Good Debt vs Bad Debt - What You Need to Know?

Good Debt vs Bad Debt: What You Need to Know?

Good Debt vs Bad Debt: What You Need to Know?

A common misconception among most of the working population is that all debts are bad, and hence they should avoid debts at any cost. Now, it is possible that you may never take any debt/obligation throughout your lifetime. However, this is not a very smart move.

Many times, taking debts to reach your goals can be a wise action and can help people succeed in the long term. As a matter of fact, all those who run a business or have a winning mindset know that – “Not all debts are bad!

Although buying luxury goods through debt on your credit card should definitely be considered as a bad debt, however, sometimes, it is okay to take a debt to start a business, buy your new house, for getting a higher education, etc when the possible returns in future are higher compared to the interests paid.

In this article, we are going to discuss good debt vs bad debt. By the end of this post, you’ll completely understand what good debts, bad debts, their characteristics, examples, and more are. Let us start with Good debts.

Good Debt vs Bad Debt

1) Good debts

house loan good debt example

There is a common saying in the business world– “Money makes money.” In other words, it means that you need money to make more money.

Concerning good debt vs bad debt, if you can use your debt to generate more money/value or simply increase your net worth, then it can be considered as good debt.

In general, these debts have lower interest rates than the potential returns and, therefore, treated as an investment for the future.

For example, if you’re starting a business, it is not necessary that you should have enough savings to get it off the ground. Here, if the future growth potential and expected returns from your business are high, you can take a business loan. The business loan can be considered as a good debt (on the condition that your business is fruitful).

Here are a few other common examples of good debts:

— Education loans:

“The more you learn, the more you can earn.”

If taking a degree can increase your earning potential as an employee (or an employer), it’s okay to go for that debt. You are more likely to be better paid if you have higher knowledge and degree. Always be ready to “Invest in yourself,” and hence, taking a student/college debt can be considered good debt.

Anyways, please note that an education loan may turn out to be bad debt if you do not get employment as per your developed skills after graduation. Therefore, always choose the degree/program carefully because if there’s no substantial earning potential after you have completed the education, it may not be a good debt.

— Business loan:

If taking a business loan can increase sales, earnings, and improve your company’s financial health in the future, it can be a good debt. Moreover, having a balance in the account can also reduce the financial stress of owners as they do not have to worry about running out of cash constantly. And therefore, they can make better decisions for their business.

With time, the owners can slowly pay down the debt when their business becomes profitable and moreover stable. Anyways, a business loan can also become a bad debt if the businessman is blindly taking money for a risky business idea.

— Mortgages:

Mortgages for buying a house or real estate debts for property ownership can be considered as good debt.

Generally, buying a house or property involves a massive upfront cost. If you do not have saved a lot of money to invest in a house/property, but the potential earnings that you can make from your real estate investment are way high, then taking a loan may be a good idea.

Here, you can buy the property, live in it for years, save money on rent, and also sell it in the future for making money. Else, you can buy the property and rent it out to make money as rental income. As you are taking a loan to build an asset that increases in value, mortgages can be considered as good debts in the long run.

Also read: What are Assets and Liabilities? A simple explanation.

The Risks of Good Debt:

Although good debts may sound like a viable option for a better future, however, they are always dependent on a lot of assumptions. There’s no guarantee that the future will turn out to be the same as planned. For example:

  • You can get a college degree from your education loan but may have no job offer.
  • Your business loan may be a waste if your business/startup fails
  • You may be paying high mortgages for your house and may be left with no savings for the future.

Even for good debts, there are a lot of risks involved as people are forecasting the future based on their assumptions. Therefore, before taking an obligation, carefully assess the risks and rewards.

For example, if you are planning to get an education loan, choose to take the loan for a degree/program that you’re confident to be fruitful. Know the expected salary after graduation so that you can plan to pay the money back.

Besides, considering the worst-case scenario may also help here as you can even plan for it. Overall, always act smartly as a good debt may not always be right for everyone.

2) Bad debts

car loan bad debt example

Bad debts are the money that is borrowed to purchase depreciating assets or liabilities. In other words, if the value of assets doesn’t go up or generates income in the future, you should not buy it by borrowing money as they are bad debts.

In general, bad debts have a higher interest rate, and people can prevent taking these debts by making smart use of money. Here are a few examples of bad debts:

— Debts to buy fancy cars:

Cars cost a lot. While having a vehicle can be a necessity as it saves money and time, however, taking debt to buy an expensive car is never a good idea. The value of a vehicle depreciates over time, i.e. becomes less than what you paid for in the future. And hence, borrowing money to buy fancy cars can be considered as bad debt.

— Debts to buy luxuries:

Taking consumer/personal loans to purchase luxuries like expensive watches, clothes, dining in fancy restaurants, services, etc. are again bad debts. Personal loans have incredibly high-interest rates and are usually caused by living beyond one’s means. The money spent on these goods/services could have been used somewhere else.

— Credit Card debts:

Credit card debt is the worst form of bad debt. The interest paid on credit card debts is significantly higher than the rates on consumer loans. Moreover, as the outstanding amount accumulates each month, it makes it easy for the people to fall behind and become prey to the credit card companies.

Mixed/Special Cases of Good Debt vs Bad Debt:

The world is not just ‘Black’ and ‘White’. There’s also ‘Grey’!

Similarly, a debt cannot always be classified as good debt or bad debt. Sometimes, it can be both. It depends on your financial situation and preference. Here are a few examples:

— Borrowing to invest:

If you are getting money at a lower interest rate and making more money by investing it, then it can be considered as good debt. In the trading world, this is called leveraging, and it can help the traders to make a lot of profits using other people’s money.

Anyways, if the interest rate on the borrowed money is way high and the profits earned from your investment is low, then this money can be considered as a bad debt.

Overall, there’s a risk involved in borrowing money to invest. Until and unless, you’re trained and experienced to do so, this approach can be dangerous.

— Credit card rewards:

Although relying too much on credit cards be harmful, however, they are also a lot of benefits of using credit cards. Most of these cards come with amazing rewards like free airline tickets, movie tickets, cashback, etc. If you can use the credit cards efficiently, it can be considered as good debt.

— Consolidation loan:

In finance, consolidation occurs when someone pays off several smaller loans with one more jumbo loan. Here, the individual gets this loan at a lower rate to pay off the higher interest rate loans. In general, it can be considered a good idea to get rid of high-interest debts. However, the problem arises when the individual is not able to pay off the bigger loan or when the debts pile up.

Also read: 11 Best Passive Ways to Make Money While You Sleep.

Summary

Let us quickly summarize what we discussed about Good Debt vs Bad Debt in this article.

Good debt is a debt for getting product/service that has the potential to increase its value with time. As a thumb rule, if it increases your net-worth or value, it is good debt. The right amount of good debt can increase your net worth, value, and help you get the things that you want in your life without taking unnecessary risks.

On the other hand, if you are borrowing money to spend over depreciating assets or liabilities, it is bad debt. Bad debt tries to lure people for instant gratification. However, they do not create any significant long-term value. Try to avoid getting bad debs for luxury products/services or borrowing high-interest rate money.

Finally, there’s no fixed boundary for defining good and bad debts. A good debt for one can be bad for another, depending on their financial situations.

How to plan your passive income the right way?

How to Plan Your Passive Income The Right Way?

How to Plan Your Passive Income The Right Way?

Hello readers! Today, we at TradeBrains, are covering a topic that might stir up a lot of interest and intrigue within our community. In recent years, we have been seeing a lot of interest among our readers to generate a second source of passive income to meet their financial goals. While stock investors do manage to achieve this when their portfolio companies shell out dividends, the reality is that for most individuals passive income requires conscious planning and periodic review.

Today’s post should help answer some of your questions and perhaps guide you on your financial journey going forward. So let’s get started.

What is passive income?

In the most general sense of the phrase, passive income usually refers to consistent and periodic income you may gain without dedicating large amounts of your time. Some people would even go so far as to say that passive income is the “income you gain while you are asleep”. 

A prudent investor would, however, understand that even though the statement puts across the idea of passive income bluntly, one would have to live in a fool’s paradise to assume that passive income actually requires no work (it requires less work, not zero work). However, by making some smart moves anyone can create a source of income to add more teeth to their financial firepower.

Why do people try to create a passive income source?

In the simplest language, passive income reduces the dependence of your lifestyle on a single income source. In other words, you ensure that you do not put all your eggs in a single basket.

Again here quite a few people may argue that the real benefit of substantial passive income is realized when one does not feel pressured for working extra hours at work to earn a meager overtime pay during uncertain times. When things go haywire in life, which happens more often than not, a second income does indeed come as a relief especially when you carry a financial burden like an enormous EMI on your housing loan.

Another reason which might have some sense is that a passive income usually acts as a force multiplier in your financial journey. You could get additional fire-power for your monthly SIPs or you could buy assets that get you even more side income all the while riding on the power of compounding to grow your wealth over time.

The motivation for generating income could also differ according to a person’s age or situation in life as well. Individuals working in senior management in private sector companies that do not pay pension might actively scout for an income post-retirement than a younger person.

What are the sources of second income?

And a comparison of skill-based and investment based sources of income.

For quite a large section of the society, the main sources of passive income are either in the form of interest gained from bank deposits or rental income from a real estate asset. However, things have changed in the last decade or so, the fixed deposit interest rates are being lowered every year and the real estate prices continue to break a new ceiling in most cities. These two powerful macro trends have rendered conventional sources quite inefficient in developing a passive income source for a young person who has just started earning.

Looking at the other options available, your second income could be either skill/service-based or investment-based. You could sell your existing skills to provide services or advice as a consultant for other people or companies that might need them. Another option could be to collect royalty income from intellectual property or any other creative services. 

But, to play the devil’s advocate, even though selling skill is rewarding, it would still require some time and effort on a consistent basis to generate a steady income. Hence, an investment based income would be more ideal if you are not able to put in lots of time or effort for any reason.

Investment based ideas could include dividend investing, fixed deposits, rental/lease income from real estate, peer to peer lending, etc. In most cases, the metric used to judge an investment based income source would be the interest rate or the yield. Although seemingly easy to execute, an investment base income strategy would require portfolio adjustments based on a periodic review of risk and reward of the portfolio.

For a list of ideas you could refer to another of our articles:

passive income quotes

How to plan your passive income portfolio?

The most important thing to consider while planning your passive income portfolio is time, the time you can invest and also the time you would be willing to wait for your portfolio to build up in value. However, prudence doesn’t hurt and it would be advisable to look at qualitative factors like repeatability and consistency while deciding on your chosen method for generating a passive income. If your passive source also happens to be scalable, then who knows? Maybe one day it might lead you to new and exciting business ventures.

The lazy way to start building a portfolio for most people with significant day time commitments would be to focus on generating steady interest income every month. Although savings schemes and fixed deposit plans have been the conventional go-to strategies, in recent times the rise in web and mobile technology adoption rates have facilitated the feasibility and importance of peer to peer lending platforms as another significant source for earning interest income.

Some people may prefer to keep a mix of side hustles and investment-based income in starting their portfolio, while others may look for only investment based avenues. Although there is no single right way, keeping repeatability and consistency as a priority would really go a long way in helping anyone build a process for growing their passive income.

6 Steps to create a passive income source

Creating a passive income is going to be tough, a lot of time will have to be spent on researching new investment sources, gaining new skills and performing tasks which can be monetized. The whole journey could be a whole lot simpler if we were to follow a process-driven approach. We, at TradeBrains, have compiled a list of things anyone could start doing right away to begin their own passive income portfolio.

1. Evaluate your time

The most important asset you have is your time so it is only reasonable to find out whether a particular side hustle is worth your time or not. In case you do not have too many hours to spare it is perfectly fine to start only on investment based income strategies.

2. Save until it hurts

Be thrifty, pay your EMIs and get out of debt as soon as possible. Try to cut corners wherever possible to get extra cash. Try cooking your own food instead of ordering every time. Only buy things you need from e-commerce websites.

3. Learn about income-generating assets and focus on buying them

Dividend stocks, REITs, government bonds, savings deposits, you name it, anything that provides you income on a regular basis should be included in this list

4. Calculate how much passive income you would need

It’s important to have a figure you can aim to act as a compass else it is possible for you to get lost and even lose motivation towards achieving your goals. A good goal is to try and generate enough alternate income to cover for your rent, food and monthly running expenses

If your annual expenses are around 6lakhs then divide the number by your expected return to get the capital you may need to save up. So if you are expecting a return of 10% from your investments, then having a capital base of 60lakhs would suffice for you to cover your expenses.

5. Grow multiple streams over time, Be diversified

Given the uncertainty of the world we live in, we simply can’t underscore the importance of diversification of income streams. Capital preservation is simply underrated in our daily conversations about money that a lot of the times we even pretend like money cannot be lost in investments. 

If we were to look back into history, after the burst of the dot-com bubble it took roughly 10 years for Nasdaq investors to just break even. Your passive income portfolio should be diversified to absorb any impact in your life in case one single income source stops churning out cash for you.

6. Be patient and don’t give up

All the above steps would amount to nothing if it is not given time to grow. Compounding works and it gives astounding results over large spans of time. Sure the wait to building wealth is always slow and long but it is definitely worth the wait.

solar panel cells

Socially Responsible Investing: Why it matters?

Deciding how you want to invest your money is often hard. You need to take many factors into consideration such as risk, returns, taxes, and inflation. It takes a lot of forethought and groundwork to figure out a way to get the best return on your investments.

Yet, there are some investors who choose to invest in companies that are not only financially stable but also make a positive impact on the environment.  Socially Responsible Investing or SRI is choosing to invest in stocks that provide a financial gain as well as do social good.

The companies are evaluated based on the ESG index: environment, social justice, and corporate governance.

Although socially-responsible investing is still up and coming in India, it is expected to gain greater momentum in the next few years. Companies have become more aware of the ESG factors and are looking to incorporate more of it into their business practices.

Socially Responsible Investing History

Socially responsible investing began in the early 1700s when the Quakers refused to participate in the slave trade in the U.S. Pastor John Wesley, the leader of the Methodist church claimed it was a sin to make a profit at the cost of your neighbor’s well-being. He stated that it was unethical to gamble and invest in industries that used toxic chemicals.

For many decades after John Wesley’s speech, investors avoided industries such as tobacco and liquor referring to them as ‘sin industries’. This evolved in the 1960s when investors decided to invest their money in companies that promoted social causes such as women’s rights and civil liberty.

Socially responsible investing played a huge role in South Africa during the 1980s when investors began pulling out their money due to the apartheid or the segregation of races. SRI had a prominent role in helping bring an end to the apartheid in 1994.

Sustainability Indexes

If you look into the American and European nations, they already a family of indices evaluating the sustainability performance of thousands of companies trading publicly. The Dow Jones Sustainability Indices (DJSI) launched in 1999, are the longest-running global sustainability benchmarks worldwide. To be incorporated in the DJSI, companies are assessed and selected based on their long-term economic, social and environmental asset management plans.

For India, S&P BSE has three main indices that measure corporate sustainability: S&P BSE 100 ESG INDEX, S&P BSE GREENEX, and S&P BSE CARBONEX.

How to be a Socially Responsible Investor?

Here are a few points that can help you become a socially responsible investor:

— Know the difference

The first and foremost important step to becoming a socially responsible investor is to know the difference between traditional and responsible investing. The difference might be in returns that you get from your investments. The returns from socially responsible investing may differ a little from the traditional one as you might be leaving behind a lot of high return investment options. However, always remember the reason why you have opted for this way of investing.

— Do your research

This is where investors use negative and positive screening to shortlist investment options. In the negative screening, they avoid investing in companies that don’t relate to their social values. Many mutual funds that are socially responsible screen out tobacco and liquor companies. One type of negative screening is divestment, this is where investors take their money out of certain companies because they do not like their business practices or social values.

Along with screening out negative companies, it is also important for investors to choose companies that align with their values. These are companies that strive to bring change to a social aspect that the investor finds important along with their socially responsible business practices. This is also known as impact investing or incorporation of ESG.

— Use your influence as a shareholder

Shareholders not only invest in companies that align with their values but they also use their position to influence the actions of the company in which they own stock. Investors do this by filing a shareholder resolution. This is a document outlining the shareholder’s suggestions for management on how to run the company in a more socially responsible way.

— Invest in the community

This is where an investor invests in companies that have a positive impact on the community. This is usually done in low-income areas where the investment is used to provide loans to people and small-business owners who would otherwise have trouble getting approved for a loan. Community investments also support ‘green companies’ that have a large carbon footprint on the environment.

— Lead by examples 

Socially responsible investing is still in the early adoption phase. By making the right investment choices, you can make a real positive impact on the community- along with building wealth. Moreover, sooner or later, social conscious will become the selling point for global companies. And you, being a part of it, can lead the movement.

Socially responsible investing: Promoting health

Socially responsible investing: Cleaner Environment

How to get started with Socially Responsible Investing?

1. Decide what your social principles are

Before you choose your stocks you need to decide what social goals you want to promote. You should focus on your values and what you want to achieve through your investments.

2. Decide what your financial goals are

The next step is to decide what financial goals you want to achieve through your investment just as you would with any other investment. You need to decide how much return you need to meet your goals as well as how much risk you are willing to handle. SRI has been shown to provide comparable returns as a traditional stock would.

3. Choose the fund that meets your needs and goals

Once you have decided what your social and financial goals are, the next step is to find the investment that’s right for you. The most common ESG funds in India include Tata Ethical Fund, Taurus Ethical Fund, and Reliance ETF Shariah BeES.

Social investing has also resulted in the success of micro-finance. This was created by social investors to create an impact on small businesses and has now become an industry worth over $8bn and is now a mainstream financial service.

Socially Responsible Investing cover

Also read:

Conclusion

Socially Responsible investing is becoming increasingly popular in India and there has been a visible shift in the market strategy adopted by many participants as they incorporate social, economic and governance (ESG) factors into their investment process. Stakeholders realize the importance of their role in financial markets to influence sustainable growth.

According to the Indian Impact Investors council ‘more than 30 impact funds have invested in social enterprises in India’. There has been $2billion investment in over 300 companies in India.

While socially responsible investing is still not as big as traditional investing in India, it is still a rapidly growing market. Social investing in India has helped provide basic needs such as housing and education to the poor. Many investors have now realized the power and influence they have to make a positive impact on society.

buying a car vs Ola or Uber ride

Buying a car vs Ola or Uber ride – Which is cheaper?

When you ask anyone – ‘Which is cheaper? Buying a car vs Ola or Uber ride?’, most of the people will have a different opinion. In this article, we have shared our thoughts.

At a press conference which happened in the last Tuesday, Finance Minister Nirmala Sitharam said that the millennial prefer to go through Uber and Ola rather than buying their Car. This is because the option is much cheaper and affordable for the current generation. 

According to the finance minister, it was said that the youth today would rather spend a load of cash on booking an Uber or an Ola other than paying long term EMIs for buying their vehicle. And this statement has created an uproar among the working individuals and even the mentioned names of the automobile/transporting service system since they reportedly said that they have nothing to do with the slowdown in the current industry’s plans.  

According to recent reports, it has been said that the makers and the top-level managers of the Maruti Suzuki have noted that the existence of the Ola and Uber has been there for the past seven years. During the peak time, there was no such slowdown in the current condition of the automobile business. They have said that they do not think that these services are responsible for the slowdown in the industry in any other way.  

A personal opinion shared by the people who use ridesharing plus a car

But have you given it a thought? Is it true that traveling via Ola or Uber will help you to cut down your costs more than paying the personal loan for your Car? As the service of Ola and Uber is growing in the market, some are wondering which might be easier to hail. Getting a car of your own is undoubtedly a cherry on the top, but somehow you have to understand that getting a vehicle is not the final thing that happens here. 

You have to take care of the loan and the EMI budget of your Car so that it can be done at the right time and paid off. It will help you to ease off your burden. This complex question is rising in the minds of the millennial, but we might help you to get an insight into the matter and take it sincerely. 

Owning a car is better for long term rides, sharing a ride will be good for the short term. It is a golden rule that you should learn from this article. 

Here is the main deal. If you have a car of your own, then you can take it for a ride at any time of the day that you want. Primarily they are needed when you want to travel and cover the long term.

Car ownerships might be affordable for people who drive typically medium to long-distance or about 20km. Whereas, the ride-sharing apps like Ola or Uber happens when you want to cover a short span of about 7 km. However, these findings are based on some back details as well.

The cost of the Car that you have depends on the on-road price of that car that you have bought, the fuel price that you have to pay for it. The maintenance charges are even varied here.

To explore this part of the question, take for example that Datsun Go is for Rs 3,50,000 – 5,20,000 and it takes about a 5-year car loan with a whopping amount of 10% of the rate of interest. Over that, you need to have six years of maintenance for that Car when the full cost is covered onto the same. There are some potential car issues which can happen here as well.

For the medium or long trips-owning, a car wins

buying a car vs Ola or Uber ride

For an individual who trips on the basis of the medium or the long trip wins here. We ‘have also found the fact that owning a car is about 44% cheaper than sharing a ride if you cover the long-distance or even the mediocre ones.

Short trip rides- the cabs win

buying a car vs Ola or Uber ride

Rideshare is in for short trips. We have found out that typically people who take journeys of about or less than 10 km wins on the Rideshare here. It becomes 24% cheaper for them. If your twice-daily rides are about for 7 km, which means one ride will time up for 15 minutes, the Rideshare or the app cab will win here. Due to the lower distance of your trip, the 5-year cost plan for your Car decreases by a rate of about 25%, and it can save a lot on the fuel consumption here.

However, in the current period, the cost of an Uber or Ola is becoming cheaper by 56%. It illustrates the fact of how you use it and how much consumption is made from your side.

Also read: How much does a Wedding cost in India? (For Average Indians)

Is Rideshare the right replacement for you?

The final verdict says that Rideshare is only a feasible replacement, for the people who want to have a shorter distance of their ride. If you are a typical short distance traveler, then the Rideshare will be a viable option for you. Of course, the cost consideration which is charged varies on your location and even the individual who is paying for the same.

If you have your Car, you can take it out on a trip if you want. You can even cover the longer distance if you wish to so with the help of your Car here. Of course, there are parking tickets you have to pay, regular maintenance of your vehicle, take your vehicle to the car wish, etc. But it will be an excellent option to invest in if you are an avid traveler.

Mainly if your place of work is situated far away from where you live, it is essential that you get a car of your own. If you use the Rideshare each and every day here, it will cost you a lot.

Additionally, you can even supplement ride sharing to motorbike ride-sharing apps like Rapido. They will cost you less. And also purchasing your motorcycle is a much cheaper option for vehicle ownership.

Image of Best UPI Apps in India

5 Best UPI Apps in India in 2019 (For Android Users)

With the return of PM Modi 2.0, digital India has continued to make new progress. And UPI payments have played a big role in this movement. In this article, we will discuss the best UPI Apps in India for easy and fast transactions. But, before we start, let’s first understand what exactly is a UPI?

UPI means Unified Payments Interface. UPI payments have taken a substantial march ahead and nowadays, the mobile app store is flooded with new and innovative UPI apps in India. Briefing about UPI, it is an instant real-time payment system developed by NPCI which stands for National Payments Corporation of India which helps in inter-bank transactions by instantly transferring funds between two bank accounts on a mobile or web platform. As of 2019, a total of 142 banks are active on UPI with a monthly volume of over 799.5 million transactions. And, this has resulted in a total transaction value of ₹1.33 trillion as of March 2019 which in increasing day after day.

Because of this advancement in UPI payments, money can now be sent to anyone across the nation within no time.

Anyways, not all apps listed on the play store are equally good for making UPI payments. Many times, the interface of some of these UPI apps in India may be hard to understand initially. Therefore, in this post, we have handpicked the best UPI apps in India that are easiest to use and definitely worth checking out.

Best 5 UPI apps in India:

1. PhonePe – UPI Payments, Recharges & Money Transfer

UPI Apps in India- PhonePe

PhonePe stands first in our list of best UPI apps in India. It is a revolutionary app which made the Indian population start trusting and moreover making online mobile payments. PhonePe not only helps in making UPI payments but users can also recharge, make online bill payments, order food, shop, etc. all in just one app.

PhonePe also provides various offers, rewards, and cash back to its customers. Having one of the simplest interfaces with the safest and fastest online payment experience in India, PhonePe is definitely better than most of the other UPI payment apps or internet banking services.

Google Play Store Rating: 4.5/5 with a total of 33,89,149 reviews

Here’s a direct invite link to download PhonePe.

2. Google Pay (Tez) – A simple and secure payment app

UPI Apps in India- Google pay

Google Pay, formerly known as Tez App, stands second in our list of best UPI apps in India. This app has accumulated a huge customer base in a very small time. And obviously, having a big brand name of ‘Google’ has helped this app to build trust among the new and existing customers.

Using Google Pay, users can send money to friends, pay their bills, shop online, recharge, or pay at the nearby café, etc. through the secure payment by Google.

Another most enjoyable part of using Google Pay is the “Scratch cards”. Whenever the users make a new transaction, they are awarded a gift card in the form of the scratch card. After scratching the card, users can earn a gift in the form of money which directly gets credited into the registered bank account. Anyways, you won’t earn a Scratch card on every transaction as there are a minimum value and number of transactions predefined by the app. However, if you’re lucky, you may get a reward of up to Rs 1 lakh.

Google Play Store Rating: 4.4/5 with a total of 27,76,391 reviews

Here’s a direct invite link to download PhonePe.

3. Paytm – BHIM UPI, Money Transfer & Mobile Recharge

UPI Apps in India - Paytm

Paytm is a quite well-known mobile payments app in India. Along with Paytm Mall, it also offers Paytm Wallet and Paytm UPI (was introduced in the year 2017). In simple words, we can call it a mega store due to the variety of products and services provided by this app.

Paytm users can perform almost each and every activity related to online payments on its app. And that’s why it is certainly the most used payments app and is third in our list of best UPI apps in India.

From making online Payments to buying household items, groceries, IRCTC train ticket booking, bus & flight booking, movie tickets, LIC premium payment, metro card recharge, buying gold, making loan payments, paying e-challans & more, everything can be done on this app.

Google Play Store Rating: 4.5/5 with a total of 61,27,939 reviews

Also Read : 7 Best Mutual Fund Apps for Direct Investment

4. Freecharge – Recharges & Bills, UPI, Mutual Funds

freecharge UPI App

Freecharge is another online payment mobile app in India which provides features like Mobile Recharges, bill payments, sending or receiving money through UPI– after creating BHIM UPI ID & linking the bank account. Moreover, because of its simple interface, everything seems quite easy for making UPI payments.

Besides, Freecharge app also provides the facility to invest in Mutual Funds, making investments with SIPs, booking movies tickets, buying food, shopping, purchasing travel tickets, etc and that too with an additional cashback and discounts.

Google Play Store Rating: 4.1/5 with a total of 11,21,313 reviews

Also Read: 7 Best Stock Market Apps that Makes Stock Research 10x Easier

5. PayZapp – Recharge, Pay Bills & Shop

PayZapp UPI App

HDFC Bank PayZapp is the fifth app in our list of best UPI payment apps in India. It is a complete payment solution giving you the power to pay in just One Click.

PayZapp is used to make online Recharge, Bill Payments, BharatQR Payments, booking travel tickets, Shopping, obtaining movie tickets, buy groceries and more. It supports payment by mVisa QR, MasterPass QR, and Rupay QR and is available to customers of all banks. Overall, PayZapp is convenient, fast and secure UPI payments apps in India and definitely worth checking out.

Google Play Store Rating: 4.0/5 – with a total of 2,82,240 reviews

5 best upi apps in India

Bonus: A few additional UPI apps in India

  • MobiKwik – Recharge, Bill Payment, Instant Loan, UPI, Insurance

    Google Play Store Rating: 4.4
    With a total of 12,03,032 reviews

  • BHIM SBI Pay: UPI, Recharges, Bill Payments, Food

    Google Play Store Rating: 4.4
    With a total of 2,63,337 reviews

  • Kotak – 811 & Mobile Banking

    Google Play Store Rating: 4.4
    With a total of 4,58,209 reviews

  • Pockets ICICI -UPI, Wallet, Bharat QR

    Google Play Store Rating: 4.1
    With a total of 1,47,135 reviews

  • JioMoney Wallet

    Google Play Store Rating: 4.3
    With a total of 1,86,001 reviews

That’s all for this post. Let us know which one is your favorite UPI payment app in India in the comment section below. Cheers!

How much does a wedding cost in India?

How much does a Wedding cost in India? (For Average Indians)

Weddings are a dream come true event for most couples. It is the single most awaited occurrence in your life. You want it to be extravagant and lavish to whatever extremes possible and while that is absolutely normal for you to expect, the ever-increasing cost of living and inflation has always been a major factor in the decision making of the entire wedding budget. The wedding cost in India is written in brief below.

The wedding cost in India may vary depending upon vital factors such as:

  • Guest count
  • Number of functions
  • Traditional activities
  • Venue location
  • Food expenses

Today, we will help you understand the various costs that you would have to incur while planning a wedding in India. Right from basic costs up to larger costs, we will try to cover all aspects of a traditional Indian wedding. Since the requirements of every religion differ from one another, the budget will differ too. However, we will give you a stable idea of the expenses incurred in a wedding for average Indians in Pune

We pick Pune since it is a metro area and expenses are higher in such areas. Remember, it is always better to assume an upper limit rather than a lower one so that when you save money from your budget, you feel ecstatic.

1. Venue:

A wedding venue can cost anywhere from thousands to lakhs and some even crores of rupees! But for an average Indian, the wedding venue must be one of the most time and resource-intensive decisions he has to take for wedding planning. In Pune, an average wedding venue for around 1000-1500 people should cost you anywhere around INR  1,00,000 to INR 3,00,000. This may be subject to change depending upon the number of guests, the location of the venue and the extravagance of it as well.

2. Decoration:

A big business in the wedding industry is the venue decoration business. A mediocre wedding decoration set up (depending upon the venue size) can cost you anywhere between INR 70,000 up to INR 30,00,000. However, for average Indians, this cost can be approximately INR 1,50,000 for a simple yet elegant venue set up with flowers and other attractive accessories.

3. Catering:

Catering is one of the major wedding costs in India and goes complimentary with the venue location decision. Like we Indians always say, “no one will remember anything about a wedding but the food!” So it is always good to research your options well before you go for any particular caterer. Again the costs will vary from vegetarian to non-vegetarian options. A vegetarian plate should cost you around INR 600 per plate and a non-vegetarian plate should cost you around INR 1,000 per plate or more.

4. Bridal/Grooms Attire:

A bride has a thousand expectations for the ideal wedding attire. Her lehenga will cost her anything between INR 25,000 to INR 1, 00, 000. An average Indian girl shall have to bear a cost of INR 40, 000 for the ideal lehenga along with the jewelry that goes with it for around INR 30, 000 extra. If gold jewelry is in the picture, for every tola of gold that you wear, INR 40, 000 shall increase in your list. Make up for the bride can cost INR 15,000 for basic bridal makeup and hairdo. Various bridal dresses from the Haldi, sangeet, and wedding and up to the reception could cost around INR 1, 00, 000.

Similarly, a groom’s sherwani would cost INR 40,000 (averagely priced) along with his other attire requirements such as juttis, turban, etc. 

indian wedding cost

5. Wedding Invitations:

Again,  planning the wedding cost in India is incomplete without a good and attractive wedding invitation card. A wedding invitation card will cost you anywhere between INR 50 – 100 per card. If you want to for more graphically created content, the cost may go up by thousands per card. So depending upon the number of invitees and your choice of content, the cost of your invitation cards can be decided.

6. Photography and Videography:

Photography and videography are extremely important for any wedding. When you look back at your wedding, there are tons of precious memories captured through these photos and video creations. Thus, employing a good photographer will cost you around INR 40, 000 per day and videographer will cost you around INR 50, 000 per day.

Go for a packaged deal of photo and videography as a bundle. You will definitely save more money by doing this and you will also get both the facilities from one vendor.

7. Accommodation:

Accommodation for guests traveling from outside locations (most weddings have at least some guests coming from outside) can be an added expense for a wedding. This can range from INR 1,000 per room on a twin or triple sharing basis and upwards to any amount depending upon the budget. Based on the number of guests and the number of rooms required, this cost will add up to your final wedding expense list.

8. Miscellaneous expenses:

A dozen things pop up out of the blue when the wedding cost in India is ongoing. Therefore it is important for families to keep a small amount of money aside for the same. Last-minute supplies, transportation costs of paying drivers, caterers, etc., or something that you have forgotten to add initially can be covered under this allowance. Additionally, if a DJ is hired for the Sangeet, his fees should be included however this is just an additional expense whereas others are bound to happen. 

Also read: Renting vs buying a home- Which one is better?

Bottom line:

Here is a rough summary of the different expenses involved in an Indian wedding:

  • Venue: INR  1,00, 000 to INR 3,00,000
  • Decoration: INR 1,50,000 to INR 3,00,000
  • Catering: INR 600- 1,000 Per Plate 
  • Bridal/Groom’s attire: INR 50,000 – 1,00,000
  • Wedding Invitation: Rs 50-100 per card
  • Photography: INR 50,000 per day
  • Accommodation: INR 1,000 per room

Overall, the average wedding in India may cost somewhere between INR 8-10 lakhs, if you are being thrifty. However, this is just an approximation of the wedding cost. Multiple factors will affect your budget and your requirements. Thus, do a thorough check and research extensively for all the above particulars stated in the above list.

Most importantly, do not over-do it. Your wedding should be as per your capability and not to show off to anyone. Be smart and be responsible with your finances. Good luck!

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7 Things to do Before You Start Investing

So, you’re thinking to start investing. But before you enter, are you prepared? Do you actually meet all the requirements that will make your investment journey smoother? In this post, we’ll discuss seven such things that you should do before you start investing.

1. Build an Emergency Fund

As the name suggests, an emergency fund is money that you put aside for emergencies. It is the money that you can reach out to during your hour of need and pay for those unforeseen and unexpected expenses such loss of a primary job, medical emergency, personal emergencies or even a car breakdown.

As a thumb rule, before you start making investments for your long-term goals, first you should build an emergency fund which should be greater than at least three times your monthly expenses. Keep this money aside in a separate account. You can read more about how to build an emergency fund here.

2. Have a budget & know your cash-flows

If you want to enjoy a healthy financial life, it’s really important to have a balance between your savings and your expenses. Budgeting your monthly finances and knowing your ‘cash’ inflow and outflow can help you plan how much you can afford to invest per month.

A simple profit and loss formula that you can use in your day-to-day life to understand your cash position is ‘Revenue — Expenses = Profit”.

Here, your total revenue (inflow) is the sum of all the income that you make from different sources like your job, business, interests on savings/fixed deposits, dividends, rental income, etc. And your total expenses (outflow) include your rent, groceries, transportation, bills, EMI’s, household expenses, etc.

When you deduct the total expenses from your net revenue, you’ll be able to find out how much you keep per month or year. And after calculating this, you can plan where to allocate this money and how much to invest in different investment options.

Note: If you are struggling with your personal budgeting, one of the easiest strategies that you can use to figure out how much should you save is the 50/20/30 Strategy.

50/20/30 is a really simple and straightforward budgeting strategy that can help you to define how much should you spend on your essential spendings (needs), savings and finally on your preferences (wants and choices). According to 50/20/30 strategy, you should allocate:

  • 50% of your monthly income on ‘Needs’ (like rent, food, etc)
  • 20% of your monthly income on ‘Savings’ (like your retirement fund, investments, etc)
  • And the remaining 30% of your monthly income on your ‘Wants’ (like traveling, dining out, etc)

50-30-20 rule

You can read more about the 50/20/30 budgeting strategy here.

3. Pay down high-interest debt

First of all, please note that not all loans or debts are bad. Here, we are talking about high-interest debts. For example, if you have taken a personal loan, it’s interest rate may vary from 13–18%. Similarly, a credit card company may charge you even higher interest on the outstanding amounts.

It doesn’t make much sense to invest if the profits that you make on your investments are lesser than the interests that you pay on your debts. For example, if your returns are 12% and you’re paying 14% as interest on your previous debt, then overall you’re in a loss. Here, instead of investing, it will be better to use that money to pay back and become debt-free.

Before you start investing, try to minimize or eliminate debt, especially high-interest debts and your credit card debt. These interests can kill your investment profits.

4. Take a health Insurance

When people are in the best of their physical health, an obvious question among them is why should they invest in health insurance? Paying a premium plan for ensuring health may seem an unnecessary expenditure.

However, accidents or health issues may come up anytime unexpectedly which can put a lot of financial and mental pressure. Further, it is a fact that, as you grow older, health issues come along with it. And hence, it is highly necessary to incorporate healthcare planning within the budget of your family financial planning.

Before you start investing, make sure to take health insurance first. Being medically insured can help you avoid facing financial instability in the future and enables you to get the best health treatment.

Also read: 6 Reasons Why You Should Get Health Insurance

5. Define your goals and make plans

One of the most critical things to do before you start investing is to define your investment goals/priorities and making plans to reach them. Here, you need to know why you are investing. It will keep you motivated and ‘on-track’ to achieve your goals.

Now, by definition, an investment goal is a realistic expectation to meet the returns by investing predefined money for a fixed time frame. The keywords to note here are ‘realistic expectations’ and ‘timeframe’.

Before you put your money in any investment options, set your short-term and long term goals and make plans for how you’re gonna achieve them. The goal can be person-specific like planning for children education, retirement fund, buying a new house or even financial independence. Once you’ve set your goal, you can choose the best investment options that can help you reach these goals in your defined time horizon.

Also read:How to Invest in Share Market? A Beginner’s guide

trade smart online discount broker 2

6. Evaluate your risk tolerance profile

Everyone has a different risk tolerance level depending on their age, financial situation, priorities, etc.

If you are young and have a stable job, you might be willing to invest in more unusual ‘high risk, high return’ options. However, as you grow old/retire, you might not have a job or primary source of income and hence you might depend on your retirement fund for meeting your expenses. Here, you may not be willing to take a higher risk and choose safer investment options.

Before investing, you need to define your risk sensitivity i.e. whether you’ve are high, moderate or low-risk tolerance profile.

As different investment options have different degree of risks, you can choose your investment options depending on your profile. For example, if you have a high-risk tolerance, you may invest in stocks, mutual funds, real estate, etc. On the other hand, if risky investments keep you sleepless at nights, better to choose low-risk investment options like fixed deposits, PPF, bonds, etc.

Also read:

7. Understand the investing basics

Don’t dive in deep water if you don’t know swimming basics. Similarly, do not start investing your money, if you do not understand the elementary concepts.

Before starting your investment journey, make sure that you understand what is meant by stocks, bonds, mutual funds, diversification, liquidity, volatility, and other investing basics. Here, you do not need to become a finance geek or an accountant. However, you should have good enough knowledge of the industry to make intelligent decisions.

7 things to do before you start investing

That’s all for this post. I hope it was useful for you. Besides, if you are ready to get an education, here’s an amazing course on stock market investing for beginners that you should check out. Happy Investing.

List of 10 Richest Person in India cover picture

Top 10 Richest Person in India in 2019

Top 10 Richest Person in India (Updated: Sept 2019):

India is widely known for its culture and diversity. With a population of around 1.33 Billion, India has set a high standard for itself in the world with its rising economy and annual growth rate. The fields of imports and exports have let India maintain stability in the market over the years.

Stemming from such fruitful opportunities, India is home to many millionaires as well as some billionaires who have put India on the world map as a fast-paced and rapidly progressing nation. These people have not only created a wide window for profitability but they have also helped the nation raise the bar for total GDP growth. They are in the list of richest person in India as well as in the world.

Here, we take a look at the top 10 richest person in India:

1. Mukesh Ambani:

Mukesh Ambani's Image - Richest Person in India

This name needs no introduction in India. Known by everyone, Mukesh Ambani is India’s largest business tycoon with a penchant for constant improvement. Mukesh Ambani stands 1st on the list of Richest person in India. He is the son of Dhirubhai Ambani and Kokilaben Ambani. He is also the Chairman and Managing Director of the Reliance Industries Limited which is one of the Fortune 500 companies in the world.

Mukesh Ambani’s net worth for the year 2019 was estimated around US $50 Billion and has been ranked number 13th on the Forbes World’s Billionaire list. His innovative ideas with regards to the Indian Telecommunications Sector (Reliance Jio Infocomm Limited) along with his other business prospects such as Reliance Industries Limited (Oil and Gas) have helped him attain the highest spot in our list.

2. Azim Premji:

Azim premji's image - Richest Person in India

Second on the list of the Richest Person in India is Azim Premji. He is known as one of the most generous philanthropists in India. He is the founder of Wipro (Western India Products Limited) which is one of the major outsourcing companies in India.

As of 2019, Azim Premji’s net worth is estimated to be around US $22.6 Billion. With the most recent development in their business with Alight Solutions of Illinois whose deal is worth US $1.6 Billion, Wipro has quickly improved its number and credibility over the years.

3. Shiv Nadar:

shiv nadar's image - Richest Person in India

Shiv Nadar comes from a humble background from Tamil Nadu but he has a made a big name for himself being the founder of HCL Technologies.

His net worth for the year 2019 has amounted US $16.4 Billion. HCL Technologies is the 4th largest software provider company in India and thus, it has created a credible name for India in the world market. His education endeavors such as Shiv Nadar University which provides quality education, are his ways to improve the Indian education system.

Also read: Top 10 Companies in India by Market Capitalization.

4. Lakshmi Mittal:

Lakshmi Mittal's image - Richest Person in India

One of the most well-renowned names in the steel industry is the name and fame of Lakshmi Mittal.

With net worth amounting US $13.6 Billion, Lakshmi Mittal has catapulted his company Mittal Steels to the top of the trade along with a profitable merger with Arcelor (France) in the year 2006. Now, ArcelorMittal has now started acquiring businesses that have failed or been bankrupted, in order to improve business prospects for themselves and other companies as well.

5. Uday Kotak:

Uday Kotak's image - Richest Person in India

Another prominent name in the richest Indians list includes the name of Uday Kotak. He is the Managing Director of one of the largest customer banks in India – Kotak Mahindra Bank.

His net worth is valued at US $11.8 Billion with constant mergers for improved profitability. His acquisition of ING Bank’s Indian operations in the year 2014 opened newer horizons for profit-making for the bank and for Uday Kotak himself.

6. Kumar Mangalam Birla and Radhakrishna Damani:

Kumar Mangalam Birla and Radhakrishna Damani's image - Richest Person in India

Although into separate business lines, these two have taken the Indian business world by storm through their profitable mergers and acquisitions over the years.

K M Birla has been with the Aditya Birla group for a while now and his unparalleled business sense has valued his net worth at a whopping US $ 11.1 Billion.

Radhakrishna Damani, the founder of D-Mart stores, has been an active investor in numerous ventures such as VST Industries (tobacco relevant), United Breweries (beer relevant) amongst many others with the same net worth as K M Birla at US $11.1 Billion.

Also Read: D-Mart Founder- RK Damani Success Story [Bio, Facts, Net worth & More]

7. Cyrus Poonawala:

Cyrus-Poonawalla's image - Richest Person in India

One of the most environment friendly philanthropists in India and his company Serum Institute of India is one of the largest creators of vaccines in the world.

His net worth is valued at US $ 9.5 Billion and he ranks No. 7 in our list. His company is known to produce around 1.5 Billion vaccines doses for a number of diseases. His son’s CSR venture, Adar Poonawala Clean City Initiative in Pune, has won a ton of appreciation from various business leaders.

8. Gautam Adani:

Gautam Adani's image - Richest Person in India

Being the chairman of Adani Group, he holds a rightful spot in our richest Indians list.

Gautam Adani has a net worth of US $ 8.7 Billion and his vast empire includes absolute control of one of India’s most vital ports, the Mundra Port along with investments in other fields such as power generation, real estate, the commodities market, etc.

Also Read: 3 Insanely Successful Stock Market Investors in India that you need to Know.

9. Dilip Shangvi:

Richest Person in India - Dilip Sanghvi's image

The pharmaceuticals industry is one of the most profitable in India. Therefore, Dilip Shangvi, founder of Sun Pharmas, deserves a mention in our list. His net worth is US $ 7.6 Billion which contributes to the ownership of India’s most reliable pharmaceutical companies.

10. Nusli Wadia:

Nusli Wadia's image - Richest Person in India

Lastly, the name Nusli Wadia is infamous in India. With him being the Chairman of Wadia Group, his net worth has been estimated to be around US $ 6.4 Billion. His company includes powerful and highly profitable names such as Britannia Industries (FMCG), GoAir (Airlines), amongst others. 

Bonus: Infographic on top 10 richest person in India

10 richest people in India

Feel free to share/embed the above infographic. Just give the credits to Trade Brains. Cheers!! 

tax saving ELSS Equity linked saving scheme

Should you invest in multiple Equity Linked Saving Schemes (ELSS)?

Equity Linked Saving Schemes or ELSS Fund is a variety of Equity Mutual Fund where the majority of the corpus is invested in equities and equity-oriented instruments. It is a tax saving Mutual Fund where your investments are locked in for 3 years.

ELSS are multi-cap equity funds which invest at least 4/5th of their assets in equities. Such stocks could be small-caps, large-caps, or mid-caps. ELSS funds can invest in the companies of any sizes. Apart from investing in the stocks of private companies, these funds also invest in the Government undertakings to a significant extent.

Note: If you are new to ELSS, you can read our previously published article here.

ELSS: A tax saving instrument

Previously people used to find FD, NPS, PPF, and ULIP as effective tax saving schemes. Nowadays, the taxpayers are feeling more interested in investing their savings in ELSS funds for availing tax benefit.

ELSS is not only having the lowest lock-in period but it also yields higher returns than the other conventional tax-saving instruments. If you are going to redeem your ELSS investments after 3 years, your capital gain will be taxed @ 10% if it crosses Rs 1 lakh.

As per section 80C of the Income Tax Act, 1961, you can get the benefit of tax deduction in a financial year up to Rs 1.5 lakhs. ELSS or Equity Linked Saving Scheme is a prescribed instrument under the said section. So, you can easily save your tax liability up to Rs 46, 800 (Tax plus Cess on such Tax).

Investing in ELSS for generating long-term wealth

If you are looking to create long-term wealth but willing to accept the risk, let me tell you that equities or equity-oriented funds are the best for you. Equities can fetch you substantial returns if you are willing to stay invested for the long term.

You can choose any form of Mutual Fund i.e. a small-cap fund, large-cap fund or a mid-cap fund. But, neither of the funds can provide you with tax benefits which ELSS can give. Moreover, if the markets seem to be bearish or moving sideways in the short run, you might feel like redeeming your units immediately.

If you have invested in ELSS, you can’t withdraw your investments before the expiry of three years. In that way, investing in ELSS ensures that you stay invested for a long-term irrespective of short-term volatility. So, if you are interested in staying invested for a considerably long period of time, ELSS is definitely an ideal investment option for you.

Should you go for only one ELSS or multiple?

In an ELSS fund, the underlying portfolio consists of around 70 to 100 stocks. Around 5,000 stocks are listed in the Indian markets. Out of such stocks, the top 250 of them contributes towards 90% of the total market capitalization. So, if you are investing in 6 ELSS funds, it means you are indirectly investing in around 600 stocks. This implies that you will end up investing in the stock market as a whole. Therefore, you are virtually removing all possibilities to beat the stock market.

Investing in excessive ELSS funds means you are indirectly looking to form a market portfolio. So, if you are looking to earn what a market index earns, you can opt for such a portfolio. It is highly probable that you won’t earn more than what the market earns but you are also not going to earn less than the same.

There is another limitation of investing in too many ELSS funds. Investing in an excessive number of ELSS will lead to portfolio overlapping. It means that you will be investing in the same stocks through multiple schemes. This would unnecessarily increase your expense ratio instead of yielding the benefit of diversification.

Well, if you are simply looking to invest in the market portfolio, you should consider investing in an Index Mutual Fund or an Index ETF. Through the passive funds, you will be investing in the market indices at a lower cost.

Let us discuss how the situation might look like if your portfolio consists of a single ELSS. If you own only one ELSS fund, it indicates that you have not diversified your investments at all. It seems to be a risky portfolio as you will be exposing it to the risk of underperformance of the Fund Manager. It is of no doubt that you have a higher chance of beating the market if the underlying assets of your scheme consist of top-performing stocks. But, if the market witnesses a downfall, your portfolio will crash down at a higher rate.

An ideal number of ELSS funds for your portfolio

Now, if you ask how many ELSS funds you should have in your portfolio, the ideal number could be either two or three. An ELSS fund is a multi-cap equity fund. Therefore, if you have chosen two to three ELSS funds in your portfolio, you can certainly form a strong portfolio in all possible ways.

Through a single ELSS fund, it is not possible for you to cover a substantial number of top equities. The likeliness increases if you add one or two more ELSS funds in your armory. If your investments can be spread across a good number of profitable stocks, you are going to make significant returns in the days to come. Although your portfolio expenses in the form of equity ratio will go up, the returns are high enough to cover the same comfortably.

We have discussed earlier that too many funds would lead to portfolio overlapping. But, you would not experience the same if you create your portfolio with two to three funds. Investment in a limited number of schemes is not going to capture the major portion of market capitalization. Therefore, you are not forming a portfolio which can replicate the market. So, whatever you will be earning will supposedly beat the market.

Also read:

Closing thoughts

No assurance can be given whether a portfolio consisting of two to three ELSS funds can alone serve all your wealth generation and tax-saving requirements. Forming a portfolio for an individual is dependent on several factors. If you are an investor with a high-risk appetite you can team up a small-cap equity fund with a ULIP. On the other hand, if you are highly risk-averse, you can go for a debt fund with a PPF.

Through this article, we have tried to give you a general idea regarding the number of ELSS funds which should be there in your portfolio. If you are seeking an investment option which combines wealth creation and tax saving, ELSS is your answer. Otherwise, if you have any specific requirements with respect to profitability, liquidity, and tax benefit, you are free to create your own portfolio accordingly.

tax saving tips trade brains cover-min

15 Must Know Tax Saving Tips in India

If you are an Indian resident, you are required to pay tax on your income (if it crosses the minimum taxable limit) to the Indian Government. Do you ever feel like you are paying an excessive tax? Have you ever thought of saving some tax from your taxable income?

The Income Tax Act, 1961 is a complicated statute in itself. If you are looking to carry out your personal tax planning, you might it find it a real tough job to accomplish.

In this article, we shall talk about the various ways which you can adopt to save your taxes.

15 Must-Know Tax Saving Tips in India

Let us first talk about the tax deductions you can claim by investing in some financial instruments specified u/s 80C. The maximum tax benefit allowed under this section is Rs 1.5 lakh.

1. Public Provident Fund

Investment in PPF (Public Provident Fund) is subjected to EEE tax exemption status. It is a savings scheme established by the Government which comes with a maturity period of 15 years. You can invest in it by visiting any bank or post office in India. Currently, the rate of interest offered on PPF is 8% every year.

2. Employees’ Provident Fund

If you are a salaried individual, you can claim a tax deduction on the contributions you make in your EPF account. The maturity amount and the interest income on EPF have also been exempted from Income Tax provided you have completed 5 years of service.

3. Five-year tax-saver Fixed Deposits

You can invest in 5-year tax-saver FDs to claim a tax deduction in a Financial Year up to Rs 1.5 lakh. These instruments carry a fixed rate of interest varying from 7 to 8% p.a.

4. National Saving Certificate (NSC)

NSC is having a lock-in period of 5 years and offers interest at a fixed rate. At present, the interest rate is 8% p.a. You can get tax benefits on both investments made and interests received.

5. Equity Linked Saving Schemes (ELSS)

ELSS funds invest a minimum of 4/5th of their assets in Equities. They have a lock-in period of 3 years. If your long term capital gain exceeds Rs 1 lakh during redemption, then such gains are subjected to tax @10%.

6. Life Insurance Policies

You can claim a tax deduction for the premiums you pay for various types of life insurance policies which include endowment plan, term plan, and ULIP. But, for availing this tax benefit, the sum assured (insurance cover) must be a minimum of 10 times the amount of premium which you pay.

7. Interests on home loans

When you repay your home loan (procured for acquiring or constructing a house), the principal portion of the same is deductible under Income Tax. The interests that you pay are eligible for tax deduction u/s 24(b) of the said Act while computing income from house property.

8. Senior Citizen Saving Schemes (SCSS)

The contributions made to an SCSS are eligible for a tax deduction. SCSS is having a tenure of 5 years. It is available for investments for those who are above 60 years. The rate of return offered by an SCSS is currently 8.7% per annum which is higher than a bank FD.

(Image credits: Paisabazaar)

Apart from section 80C, there are various other sections in the Income Tax Act of India which provides you with tax benefits.

9. National Pension Scheme (NPS)

Whatever contribution you make in your NPS account, you are eligible to obtain tax benefit up to Rs 1.5 lakh under section 80C. An additional tax deduction to the maximum of Rs 50k u/s 80CCD(1B) is available on your contributions in your NPS account. Investing in NPS lets you invest in both equities and debts at the same time and build a significant retirement corpus.

Also read:

10. Medical Insurance Premiums

You can avail tax deduction up to Rs 25k on medical insurance premiums paid u/s 80D. This tax benefit is allowed to you and your family. For senior citizens, this limit changes to Rs 50k. Again, if you are paying health insurance premiums for yourself and/or your family and senior citizen parents, the maximum combined deduction available is Rs 75k in a Financial Year.

11. House Rent Allowance (HRA)

If you are a salaried employee getting House Rent Allowance (HRA), you can enjoy tax exemption on the same if you stay in a rented house. But, if you don’t get HRA from your job but staying in rented accommodation, you can still claim tax deduction u/s 80GG to the maximum of Rs 60,000 p.a.

12. Home loan for constructing a house property

If you have raised a home loan for acquiring or constructing a house property, the interest payable on the same is tax deductible u/s 24 up to a limit of Rs 2 lakh per year. But, the interesting thing is that, instead of a self-occupied property, if you have given the house on rent, there is no upper limit for it. But, the total loss that you can claim on the head of income from house property is limited to Rs 2 lakh.

13. Partial benefits on Saving Account Interests

The interests that you receive on your Savings Bank Account are tax-free to a limit of Rs 10,000 per year u/s 80TTA. But, if you are a senior citizen, the tax deduction on interests received on both FD and savings account is allowed up to Rs 50,000 u/s 80TTB.

15. Disabled Assessee Deductions

If you are an Assessee suffering from any disability, you can claim tax deduction u/s 80U for yourself. Under this section, the maximum deduction from your taxable income allowed is Rs 1, 25,000.

15. Disabled dependent deductions

You can enjoy tax benefit u/s 80DD if there is any disabled person in your family who is dependent on you for his/her living. This section allows you to claim a deduction of Rs 1.25 lakhs from your taxable income.

Bonus: Donation or relief funds

If you make a donation to any relief fund or charitable institution, the limit of the tax deduction is 50% of your donated amount. Some entities allow 100% tax benefits on the donations made, subject to a maximum of 10% of the adjusted total income. There are some organizations where 100% of your donations are allowed as tax deductions without any conditions.

Closing Thoughts

In this article, we have provided you with some tax-saving tips. If you could follow our guidance, it would help you to plan your personal taxes better. The Income Tax Law of India is itself a huge one. Further, many amendments come every year in the form of a new budget (Finance Act), circulars, notifications, and case laws.

Therefore, we would like to warn you that you should not rely only on our stated tax-saving strategies. For managing your tax compliances in the most effective manner, it is recommended that you consult any tax consultant like a Lawyer or a practicing Chartered Accountant.

We wish you all the best for your personal tax planning.

3 Uncommon Alternative Investments Option in 2019 cover

3 Uncommon Alternative Investment Options in 2019

It is no secret that diversifying is the key to success for investing and as humans we love our options! Many investors assume diversifying means investing in different types of securities like bonds, stocks, and options. However, the top investors take the term in their most exclusive form and invest in truly diversified assets. This brings us to alternative investments.

What are alternative investments?

Outside stocks and bonds, there is a world of investments that we can choose from. Alternative investments are those investments that vary from the traditional forms of investing in terms of liquidity, how they are regulated and the way they are managed. Having a mixed basket of investments is very beneficial for an investor especially during a downturn. People who have experienced a recession or inflation will tell you that investing in only one type of asset will result in great losses.

A few examples of alternative investments include venture capital, real estate investments and even gold efts. These assets are usually more illiquid than traditional investments and have little to no correlation with stocks and bonds. However, alternative investments are less regulated than traditional stocks which are under the control of organizations such as FINRA, SEC in the U.S or SEBI in India. On the flip side, although they are not controlled investments, the performance of alternative investments is difficult to measure. This is because, unlike stocks, there is limited information available on alternative investments, making them difficult to assess.

Types of alternative investments

Alternative investments is a mindset approach to investing rather than a specific investment. There are various alternative investments out there and investors can choose the ones that best suit their management style. A few investments include:

1. Private equity

Investing in the stock market is great but not all companies are listed on the exchange. There are more private companies than public companies and the companies often take on an investor to help fund their growth. Private equity is the broad term to describe the spectrum of investors in the private market. The funds raised by the private equity firms will be invested in private companies, many of which include promising startups. The capital raised is used for organic and inorganic growth of the company. The amount invested is then returned back to the investors during an exit event such as the private firm issuing an IPO to go public or an acquisition or merger.

To assess the performance of this alternative investment, many investors use the internal rate of return (IRR) however this does not take into consideration the interim or negative cash flows. In recent years, this formula evolved to the Modified IRR which is a more holistic approach to analyze the performance of a private equity investment.

2. Collectibles

paintings

Collectibles is the broad term used to describe items such as cars, antiques, paintings and various vintage items. In other words, they are items that have a low intrinsic value. Many people place a high value on these items, but unlike stock and bonds that can generate profits and income, the value of the collectibles is based on the speculations of buyers and sellers. An investment into collectibles can help diversify your portfolio but you need to have a good understanding of the items you are collecting to reduce risks.

One of the best ways to invest in collectibles is to have a personal interest in what you are collecting. This will help you develop an interest in the market and gain expertise on the items you are investing in. Items collected this way will give the collector personal satisfaction of the items they own whether or not they receive the expected return.

It is important for investors to remember that collectible items have a long holding period. While stocks and shares can be sold at a whim, depending on market conditions, collectibles, on the other hand, need to be ‘held’ by the owner for an extended period of time. This is because collectibles tend to gain value over time and selling them too quickly can only result in high transaction costs.

While collectibles can help diversify your portfolio, an investor requires extensive knowledge in the market to make the right decisions. But collectible investing is great because not only is it an alternative investment but it is also a hobby for many!

3. Hedge funds

A hedge fund isn’t a single investment but rather a pooled investment that is managed by an investment advisor. A hedge fund raises money from investors and uses the money to buy up entire businesses, either through a takeover or by investing in the business to improve operations. There are also hedge funds that specialize in real estate or other assets such as patents and trademarks.

Investing in hedge funds can help an investor diversify their portfolios because hedge fund managers used a variety of strategies when investing. This includes arbitrage, distressed assets, and macro-trends. They also take a Leveraged approach to investment which is using borrowed money for investment.

Hedge Funds vary from private equity investments because they invest in public companies, thereby providing more liquidity and making it easier for investors to take out their money if required. A report by the World Economic Forum states that in the U.S investments in hedge funds represent 40% of total alternative investments.

Also read: What is a Hedge Fund? And How do they operate?

Closing Thoughts

Diversification is the mantra when it comes to earning high returns on your investments. While the stock market allows investors to assess the performance of their stocks and provides liquidity, it is not always the safest investment as the markets are constantly volatile. This has led to an increase in the popularity of alternative investments in the last couple of years.

Historically, however, alternative investments are more popular among high net-worth individuals as they require a large initial investment and cannot be converted to cash quickly. Nevertheless, alternative investments have numerous advantages such as portfolio diversity and active management of funds.

Alternative investments are now an option for all classes of investors and not just the wealthy ones. But these investments requires a lot of research and study and investing in them without a thorough assessment can be incredibly risky.

What is National Pension Scheme (NPS)? Advantages, Tax Benefits & More cover

What is National Pension Scheme (NPS)? Advantages, Tax Benefits & More

NPS or National Pension Scheme is a pension plan which was initiated by the Indian Government in January 2004. It was primarily introduced for those Government employees those who joined employments in 2004 and onwards.

Subsequently, the Government of India wanted to develop the habit of savings among the salaried Indians, specifically for retirement. Therefore, from the month of May in 2009, NPS was made available for all employed Indians. PFRDA (Pension Fund Regulatory and Development Authority) is the regulator of NPS in India.

How can you start NPS?

If you are a salaried Indian resident, aged between 18 to 60 years, you are eligible to invest in NPS. You can open your NPS account with any entity called the Point of Presence (POP). POPs mostly include banks and other financial institutions. The authorized branches of a POP are called Point of Presence Service Providers (POP-SPs). POP-SP acts as the collector of its POP.

In order to enroll in an NPS account, at first you have to make an application in a prescribed form. Next, you have to furnish the documents required for complying KYC norms. Once your application is processed, the Central Record-keeping Agency (CRA) will send you your PRAN. After that, you have to pay the minimum account opening fee along with the management fee to activate your NPS account.

Various types of Accounts in NPS

There are two types of accounts in NPS, which are Tier I account and Tier II account.

Tier I account is mandatory for all subscribers of NPS. If you are a Government employee, you are required to contribute 10% of your Basic Salary plus D.A. in NPS. The Government of India also contributes an equal amount in the same account. A minimum of Rs 500 per month is required to be contributed in your NPS account, i.e. Rs 6000 in a year.

In case you are a private employee, you get the option of choosing between NPS and EPF. If you choose NPS, you have to contribute an amount equal to 10% of the sum of your Basic Salary and DA. Your employer will also contribute an equal amount in your account. You can find your employer’s contributions towards your NPS account in Form 16.

Tier II account of NPS is a savings account and you can withdraw money from it anytime. Neither your employer contributes any amount in this account nor do you get any tax exemption on such contribution made. You have to pay Rs 1,000 to open this account. In your subsequent contributions, you have to pay a minimum of Rs 250 on each occasion. Further, every year end, your balance in this account should be at least Rs 2,000 to keep your account operation.

How does NPS work?

An NPS invests in Equities, Corporate Debts, and Government Securities. You can choose any from the Active, Auto or Default plan. In Active plan, maximum 50% of your investments can be allocated to Equities.

In the Auto plan, until you reach 35 years of age, maximum investments that can be made in Equities and Corporate Debts would be 50 and 30%, respectively. After that, in the next 20 years, the investments in Equities and Corporate Debts go down every year by 2 and 1%, respectively.

In the Default plan, maximum 55% in Government Securities, 40% in Corporate Debts, 15% in Equities, and 5% in Money markets can be invested out of the contributions made. If you are a Government employee, please note that you can only opt for the Default option.

The financial assets of your NPS account are managed by an established Fund Management Company. You can choose your fund manager from any of the following:

  1. ICICI Prudential Pension Fund.
  2. LIC Pension Fund.
  3. Kotak Mahindra Pension Fund.
  4. Reliance Capital Pension Fund.
  5. SBI Pension Fund.
  6. UTI Retirement Solutions Pension Fund.
  7. HDFC Pension Management Company.
  8. DSP BlackRock Pension Fund.

How your NPS account provides you with pensions?

When you subscribe to an NPS scheme, you are provided with a Permanent Retirement Account Number (PRAN). While you work, NPS accumulates your savings in your Permanent Retirement Account (PRA).

When you retire, your savings in the PRA will be used for providing you with pensions throughout your retired life. When you retire from your job after reaching a certain age, NPS allows you in withdrawing up to 40% of the corpus in your PRA. The balance corpus continues generating pension amounts for you annually.

You should also keep this in mind that you can only withdraw from your NPS account after three years from your subscription date have been completed. You can withdraw funds only to the maximum of 25% of the amount contributed by you. Furthermore, you are allowed to withdraw to the maximum of three times during your subscription tenure.

Also read:

Benefits of investing in NPS

When it comes to investment management, NPS provides you with a certain amount of flexibility. Your savings in NPS is operated and managed by a private investment entity. If you are dissatisfied with your chosen fund manager, you can shift to another Fund Management Company.

Apart from that, NPS is a safe investment as it is regulated by PFRDA, a statutory body of the Indian Government. NPS has been in India for around 15 years and it has consistently yielded between 8 to 10% returns every year.

One of the greatest perks of investing in NPS is that it provides huge tax benefits to its subscribers. Whatever you contribute to your NPS account is eligible for tax benefit up to Rs 1.5 lakh u/s 80C of Income Tax Act, 1961 for every Financial Year.

Further, a tax benefit of extra Rs 50k out of your employer’s contributions is allowed u/s 80CCD1B for every Financial Year. NPS has an EET status like PPF. This means the investments, returns, and redemptions are all eligible for tax benefits. You can read more on taxation of NPS in this blog.

Closing Thoughts

You must have heard that one should not put all the eggs in a single basket. Diversification is the key to success in the financial market. Diversifying your corpus is difficult if you directly invest in the market. This is because you would require a huge amount of money to create a well-diversified portfolio.

Investing in Mutual Funds can sort this problem to a huge extent. But, it is not going to be of much help to you if you lack the knowledge of picking the right Mutual Fund scheme for your financial needs.

NPS overcomes this shortcoming of Mutual Fund. Here, you don’t need to analyze a plethora of schemes by yourself. You just require picking your desired fund manager who would handle all your investments as per your chosen NPS plan. The beauty of investing in NPS is that you don’t need to possess any practical knowledge of the stock market.

Renting vs buying a home- Which one is better 3

Renting vs buying a home- Which one is better?

Renting vs buying a home has always been a big topic of discussion. Whenever we look for any long-term accommodation, we analyze deeply whether to buy a house property or take it on rent.

Some people say that staying in a rented home is better as we don’t have to spend a huge amount of money upfront. Moreover, when we opt for buying a residence, we mostly prefer raising a home loan which can again be a big commitment. On the other hand, those who advocate acquiring a residential property, state that it feels completely different to live in one’s own house and the house is their biggest asset.

We shall take an example to analyze the question of renting vs buying a home.

Renting vs buying a home

Let us consider two guys, Rohit and Sumit, who have got jobs as freshers in the IT sector in Kolkata. The former has decided to stay in rented accommodation while the latter has chosen to buy a flat on loan.

Let us see how the financial picture of Rohit looks like.

Renting a home

Renting vs buying a home- Which one is better 2

Rohit has decided to stay in a 3-BHK apartment on rent. Let us assume Rohit’s rent to be Rs 20k per month with an average annual appreciation of 5% per annum. This is to be noted that if you take accommodation on rent, your landlord may increase your rent with time so as to adjust inflation.

Coming back to our example, the expected rent of the apartment after 20 years can be assumed to be Rs 40k per month. The monthly rent after 20 further years (a total of 40 years from now) is expected to become Rs 80k per month. If we calculate, we will find that after 40 years, Rohit would have paid Rs 2.9 crores towards the rental of his home.

Pros and cons of staying in rented accommodation:

As Rohit has opted to stay in a rented apartment, he needs to consider a few key things. First, he can’t treat his house as his own home as the legal owner is his landlord. Next, Rohit is always exposed to the risk of losing his shelter as his landlord may ask him to leave anytime (by giving a notice period as per the rent agreement).

Generally, the landlords in the majority of the states in India impose restrictions on the number of years a tenant can stay in his house. This happens as the landlords are not adequately protected by the applicable Indian laws. There are certain restrictions that Rohit will have to face with regard to the renovation of his apartment and keeping pets. Moreover, he has no scope of enjoying complete privacy in rented accommodation.

There are a few advantages too that Rohit can enjoy while staying in his rented residence. He is not required to pay any house taxes. Next, Salaried individuals, who live in rented houses, can claim the House Rent Allowance (HRA) to lower their taxes – partially or wholly. Apart from paying a refundable security deposit and sometimes the maintenance charge, he is not required to pay any further lumpsum amount upfront.

If Rohit changes his job to another location or he is transferred to another location in his existing job, it won’t bother him financially. His contract with the existing landlord will be canceled and he will enter into a fresh contract with a new landlord.

Also read: HRA – House Rent Allowance – Exemption Rules & Tax Deductions

So, far we have discussed only regarding Rohit. Let us now analyze the situation of Sumit.

Buying a home

Renting vs buying a home- Which one is better 1

It was stated earlier that Sumit has decided to buy a similar accommodation like Rohit by borrowing from a Bank. Let us assume the amount of his home loan is Rs 40 lakhs which he has to repay in 2 decades time. The applicable interest rate is 8.3% p.a and Sumit requires paying EMIs of Rs 34,200 for 20 years loan duration. So, if we calculate, the total amount that Sumit has to pay after 20 years, it will amount to Rs 82 lakhs.

After the loan is repaid, Sumit is not required to pay anything at all to the Banker. So, for staying in rented accommodation for 4 decades, Rohit has to pay Rs 2.08 crores more than Sumit. Although Sumit is required to pay Municipal Tax every year, it is a nominal amount and can be ignored in our analysis.

Sumit would get dual income tax benefits every year as long as he is repaying the loan on house property. On one side, his gross total income will get reduced by the Interest on Loans paid by him u/s 24(b) of the Income Tax Act, 1961. On the other side, he would get deduction u/s 80C of the said for the principal amount of loan paid by him. The maximum deduction allowed u/s 24(b) and 80C are Rs 2 lakhs and Rs 1.5 lakhs, respectively.

So, from the above discussion, Sumit’s decision of purchasing a house property seems to be financially more viable than that of Rohit’s choice of rental accommodation.

Pros and cons of staying in buying a home:

Let us discuss some major benefits that Sumit can enjoy by opting for buying an apartment.

It is needless to say that having one’s own house is a sign of pride, sense of achievement and source of privacy. If Sumit is transferred to a new location or takes up a job in another location, he can sublet his property to someone. Even if he doesn’t stay in his house, it doesn’t mean that he has to incur a loss if he has bought the apartment on loan.

Many people say that rentals are always cheaper than EMIs. But, the fact is that, as time passes, the rentals tend to get higher and higher while the amount of existing EMIs doesn’t.

As an owner of the house property, Sumit can obtain any personal loan keeping his apartment on collateral. Today, real estate is a growing industry where the price of properties is going up every single day. Therefore, as Sumit has chosen to buy a house property, he will be investing in a physical asset having huge potential to generate large returns in the days to come.

There are a few shortcomings of buying a house too. Although Sumit will get the house in his own name, he can only enjoy the ownership in a true sense after he has repaid the loan in full. Generally, a Bank charges a down payment while granting the home loan. This upfront payment could be as high as one-fifth of the price of the apartment bought. So, in the short term, Sumit has to incur a heavy payout to buy a house property on loan.

Also read: Are REITS in India a worthy investment option?

Closing Thoughts

The decision of buying vs renting a home is not going to be the same for every individual. Whether you want to buy a house property or take it on rental, it totally depends on your financial situation. If buying accommodation suits my financial situation, it may not suit yours.

Moreover, both the options are having their own perks and shortcomings. In this article, we have evaluated both the options where buying accommodation sounds financially fitter than staying in a rented home.

Minimalist lifestyle Is it worth being a minimalist cover

Minimalist lifestyle: Is it worth being a minimalist?

Being a minimalist is all about living with less and in recent years it’s become somewhat of a trend with shows such as Tidying up with Marie Condo and the Minimalism documentary (both on Netflix) taking the internet by storm. They say that minimalist lifestyle can change your life for the better and living with less equals more time to focus on the important things in life such as growing your personal relationships. But who is a minimalist and is it really worth being one?

Minimalist lifestyle: Is this for you?

While the word minimalism, these days, is synonymous with the clutter-free way people live their lives, it was traditionally a word used to describe art and design (such as the decorating your home with a minimalist concept). However, this word has become so much more today as we use it to define a certain lifestyle- less is more.

The idea behind this concept is that in today’s digital age we are often overwhelmed with materialistic things such as our iPhones and laptops. We forget to spend time with our loved ones and enjoy the simple things in life like cooking or creating art. Minimalism serves as an answer to these problems.

Minimalism is intentional living and involves getting rid of anything that takes up unnecessary space in your life like unwanted clothing, household items, bills, and fees. While living a clutter-free life sounds like a good idea, it may not be for everyone. Here are a few pros and cons to help you decide if the minimalist life is for you.

The PROS

Minimalism lets you focus on what matters the most and take out what you don’t need. Here are a few reasons why you should consider this lifestyle.

It helps you find the things you really need

Let’s be honest, you could honestly survive without a lot of things currently sitting in your house. The first step to being a minimalist is picking an area or room in your house and clean it out. You will find a bunch of things you no longer use or didn’t even know you owned.

Take this opportunity to either donate or sell these things. Not only does this leave you with the things that are important to you but you can also make a quick buck on the side. The rule of thumb is to take an item and see if you’ve used it in the last 90 days if the answer is no, will you use it in the next the 90 days? If the answer is still no, you no longer need it.

Having fewer things makes it easier to budget

When you know exactly what you have, it is easier to budget and make decisions. One of the main reasons many people find it hard to forecast expenses and prepare financially for the future is because they have too many unnecessary expenses to think about. This includes bills to apps like Hulu or Netflix or unwanted subscriptions. While these may not seem like too much money at first they can add up over time.

A few ways to overcome these unnecessary minor expenses is by having just one card to pay all your bills. You can even get a card with a good rewards program to rack up those points. This way you have all your major expenses on one statement which makes it easier to budget for the upcoming year.

Another option is to have a single checking account and a single emergency fund. This way you can maintain the minimal balance for the account and have a better idea of your daily expenses. An emergency fund is particularly useful during a period of a cash crunch. Getting your finances in order is a crucial element in living a stress-free and clutter-free life.

Also read: How Much Should You Save  - 50/20/30 Rule!

You create room for the important things in life

Having too many things can create a sense of claustrophobia which often leads down a road of anxiety and unhappiness. So when we clear out unwanted items, it leaves more room for what truly brings happiness to our lives. Physical things tend to tie us down like an anchor and living a minimalist life can take that weight off your shoulders- freedom from greed and debt.

Happiness is subjective and can mean different things to each one of us. For some, it could mean spending time with your family, your puppy or even doing something you are passionate about. Many people find that living a minimalist life will get them closer to this goal.

The CONS

While living a minimalist life looks interesting, it is often easier said than done. Minimalism isn’t a personal project and tends to affect those around you as well. Here are a few cons of living a minimalist life.

The minimalist lifestyle is difficult to adopt

Living clutter-free sounds like paradise but many people find it incredibly challenging to trade in their material possessions for a more minimalist life. In today’s digital age, with new trends popping up on the internet every day, there is a lot of peer pressure to keep up with the latest styles. Living without material possessions (shoes, clothes and electronics) can seem unthinkable for many.

The process of de-cluttering your life is stressful and overwhelming and going through all your things can bring up a lot of memories (some good, some not so good). Moreover, minimalism has a different meaning for everyone so it can be hard to decide how much minimalism is right for you.

(Video Credits: Matt D’Avella)

Minimalism is not a one-stop solution to all your problems

Greed and debt are two evils that people want liberation from and many people see leading a minimalist lifestyle as the answer to all their problems. But this is not the case because if you wake up one day and decide to go cold-turkey and lead a completely minimalist life, you are more than likely to relapse and go right back to your old habits.

It is important to see minimalism as a gradual process rather than a quick fix to all your problems.

Also read: 7 Fun And Easy Tips to Save More Money

So, should you become a minimalist?

Well, that’s a question only you can answer. Leading a clutter-free life is a great feeling but it is not for everybody. Some people often find happiness amongst their chaos.

Choosing to live a minimal life depends on your mindset and what you hope to get out of it. If you do decide to become a minimalist, remember to take it one day at a time.

7 Incredible Side Hustle Ideas to Make an Extra Income

7 Incredible Side Hustle Ideas to Make an Extra Income

Thanks to the world wide web, earning a few extra bucks with a side-hustle is now easier than ever. But although there many different ways one can make money, you need to pick the side hustle ideas that matches your skills and needs.

Fortunately, there are many unique ways you can earn an income without an investment or a highly-specialized skill-set. While not all side-hustles may be the best fit for you, you need to pick the one that derives the most value- because at the end of the day, your job satisfaction is what mattes the most.

What are side hustles important?

Side hustles provide an outlet for you to pursue your passions outside your 9-5 job while giving you the opportunity to make an extra income. It is all about personal growth, discipline and can help you develop an entrepreneurial streak.

When choosing your side hustle, you may want to consider what you would want to supplement your current job with. This could be anything from blogging to selling your artwork online. Whatever your side hustle may be, it’s all about following your passions and seeing them through. Additionally, you can make some extra bucks and treat yourself.

Side hustle ideas

The idea of a side hustle can seem alluring but you are not sure what kind of job you want to do. Thanks to the developments in technology we have the world at our fingertips and a myriad of side hustles to choose from. A few of them include:

1. Sell your crafts online

If you have an artistic streak, you can use your talent to start a side hustle and earn some extra cash. They are many websites out there such as Etsy where you can list your crafts and other home-made items for others to buy.

Apps such as Instagram and Facebook are also great places to showcase your work. Many artists post pictures of their work on their Instagram or Facebook pages along with a link to their websites where customers can purchase the products. The rise in businesses born this way has led to a decrease in the number of brick and mortar stores worldwide.

2. Sell your stuff on e-bay or Amazon

A sure-fire way to make money online and have a lucrative side-business is to sell your items on websites such as e-bay, Amazon, or Olx. These items could include anything from household goods to furniture, books and even stamps. This is a great way to make use of things that you don’t really use or need. If you find that you have a knack for selling stuff online, you can do this professionally and earn a commission on every sale.

3. Drive for Uber or Ola

One of the best and most versatile ways to make money is to drive for Uber or Ola. Companies such as these have transformed the way we view transport in today’s sharing economy.

What makes these ride-share companies so great is that you get to decide when you want to work with just the click of a button. In metropolis cities such as Bangalore or Chennai, this is an easy and convenient way to make a side-income.

4. Start a blog

Starting a blog is not a quick money maker but it is a great way to create a platform for something you are passionate about while developing your skills.

What’s more? you can do it anywhere and from any part of the world. A blog is something you can create in your spare time and consistently working on it and posting great content can result in a high income eventually. You can even monetize your platform through sponsored posts, affiliate links or a shopping link to buy your products. Many people have created very lucrative businesses through their blogs.

5. Get a part-time job

If you want to trade in your time for money, you can get a part-time job. They are many options you can choose from to match your interests and skill-sets. A few ideas include babysitting, an administrative assistant or a barista.

If you are big on Instagram or Facebook, you can even take on a social media gig. The only downside to part-time jobs is that they often don’t pay as well as online businesses but they are still a great way to earn money while doing something you love.

6. Teaching

If you have the ability to teach other people skills, this opens up numerous side hustle possibilities. For example, if you are skilled in a particular academic field such as math or science, you could tutor students or even teach an online class. If your interests lie in other areas such as fitness or calligraphy, you can use your skills to teach a class in your free time. The great thing about teaching as a side hustle is that you get to do what you love while sharing your passion with others.

7. Freelance writing and editing

For those who possess the skill of putting words on paper, they are many side hustles that allow you to share your stories with others. Freelance writing and editing allows for flexibility and is quite enjoyable. You could write articles for magazines or journals on various genres (travel, fashion) and even edit student essays or websites online. You can develop your skills while expressing your creativity.

Also read: 11 Best Passive Ways to Make Money While You Sleep

Closing Thoughts

Tony Robbins famously said that’ if you do what you’ve always done, you’ll get what you’ve always gotten’ and this holds true for a lot of things in life.

Even if you love what you do for a full-time job, it is important to have an outlet where you can develop your passions and express free -thinking- this is where side-hustles play an important role in our lives.

While side-hustles can help you earn a supplemental income, they are important for many other reasons as it taches you to step out of your comfort zone and develop life-skills. While getting another job may be hard there are many ways you can earn an additional income as listed above.

So get a side-hustle and develop those skills!

How to eat an elephant? One bite at a time cover

How to eat an elephant? One bite at a time!

Desmond Tutu once wisely said, “there is only one way to eat an elephant: a bite at a time.”

In other words, what he meant to say was that even an enormous goal can be achieved if you take a little step at a time. Bit by bit, bite by bite, you’ll make possible what at first seemed impossible. Most people fail to achieve a massive goal because they try to eat the whole elephant at once.

Your financial goals are similar to eating an elephant. And in order to reach those goals, you need to take one step at a time!

Goal Setting:

The biggest factor for turning your dreams into reality is goal setting. No matter how big the goal, if you can set it, put a timer and start working on it, you can achieve the goal eventually.

Personally, I’ve two goals for the next five years. First, to turn my venture ‘Trade Brains’ into a massive online education platform which can provide financial literacy to thousands of investing population. And my second goal is to write a book. My long-term financial goal is to achieve FIRE- Financial freedom and retire early as soon as possible.

For those who know me, you might have watched me working on this blog ‘Trade Brains’ for over two and a half years now. I always knew that the path is not easy. But bit by bit, I’ve been adding investing lessons which can be useful for the beginners as well as matured investors. Similarly, for my long term goal of financial independence and early retirement, I have been working hard and investing consistently.

My investment strategy is simple. I do not try to get huge returns for a year or two by investing aggressively. I prefer consistent decent returns because I know that the power of compounding is in my favor. Time is the biggest friend for those who start investing early.

Now, why I’m telling you all this?

Similar to my goals, you might also have a gigantic dream of eating an elephant. Maybe you aim to build a huge retirement corpus or to buy your dream house on a beach across western ghats in India or to become a successful investor. And if you want to achieve these goals, you also need to take one step at a time.

If you want to learn how to invest intelligently and become victorious in investing, take your first step. Buy your first investing book and read it. Then read the second book and continue the process. You certainly won’t become an expert investor in a year or two. But with time, practice, and efforts, you will get better than 99% of the investing population.

In a similar way, if you want to build a huge corpus, let’s say for your retirement, you definitely cannot build this huge corpus by a few profitable investments. You need to be consistent in your investment strategy.

I receive a lot of emails from people asking for recommendations of hot stocks that can give them huge returns in the next six months or a year. But setting small goals and investing for six months won’t help in achieving a massive goal. Maybe you’ll win and get good returns on that stock. But this one-time return won’t make you any richer. You’ll probably remain at a similar financial situation compared to where you were last year. For achieving your financial goals, you need a reliable strategy that can give you consistent returns year after year, not just one-time big return by fluke.

It doesn’t matter how big your first few bites are, you cannot eat an elephant with a few big bites. Similarly, no matter how big the returns are, you cannot build your dream corpus in a year or two. Consistent returns are the steps to achieve your goals.

A few other tips to help you eat that elephant

Now that you have understood how to eat an elephant, here are a few other tips that can help you further:

— Set SMART Goals: Setting a smart goal is the first step towards achieving your massive goal. Often, SMART goal is described as (S)pecific, (M)easurable, (A)uthentic, (R)elevant and (T)ime bound

— Start breaking into small pieces: Even the biggest of the objects can be broken down into small atoms. Once you have set your goal, start breaking it down into small pieces. For example, if you are building a retirement corpus, find out how much you’ll need to invest yearly, monthly or even weekly to reach your goal in the desired time frame.

— Stick to the plan: “A goal properly set is halfway reached.” However, the next half is to stick with the goal– which is the toughest. If you are planning to build a corpus of Rs 10 crores in the next 30 years by investing in mutual funds, stick to your investment strategy. Do not stop your SIPs in between because of small-term market corrections.

— Celebrate small wins: Periodically measure how close you are to your goal and each time you reach a milestone, celebrate it. Achieving a massive goal will take time, and enjoying the small wins will keep you motivated to take your next bite.

— Mastermind: Probably the most important but often ignored tip. Keep close to people who encourage you and from whom you can learn. Surround yourself with people having similar goals as that of yours.

Closing Thoughts

The biggest mistake that people commit while chasing a massive goal is taking huge bites initially and try to eat the whole elephant at once. This eventually leads them to burn out too soon. Nonetheless, any big, enormous goal can be achieved by breaking it into small pieces and taking small steps.

Before we end this post, here is the final tip. Enjoy the journey. It’s gonna take time to achieve a huge goal. And enjoying is really crucial if you want to keep going.

That’s all. Take care and talk soon!

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7 Fun And Easy Tips to Save More Money

We all want to save money and build a comfortable financial cushion to plan for our future.  Many of us have milestones we want to reach like buying a house, a car, paying off debt or going on vacation. But although we may have good intentions, many of us don’t save money until much later in our lives because our current wants and needs seem much more important.

The trick to having enough money for a comfortable financial future is to start saving money as soon as you enter the workforce. Saving is not as overwhelming as it sounds and with a little prioritization and self-discipline, you can make it a life habit. Here are a few tips to help you get started:

7 fun and easy tips to save more money

1. Tackle your bigger debts

The first step to start saving money is to tackle your bigger debts, specifically the high-interest ones from any loans or credit cards you have taken out. This is because the fees on the loans add up quickly and can take up a significant portion of your income. Also once your debts are paid off, saving money in other areas of your life becomes much easier.

However, tackling the bigger debts can be intimidating so another effective way is to use the snowball method. This is when you start by paying off the small debts before you pay the larger ones. This method does not focus on the numbers in debt repayment but on behavior modification. When you pay the larger debts first, you will not see the numbers go down significantly and this can demotivate you. But paying off smaller debts is easier and you see the progress quickly which encourages you to stick it out until you’re debt free!

2. Cut down any unnecessary bills

When people budget out their expenses, they find many unnecessary leaks in their income. A major expense bracket is your grocery and entertainment bills.

For groceries, a great way to save money is by planning out your meals each week and taking account of what you have and what you need to buy. This will stop you from overspending on food and reducing any wastage. Managing your grocery expenses also reduces the money spent on restaurant meals as you can eat more home-cooked meals.

Brewing your own coffee at home is also very beneficial. Studies show that the average American spends $2,600 on Starbucks coffee every year which is a considerable amount of money to spend on coffee!

starbucks

3. Reduce household expenses

In addition to food and entertainment, there are many ways you can reduce your household expenses as well. A quick way is to have an eye on the thermostat in your home, lowering the temperature by 10 degrees Fahrenheit can reduce energy costs by 3-5%. Other ways to reduce energy costs includes taking shorter showers, washing your clothes in cold water or switching to LED bulbs that have a lower energy consumption.

With OTT platforms such as Amazon Prime and Netflix, many people no longer find the need for cable television. Although your cable bill may not seem like much, it adds up over the course of the year. Cutting ties with cable and switching to streaming services can help you reduce your expenses in the long run.

Another expense you can reduce is your phone bill. You can either opt for a family plan to lower your overall costs or minimize your data plan by using apps such as WhatsApp, Skype or Facetime to make phone calls.

4. Use a zero-sum budget

Saving enough money always comes down to a well-structured budget. If your goal is to save money aggressively, a good method to utilize is the zero-sum budget.

The goal of this budget is to make your income minus the cash outflow equals zero. This is done by allocating every single dollar you make to a certain category. So for instance, you could allocate money to food, entertainment, bills, savings and paying off debt. A survey conducted showed that people were able to save 19% more of their income with this method.

Also read:

5. Automate your savings

A fool-proof way to save money is to automate your savings. When you ensure that a portion of your income goes into a savings account, you will be living on less money without even realizing it.

Creating a budget is easy but sticking to it is the challenging part. By automating your savings, you no longer have to worry about not meeting your budget goals. It is a good idea to have a separate checking and savings account or an emergency fund where the money from your income can be transferred every month.

automating expenses

(Image credits: Forbes)

6. Get a side hustle

In addition to cutting your costs, another great way to save more money is to diversify your income. You can do this by getting a side-hustle.

A side hustle is a part-time job or a passion project which provides an extra source of income. Many people do side-hustles as a hobby and use it as an outlet to express their creativity while earning an extra income. Very often, bloggers and Instagrammers turn their side-hustle into their full-time jobs if they find it to be a lucrative career. A few great side-hustle ideas include writing, coding or teaching a class.

Also read: 11 Best Passive Ways to Make Money While You Sleep.

7. Take a ‘staycation’

A staycation is an inexpensive alternative to an actual vacation and can be just as fun! While it is a trendy term used in social media, the reasoning behind it is pretty rational. If you are looking to have fun while saving some money, you can find some fun activities to do in the area you live in instead of dropping money on expensive airline tickets.

A staycation includes everything you would do on an actual vacation like taking time off work to relax and unwind and spending time with family and friends.

Closing Thoughts

Saving money can be intimidating at first but with a little perseverance and discipline, it can become a life habit. Each person has different goals when it comes to saving and it is up to you to decide where you can cut costs to make the most of your income.

While saving is important don’t forget to indulge in experiences once in a while because at the end of the day it is the experiences that you will remember not the materialistic comforts.

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Are REITS in India a worthy investment option?

In developed Asian countries like Singapore and Hong-Kong, REITs or Real Estate Investment Trust is a popular investment option. However, the concept of REITs in India is yet to gain popularity among the Indians.

In simple words, a REIT is a collective investment scheme just like a Mutual Fund. It is an investment vehicle which pools your savings and invests in the portfolio of income generating properties. REITs are licensed to operate in India by the SEBI.

Structure of REITs

Although REITs are similar to Mutual Funds, they have a three-tier structure. A REIT consists of a Sponsor, a Fund Management Company, and a Trustee.

The sponsor is responsible to set up the REIT while the Fund Management Company selects and operates the real estate portfolio of the same. The Trustee ensures that the investors’ money is managed in the interest of the latter. Trustees have defined responsibilities which involve complying with all applicable rules and regulations that protect the investors’ rights.

How does REITs work?

A REIT pools money from investors and spends that sum in diverse real estates. It creates a portfolio of real estate assets including Offices, Residential Properties, Hospitals, Restaurants, Hotels, Warehouses, Corporate Buildings, etc.

A REIT is a trust which requires to be registered with a stock exchange. It issues its units via an IPO or Initial Public Offering. These units are consequently traded as securities in the stock exchange.

You can invest in the units of the REIT scheme in a similar way that you invest in shares, either in the primary market or the secondary market. The minimum ticket size of investing in a REIT fixed by the SEBI is Rs 2 lakh.

Now, the next big question is how to make money by REITs?

You can get returns from REITs in the form of dividends. Besides, you can also earn income in the form of capital gains if the REIT makes any profit by selling any of its property.

Quick Note: The minimum assets that a REIT is required to own are fixed at Rs 500 crore by the SEBI. Further, SEBI has made a rule that the minimum issue size has to be less than Rs 250 crore.

Perks of investing in REITs in India

As per SEBI guidelines, REITs are required to pay you at least 90% of their rental incomes every 6 months. Moreover, when REITs dispose of any of their properties, they have to distribute a minimum of 90% of such capital gains to their investors.

The activities of REITs have been also made transparent by the SEBI. A REIT has to compulsorily disclose the full valuation of their investments every year. Further, they are also required to update the same on a half-yearly basis.

Further, REITs are required to invest their money in a minimum of two projects as per SEBI. If a REIT chooses to invest only in 2 projects, it has to mandatorily invest 60% of its assets in a single project.

Besides, REITs have to allocate 80% of their assets in finished and revenue generating projects. They can invest the rest 20% of their money in under construction projects, mortgage-based securities, Government securities, cash & cash equivalents, and many others. 

Should you invest in REITs in India or actual properties?

house

Living in own house is in the bucket list of the majority of the income earning Indians. Moreover, unlike stocks or equity market, the valuations of properties don’t fluctuate drastically. Ideally, the intrinsic value of properties keeps moving upwards and hence, investing in the real estate sector seems an appropriate idea for a majority of Indians.

Furthermore, one can also earn a significant income in the form of rentals by investing in a property. And that’s why, even after owning a house property, many people prefer buying their second or third home for earning income in the form of rental (and of course, capital appreciation over time).

Nonetheless, the ticket size of investing in real estate varies from a few lakhs to over crores which might not be affordable for the major earning population of India. Here, in order to earn a regular income, investing in REITs seems more bearable because of the lower ticket size and diversification benefits.

Overall, if you are looking to invest in the Real Estate sector of India but do not have a huge corpus, REIT seems to be a more appropriate investment option for you.

Also read:

Closing Thoughts

REITs in India provide diversified and secured investment opportunities in the real estate sector. They are managed by professionals having years of experience and expertise who ensure to provide maximum returns to the investors at reduced risks.

By now, although investing in real estate seems profitable, but it is not free from limitations.

Firstly, no doubt, it is a profitable investment alternative for creating huge wealth but, it is only affordable for the upper-middle-class families and the affluent people. Second, both capital appreciation and rental income from properties depend on a lot of factors like infrastructure, location, industrial development, which may not always be in favor of investors.

Third, the Real estate in India has been affected by liquidity crunch in the past owing to low demand and unsold inventory. And lastly, although the Indian real estate sector is functioning under the regulations of SEBI, becoming an organized industry is still a distant future.

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5 Incredibly Inspiring Tips From The Top Women in Finance

It is no secret that the finance sector is a fast-paced, competitive environment where it’s survival of the fittest. When you factor in gender dominance into the equation, there are often more hurdles that women need to overcome to find long-term success in the industry.

According to the World Economic Forum Gender Gap report in 2017, ‘female talent remains one of the most underutilized business resources’ and this is especially true in the finance sector where although 46 percent of the industry are women, they only represent 15 percent of executive level positions.

While this statistic is shocking, it’s true. There are many women in Finance who believe that the right personality traits, qualities and skills, regardless of gender, can get you to the top of your career. Here are a few career tips from the top successful women in Finance:

Network, Network, Network

As they say, ‘it’s about who you know, not what you know.’ Getting to the top of your game in the financial industry involves having a broad network of connections. According to Sally Krawcheck, CEO and Co-Founder of Ellevest, it is the number one rule for success in business- for both men and women.

Building a strong network requires time and patience and a lot of hard work on your part. Your professional network can include people from all walks of life, who share the same passions as you and can help you achieve all your career goals. But networking is a two-way street so while you reach out to others for help, you should develop a mutually beneficial relationship and aim to be their ‘go-to’ person at a time of need. You’ll find that your kindness will be repaid in multifold.

Find your passion and work towards it

Do what you love and you love and you’ll never have to work a day in your life. Before you take up a job, be it in finance or any other industry, you need to make sure you are passionate about what you are doing. This is exactly what Edie Hunt, the Chief Diversity Officer at Goldman Sachs, did. She always looked for opportunities that highlighted her passions and aligned with her personal and professional goals. Hunt believes that if you are passionate about your job, there’s a high chance that you will be good at it.

However, Wei Sun Christianson of Morgan Stanley says you should not fill your goals with only passions as you may hit a rough patch during your career and can get disheartened. When chasing your dreams it is important to be driven and develop a versatile skill set to get that job!

Never stop learning

The opportunity to learn new things every day is a driving factor for many in their career. Elle Kaplan, the CEO of LexION capital says that her ‘deep-seated intellectual curiosity’ is a motivating factor to learn new things every day. For her, the financial markets are always changing and they are constantly impacted by a variety of elements from politics, to current events and even climate change. Keeping up with the constant changes in the markets gives her the opportunity to soak up a wealth of knowledge every day.

The gender gap presents an opportunity

It comes as no surprise that the finance sector is a ‘boys club’ and women often find it a challenge break into the industry. Francesca Frederico of Twelve Point Wealth Management says that with the right outlook on life, you can turn a challenge into an opportunity. Instead of trying to fit into a male dominated environment, use your expertise and skills to do things your way. Women need to think outside the box, be more willing to take risks and follow their dreams. Not only is it an enlightening feeling to be yourself, but you will see that not doing things a certain way is not always the right way.

Take the risk

The greater the risk, the greater the reward. In order to find success in the finance world, women need to trust their gut and take the risks to get the most out of their career. Although you may face many trials and tribulations to the top, you need to follow your instincts and take the leap of faith to reap big rewards. At the end of the day, your journey of risk-taking should lead you to a job that you are passionate about.

Also read: 5 Psychology Traps that Investors Need to Avoid

Bonus: It’s not always about the money, focus on making a change

This does not just apply to jobs in the financial industry but to any job you have in your life. While paying your bills is important, you need to use your knowledge to make a difference in the lives of the people around you. Many financial leaders use their skills to educate people on wealth management and investing. This is a system that is a necessity for many people in world as nearly a majority of the population has a hard time saving money.

Although there is a gender gap, there are still many women blazing a trail in the finance industry, they took the risks and fought for what they believed in, ultimately making their mark. The future is bright for women in finance and it is up to us to find our passions and work diligently towards them. So this Women’s Day encourage the women around you and climb higher mountains and celebrate each other’s successes.

“Every great dream begins with a dreamer. Always remember, you have within you the strength, the patience, and the passion to reach for the stars to change the world.” —Harriet Tubman