FROM THE FINANCIAL ADVISORY DESK :

Finances have always been the mainstay of life. This is more so in these modern times when most of us have carreers in private and globalised businesses and our lives are planned on leveraged finances. To keep ahead in life, we need to manage our financial affairs with a lot of planning and care.

In this background we bring forward to you few simple but very useful things to remember with regards to your financial affairs:

• Get your PAN at the earliest and start filing your Income Tax Return regularly, every year. This small step will formalize the financial identity of an individual and generate confidence about his financial worthiness for any kind of loan application before any bank or financial institution.

• Never hold more than one PAN and always provide correct information for your PAN in any of your transactions otherwise you may face serious legal consequences later on. Simple mistakes may cause you disproportionate embarrassment from Income Tax Departments of Government of India. So start taking these things seriously.

• Avoid the marketing gimmicks while buying financial products and compare the costs and benefits based on maximum possible information and analysis. For example:

• • Generally, prefer a bank account that requires a lower minimum monthly/ quarterly average balance (MAB/ QAB). Do not fall for the attraction of free services in accounts with higher MAB /QAB, unless you really require those free services. Otherwise you will end up paying more of minimum balance charges than you save on free services.

• • Plan your income tax deductions under Section 80C (Rs. 100000/- on investments in specified savings products – e.g. Life Insurance, NSC, ELSS, repayment of home loans etc.) Many times one invests in those products more than one need to do and realizes later on that he is losing more in terms of interest /opportunity cost of funds than he saved on tax.

• •  Personal loans are always better than credit cards due to their lower rate of interest and bank charges. Secured loans are always cheaper than unsecured loans.

• • Always prefer a loan bearing fixed rate of interest, if you are not comfortable in doing (or in sparing time for) financial calculations or in understanding the details of legal agreements.

• Don’t speculate more than you can afford to. Allocate your income in this sequence –
  • Daily necessities,
  • Savings and investments for safety (fall back for a rainy day),
  • Future accumulation for dreams and then only
  • Speculation.

Though many have made a killing in share markets or in property market boom, but many others have been killed as well. After all, in all speculation, it is transfer of money from one hand to another. One gains at the expense of another. There is no net creation of wealth.

• In short, one needs to remember the following financial common sense:
• • Nothing comes free.
  • Anybody’s resources are limited. And secondly, there is always a time value of money. One rupee today is more precious than one rupee tomorrow. So, one should plan for and buy only what and when it is needed.
  • There is no alternative to knowing the cost and benefits in full detail of the transactions that you enter in, or reading the documents and agreements that you sign.