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Old 13th April 2010, 14:48   #31
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Originally Posted by pramodkumar View Post
The point is there is no decipline in our lives(most or rather some of us ) today, we will modify our life styles automatically according to what we earn, For us Short term is a day and longterm is a month, a year sounds like 10 years and 10 sounds like 100, so we end up living a life which is not at all lavish but also not lean
See Pramod, you've answers for most of the questions but as you say, the discipline lacks & that's the reason our grandparents were more happy.

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The last movie we went for was my name is khan which was almost 2 months from today
To help you further on our life style, the last movie that we watched was Guru

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But still where is the savings?
Unless you start controlling yourself on expenditures, you cannot realize the savings

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Without knowing all this i just asked him how many months can he sustain himself without and income, his answer was couple of years . I am not sure if any other guy working for an IT company would have such an answer.
I'm sure many guys will agree with me that they'll be able to sustain anywhere between 6-12 months. I wouldn't exaggerate myself saying couple of years, but I will be able to sustain definetly for an year with the same standard of living.

Last edited by aargee : 13th April 2010 at 14:53.
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Old 13th April 2010, 15:11   #32
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See Pramod, you've answers for most of the questions but as you say, the discipline lacks & that's the reason our grandparents were more happy.
Aargee, i agree with you, but just to add (bit OT) my grand parents were not the rich, but they were happy, those were days when family values were important, i know a person who is selling his Canon 30D + (17 - 85)mm + (70-200)mm F4 L -series IS, reason upgrading, while i am not sure if he is a good photographer but what i came to know is he is agadget freak, he might be able to do so but will i be able to follow him? the answer is no. I do not have a credit card for the last 4 years now, i had one with 10k limit 4 years ago, but it taught me a lesson. so that was my first step to decipline. My loans are getting over by march next year, and i am not taking another loan that is my second step. I have to have some investments may be in 2 years so that i can afford to stay at home for a year.

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To help you further on our life style, the last movie that we watched was Guru
Guru is a Nice movie, here in trivandrum each ticket cost 40 Rs insted of 250-300 in chennai, the question i have to myself is, there are no ways of spending money here, but still no investments.


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Unless you start controlling yourself on expenditures, you cannot realize the savings
The point is not only how to control ourselves, but also how to systematically start saving, there are no shortcuts but definitly there are better roads to success, this thread is helping not only me but a lot others. Let people share their success stories, let this thread also be a motivation for others who are still nacent in their careers, Though in my 5 years of career, and 4 years of marriage, i might not have savings, but i have every houseold article a car, a decent life style and loans which are still manageble, i feel saving some money now would add to my achivements, i would not call the past as wasted years.


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Originally Posted by aargee View Post
I'm sure many guys will agree with me that they'll be able to sustain anywhere between 6-12 months. I wouldn't exagerrate myself saying couple of years, but I will be able to sustain definetly for an year with the same standard of living.

my target now is get where you are , later where my friend is.

ALL please share some success stories, every one i met so far only tells half of the story, like i invested in shares and i am successful, please be little elaborate for boneheads like me

Pramod

Last edited by pramodkumar : 13th April 2010 at 15:15.
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Old 13th April 2010, 15:25   #33
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I do not have a credit card for the last 4 years now, i had one with 10k limit 4 years ago, but it taught me a lesson. so that was my first step to decipline. My loans are getting over by march next year, and i am not taking another loan that is my second step. I have to have some investments may be in 2 years i can afford to stay at home a year.
, Pramod, credit cards (CC) has got nothing to do with savings; I own a CC for over 12 years now & still consistently putting money aside as saving.

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Originally Posted by pramodkumar View Post
Guru is a Nice movie, here in trivandrum each ticket cost 40 Rs insted of 250-300 in chennai, the question i have to me is there are no ways of spending money here, but still no investments.
I couldn't get you, can you elaborate more?

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The point is not only how to control ourselves, but also how to systematically start saving,
The point here is, unless you stop spending you cannot save, but the viceversa does not hold good. Let me know if you want me to elaborate on this.

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there are no shortcuts but definitly there are better roads to success,
Success is a subjective word, so let me not use it. But yes, there're shortcuts, but the problem is the sooner you get more money, the sooner it leaves you. So, start early & start with large amount.

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Though in my 5 years of career, and 4 years of marriage, i might not have savings, but i have every houseold article a car, a decent life style and loans which are still manageble, i feel saving some money now would add to my achivements, i would not call the past as wasted years.
Trust me, first 3 years of my career I saved nothing. The next 3 years I should've done about 75% a month & the next 2 years about 50% a month. So 5 years is never too late. BTW - are you saying 5+4 or just 5 years? Fortunately this forum is helping you & I'd to learn the hard way all by myself.

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ALL please share some success stories, every one i met so far only tells half of the story, lie i invested in shares and i am successful, please be little elaborate for boneheads like me
Pramod, success is a subjective term, we can all keep talking only about the methods for saving here.

Hope you've read this book by now.
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Old 13th April 2010, 15:45   #34
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I started saving from Day 1 of my career, which was more than 10 years back. This is one good habit I inherited from my dad. Having said that, I never compromised on my living standard. As many folks wrote already, it's all about training yourself to have that financial discipline. On the other hand, I know people who think twice or thrice before spending 70 rupees to buy themselves a mid-day meal, who take a loan to buy anything expensive, who maintain 4 credit cards all of them having negative credit etc.

I have no loans as of now, (ad a car loan which is closed now) and it feels good to be in this state. I cannot even imagine the state of some guys where they end up having to pay about 35K EMIs for 15 or 20 years for the 55 Lakhs apartment which they bought.

Just add up all that interest one's paying! My approach is, accumulate as much wealth as you can, and then spend for your bigger financial needs like a house or car for example. As far as possible, stay away from loans. I won't even buy the tax saving argument if you have a home loan.

If you have EMIs to pay, you're bound to your job for the monthly income - unless you have strong financial support from someone. I remember the time when recession hit IT industry, the most worried people among my friends were those paying hefty EMIs.

Honestly I don't want EMIs to be my driving factor to carry on with my job.

Last edited by clevermax : 13th April 2010 at 15:56.
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Old 13th April 2010, 15:50   #35
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Just one solution to all these problems, Don't get married and don't plan a family. You can surely live a peaceful life ;-). He he just kidding but I need to do the exact opposite of what I said. But this is nice discussion, I have had similar discussion once in a year with friends/colleague and self. After the brainstorming sessions I would agree to save money and start doing so also. But after 3-4 months of savings I will find out a way to spend all the money that I saved and actually would end up spending more than I would've spend had I not saved. Yes, I'm the classic case of impulsive buyer who just can't stop himself from buying something new which I like. Whenever I see money in my account all I can think about spending it somehow.
And I've probably two of the worst (in terms of cost) hobbies, Photography and watching movies and I don't think twice when there is an urge to spend for any of these two hobbies. Already spend probably more than 50% of my income till date on my hobbies. I find immense satisfaction to spend on my hobbies. So for a person like me it's a difficult proposition to save money for the rainy days.
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Old 13th April 2010, 15:51   #36
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Thats a discerning thought which most of us know but somehow dont come to terms with since we all are carried away by so many external factors and influences which makes us spend money ( many a times, unnecessarily).

I too was like most people who spend entire money and at the end of month a bleak bank balance stares back at me. But, over the last few years, i decided to take that situation by its throat and strangulate it for good.

My simple advice is to save cash ( i beileve only in liquid cash) to the tune of 15% of your monthly net income, if possible. If you cannot, then target for 10%. IMO, a minimum of 5% of your monthly net salary should be saved at any cost. Else, your heading straight for disaster.

Another influencing factor is that my parents force me into several obligations. These huge monetary obligations each month are towards "cash saving". Not, spending !

As and when some additional cash comes in, that again goes as advance payment towards cash savings.

When it comes to my case, I am happy to say that my target of saving 15% of monthly income initially (3-4 years ago) has drastically gone up and I now save anywhere between 40%-50% of my monthly income towards cash savings.

Another crazy fetish/dread that i have is "not" to have a healthy bank balance. For some it could be 10K, for some it could be 50K but for me, if its anything less than 2 Lakhs, i just cannot go to sleep have the feeling of impending doom.

That money is parked for "unforeseen emergencies" and helps me in sleeping peacefully.

Having said all the above, i repeat again. Please save a certain % of your monthly income and see the amount grow in just a few years. It's a great feeling !!!
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Old 13th April 2010, 15:54   #37
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There are different Lifestyles

A. Hand to Mouth existance :
-------------------------------------------
In this class Saving for the future is the priority number one. Expenditure will be pushed further to ensure that the targetted savings are achieved every month.

the formula is
Income - Liabilities - Insurance/Healthcare - Education expenses - Target Saving - = expenditure

explaining a bit more..it could mean

* basic Entertainment (TV centric)
* near zero lifestyle defining equipment/infastructure
* need based expenditure for clothing
* Zero expenditure on travel/vacations/gifting

B. Life is Good :
---------------
In this class, plople gradually invest in proving the lifestyle and use their savings for this.

here also Savings are priority over expenses, but it is very much balanced.

so the formula becomes..

Income - liabilities Insurance/Healthcare - Education expenses - investments to to improve lifestyle - saving - expenditure = 0

explaining a bit more.. it could mean

* Basic entertainment (TV/DVD/cable TV etc)
* Basic lifestyle infrastructure/funiture/gadets
* own transportation / vehicle
* affordable indulgence on clothing
* minimal/need based travel/vacations/gifting

C. Consuming Indulgence :
---------------------------
In this class, people are nothing pure consumers who indulge themselves.
basically depends on the disposable income

so the formula become..

Income - liabilities - eduction expenses - living expenses - lifestyle expenses - target saving = cash surplus

This is when the probelms really start. one needs to dynamically control the lifestyle expenses and saving targets to ensure that the cash surplus is near zero. else the cash will spend itself anyway we do not find a better way to park it.

D. Insane Indulgence :
-----------------------
There is no formula here, it means simple, the person is just focussed on indulgence or spending spree like no tomorrow. here often person returns to hand to mouth exsistance because he does not buld any reserves.

Deciding a lifestyle for oneself is the first decision one as to do as a family. It depends on one's individual goals/aspirations to family goals, one's values/beliefs, circumstances/pressures, one's apetite for risks etc etc.

Planning is the next step to pin down the above made deicsion. Income planning, Savings Planning and Expenditure planning are the three different things to be done.

Typical planning cycles are as below

1. Immediately after one gets his first job
2. re-evaluate after 3-4 years
3. re-evaluate immediately after one's marriage
4. re-evaluate once the child is born/starts schooling
5. every 3 years atleast.
6. Every time a decade is added to one's age (40, 50)
7. 2 years before retirement from active work life
8. Every year after the retirement.

Best thing to do is to focus on Income planning than expenditure planning. Enhanced income is always a better situation than reduced expenditure. Income can be enhanced by being in a better job or having more streams of income (e.g. from rental, from interests, from stock market returns, from having more income earning members in the family etc)

Once Planning is done, only thing left is execution, but it is the most difficult thing, there are no short cuts, just do it.
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Old 13th April 2010, 16:02   #38
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Originally Posted by aargee View Post
, Pramod, credit cards (CC) has got nothing to do with savings; I own a CC for over 12 years now & still consistently putting money aside as saving..
Getting rid of the CC i had was the fist step towards decipline, i have a friend who used to have 2 cards, and a good amount of saving, he got into some money chan business and he helped to enroll people under him with his card later he when the business went broke he had huge debts, this made me stay away from CCs


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I couldn't get you, can you elaborate more?.
When i was in hyderabad evertime i used to visit Imax i ended up spending atleast 1k, that time i knew i had to avoid going there to reduce my spending, here there are no such places but still money goes, i have tried maintaing an excel sheet but is of no use


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Originally Posted by aargee View Post
The point here is, unless you stop spending you cannot save, but the viceversa does not hold good. Let me know if you want me to elaborate on this..
Thats ok, got your point


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Originally Posted by aargee View Post
Success is a subjective word, so let me not use it. But yes, there're shortcuts, but the problem is the sooner you get more money, the sooner it leaves you. So, start early & start with large amount. .
True, for me success is to have a peaceful night sleep, which get every night


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Originally Posted by aargee View Post
Trust me, first 3 years of my career I saved nothing. The next 3 years I should've done about 75% a month & the next 2 years about 50% a month. So 5 years is never too late. BTW - are you saying 5+4 or just 5 years? Fortunately this forum is helping you & I'd to learn the hard way all by myself..
Its 5 actually(the 4 is actually included in the 5)


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Originally Posted by aargee View Post
Pramod, success is a subjective term, we can all keep talking only about the methods for saving here.

Hope you've read this book by now.
That book is on my list

Pramod
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Old 13th April 2010, 16:02   #39
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I started saving from Day 1 of my career, which was more than 10 years back. This is one good habit I inherited from my dad. Having said that, I never compromised on my living standard. As many folks wrote already, it's all about training yourself to have that financial discipline. On the other hand, I know people who think twice or thrice before spending 50 rupees to buy themselves a mid-day meal, but will take a loan to buy anything expensive, will maintain 4 credit cards all of them having negative credit etc.

I have no loans as of now, (only had car loan which I closed) and it feels good to be in this state. I cannot even imagine the state of some guys where they end up having to pay about 35K EMIs for 15 or 20 years for the 55 Lakhs apartment which they bought.

Just add up all that interest one's paying! My approach is, accumulate as much wealth as you can, and then spend for your bigger financial needs like a house or car for example. As far as possible, stay away from loans. I won't even buy the tax saving argument if you have a home loan.

If you have EMIs to pay, you're bound to your job for the monthly income - unless you have strong financial support from someone. I remember the time when recession hit IT industry, the most worried people among my friends were those paying hefty EMIs.

Honestly I don't want EMIs to be my driving factor to carry on with my job.
As your name says, you are very clever and also i am sure you are too far a lucky chap.

What about people who will have to start from the scratch from looking for job, earning first salary then think of saving and then think of an house. An house is everybody's dream. People do tend to take risks to make an house.Me too have taken a risk by opting for a loan. I too pay an EMI for this.

How can anybody think of generating so much funds to buy a flat or a house without any loans. Well i cant think of it even though i am on my own for a decade now.But yes i have made couple of assets which are clear of loans now.This is also the case with somebody who wants to buy a car he or she loves.

Come on , we cannot keep quite not taking risks in life. I cant think how anybody can generate 50 lakhs or so to buy a house, flat without loans.

But yes, one has to think and plan well to take a risk.

I have been using credit cards for a long time now. This has never put me in any kind issues, since my funda of using the credit card is different. I use it only if i have the cash ready to pay it the day i swipe the card. I mean to say that the credit cards are to be used only if you have the spent amount as a saving. I clear the outstandings just before a day or two the due date is near.I have not paid a single penny as interest on the card whatsoever.

and Max, i too know so many guys who not only think hundred time to spent for their meal, but dont spend at all. I do have a friend from past 20 years, who i have never seen spending a single paise till now. i have never seen money in his hands. He comes with us does everything with us, but uses the loo when the bill arrives.

I also have a friend who is CEO of a ready mix company, who does the same thing. he started off as a site supervisor after his BE.

Today, He talks big , very big infact, but when it comes to spending, there is no way you can expect any contribution from him.He looks somewhere and is absolutely quite when the bill arrives.

I have two sibling who compete with each other. Last year, one of my sibling bought a scorpio, the other sibling bought a Fortuner this year. These silly ego things are to be avoided. Both tell me, that they are no less to each other.

End of the day , " It takes all kinds to make the world" and calculating the risks should make things better than push us into trouble. Overspending or oversaving should be avoided. Temptations are to be controlled knowing our limits. I think living a very simple life and not falling for unnecessary materialistic things should help a long way.

Last edited by nandans2005 : 13th April 2010 at 16:22.
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Old 13th April 2010, 16:04   #40
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WARNING - Long Post!!
&
There is no one size fits all in personal finance - strategies will vary based on age/income level/no of dependents/goals and very many other factors. However, I will try to stick to the basics here.

Step 1: Begin at the begining

First of all, we need to find how the money comes and how it goes which means we need to first total up our monthly net income sans tax. That usually is easy (if you are salaried) and once you have that figure, then you should find out as to where it goes - Observe /note down every paisa you spend over a typical one month period. Once you have this information, group them expenses into broad categories - House EMI, Car EMI, Credit card payments, House maintenance, grocery, eating out and so on.
I'm sure you will be surprised at some of the expenses - I was. Anyway, once you have the info, create a monthly spending plan. A spending plan is a plan which helps you allot a certain amount to each of the categories. Be honest with yourself. Do you really need to eat out 5 times a week? Or do you really want to watch so many movies?
Make sure that the plan you make is something you are comfortable sticking to - cutting down eating out to nil will not work either so try to find a balance. Ensure that at a minimum, your income is a little bit more than your expenses. We will see how to put that "little bit more" to work in subsequent steps.
Oh by the way, take all the credit cards you have and lock them away somewhere you cannot access and take a pledge (Bheeshma - Parthijna) that you will never use credit cards again.

Step 2 - Building an emergency fund

An emergency fund means exactly that - money to be used in an emergency. If you are living pay cheque to pay cheque - and an emergency comes along, you will end up going deeper in debt to get over that situation. This fund is something which will help you pay cash and tide over that emergency without using say a credit card or going for a personal loan.
That "little bit more money" comes into play here. Start a savings account (separate one from your salary account) and put the monthly amount into the savings account. This should form a basis for your emergency fund. Meanwhile keep paying your EMI's and minimum payments on your credit card balances (if you have them). I suggest having minimum 2 months of living expenses in the emergency fund. By living expenses, I mean the amount of money you will need to live comfortably paying all your regular EMI's, paying your house maintenance, spending on food etc for one month. People have different views on how much the emergency fund should contain but 2 months is a good starting figure.

I have for example, a 12 months emergency fund. It means that if I loose my job today, I can live comfortably for next 12 months without any income. Sometimes, even 2 months of living expenses is too much to aim for initially. In that case, suggest with a figure you are comfortable with - say Rs 10,000 Rs. Do not touch your emergency fund for regular expenses. It must be only used in an emergency - like hospitalization/unexpected expenses like car breakdown/house repair etc.

Once you have build up an emergency fund, start step 3.

Step 3: Getting rid of debt

This step is for those of you who have debt other than a housing loan for a self occupied house. No debt other than housing loan EMI's? Great. Jump to step 4.
Before we start investing and truly saving money, we have to eliminate our debts. For that, the best method I have come across is known as the "debt snowball" method especially if you have credit card debt.
The debt snowball works like this:- list all your debts in the order of highest interest rate debt first to the lowest interest rate debt last. Now, start paying that "little bit more money" every month into the first debt (highest interest rate debt - usually a credit card debt). Keep paying the minimum payment on your other debts. Once you have paid off that debt, then add the amount you saved by paying off the first debt to the minimum payment on your second highest rated debt and so on until you are left with essentially no debt.
Another variation to this which I like works like this - especially if your highest interest debt is a huge amount - instead of listing the highest interest debt first, list the lowest amount of debt first. This way, you tend to see results faster and get satisfaction in seeing your debts go away faster.

Step 4: Putting money to work

Now that you have no debt (or never had to start with) and that "little more money" has become "a substantial amount of money" per month, let us start investing that money because saving without investing is almost as bad as not saving at all (more on this on some other post).
Here is a very simple plan for investing in the future:-
First, open a PPF account. Start putting your money monthly in that. You can invest a maximum of Rs 70,000 per year in that which means a sum of approx Rs 5834 per month. Hey c'mon guys - govt guaranteed, tax free and pays 8% !!
If you have money left over and above what you can put in PPF, start an SIP (Systemic Investment Plan) in an Index fund with the extra money you have.
Simple isnít it?

Some important points: -
1. This plan will work only if you do not plan to withdraw money from the index fund at least for 5 years. In fact more numbers of years you invest, better returns you get.
2. Insurance - get a term insurance and forget about all other forms - ULIPS/Money Back/Childrenís/fathers/Mothers/his/Hers/Anything.
3. Keep smiling and say "I love you" every day to your wife/husband/significant other/kids/parents/siblings

Here are some resources to check
www.getrichslowly.org
www.thesimpledollar.com

Yeah, I know that they are US centric ones but the basics work perfectly fine for us Indians too.

Disclaimer:
Iím not a Personal Finance expert or an investment advisor/consultant/expert. Iím a regular car enthusiast like you who is also interested in personal finance, investing and living a better life. So please do consult a certified financial planner before acting on anything you see in this post.
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Old 13th April 2010, 16:10   #41
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Saving money is not everything. We should be able to create wealth out of the money we have saved and that too effectively. So far I am trying to diversify the investment into cash, gold, FD and some amount into equity (MF and Stocks). My aim is to save around 25-30% of the property value (around 32L) by next year Apr. Even I think resale flat makes much sense than buying a new one in a big township as maintenance costs are day time robbery these days.
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Old 13th April 2010, 16:28   #42
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Saving money is not everything
Exactly. You should make the money work for you. I agree !

I'll give a couple of examples of savings started just recently that has a flavour of what you mentioned :-

1. In Feb'10, I bought a Post Office NSC of an individual who was in need of money. Value of NSC is Rs.1,60,000 in 6-year term period ( Original Value is Rs.1 Lakh). So i paid him Rs.1,30,000 and in Feb'11 it matures. So its a clean profit of Rs.30K in 10 months.

2. Started a PO savings of Rs.11000/Month in Feb'10 which paid for 72 months will fetch me Rs.10 Lakhs + cash at end of 72 month-period. Paid for 1st year in complete in advance so got a 5% discount. Means, more savings.

Like above two, i got some other attractive schemes going on with Chit ( Family run) where my savings with them are paying for new chits. So essentially, the money is working and paying for new wealth creation.
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Old 13th April 2010, 16:34   #43
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Saving money is not everything. We should be able to create wealth out of the money we have saved and that too effectively.
Absolutely agree. We should also be careful about overdiversification which will affect overall returns. However, diversifying is a good strategy to counter risk if you have a sizable sum in your investment portfolio.
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Old 13th April 2010, 16:39   #44
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Originally Posted by pramodkumar View Post
Getting rid of the CC i had was the fist step towards decipline, i have a friend who used to have 2 cards, and a good amount of saving, he got into some money chan business and he helped to enroll people under him with his card later he when the business went broke he had huge debts, this made me stay away from CCs

Pramod
Liked the thread & don't know how I missed it.

I differ with Pramod on his view on CCs. What I see it as a facility and how you use (or misuse) it. I prefer using them with the following 2 rules:

1. Never miss payments (don't go for partial payments, always do full payments on time)
2. Never use them as Credit = Loan. Always use them in limit which one can repay (bot the eligible limit that you have) in next billing cycle.

Now not giving the name (as it may look like Adv. for the card) but I use the card which gives 5% cash back on Petrol transactions. Actually it's 2.5% cash back (considering the fuel charge) and that will be like Rs 25 discount on Rs 1000 of petrol filling.

Considering all other advantages/disadvantages, I look them as good option.

Thanks,
Pradip.
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Old 13th April 2010, 16:54   #45
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Originally Posted by pradipk View Post
Liked the thread & don't know how I missed it.

I differ with Pramod on his view on CCs. What I see it as a facility and how you use (or misuse) it. I prefer using them with the following 2 rules:

1. Never miss payments (don't go for partial payments, always do full payments on time)
2. Never use them as Credit = Loan. Always use them in limit which one can repay (bot the eligible limit that you have) in next billing cycle.

Now not giving the name (as it may look like Adv. for the card) but I use the card which gives 5% cash back on Petrol transactions. Actually it's 2.5% cash back (considering the fuel charge) and that will be like Rs 25 discount on Rs 1000 of petrol filling.

Considering all other advantages/disadvantages, I look them as good option.

Thanks,
Pradip.
I was never able to tell the difference between a recreational drinker and a habitual one, similarly for people like me credit card was more of a additional problem than a solution. I know a lot of people who were completely beaten down by credit cards, i started with a low limit card but soon when i realized its not doing me good i discontinued it. I know there are many cards which provides you a lot of offers like cashbacks on purchases, free voccation holidays etc, remember there are no free lunches in this world.

Praomd

Last edited by pramodkumar : 13th April 2010 at 16:55.
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