of time”, says an expert.

Change in Plans

It is clear that the government is pushing individuals to buy life insurance policies in its true term rather than the insurance-cum-investment plans such as ULIPS and endowment, which are more popular. Due to mandatory higher life cover, higher premiums will be diminished, as ULIPS and endowment insurers will be left with a relatively small amount for investment.

“A person not looking for a pure protection cover need not buy a life policy at all. Instead, if their objective is wealth-creation, they can direct their funds to instruments like public provident fund (PPF), tax-free infra bonds and highly-rated non-convertible debentures (NCDs). In terms of equity, depending on their risk appetite, they can invest either directly in stocks or through mutual funds. Based on their risk-taking ability they can choose from large-, mid- and small-cap funds,” advises a Certified Financial Planner.

Prevention Could be the Cure

There is again a small but significant change in the deduction for spending up to 5,000 on preventive medical checkups. CEO of ICICI Lombard says, “Providing this tax exemption to individuals is a step in the right direction… it will help in bringing a greater focus on preventive health care. Most progressive health insurance companies have already started focusing on this space.”

“You can undergo a preventive health check-up at a diagnostic centre and submit the bill along with your investment declaration to your employer,” says the Director of H&R Block India.

Senior Citizens

From now on Section 80D will allow a tax relief of up to 15,000 on health insurance premium paid for self, spouse and children. This small change will help the elderly to claim higher deductions on health insurance premium.

Under Section 80DDB, the tax benefit on medical treatment, for senior citizens with disabilities is 60,000. For others, the limit in up to 40,000

Bonus will Not Count as Cover

Pranab Mukherjee, Finance Minister, has also altered the definition of insurance cover. While computing the sum assured for claiming deductions, premiums will be returned to the insurer and bonus will not be taken into account.

The Budget states, “This amendment has been proposed to ensure that the life insurance products are not designed to circumvent the prescribed limits by varying the capital sum assured from year to year”.

This simply means “Focus on life cover, and not on the Investment Component.”