[jp2u]

@ aargee: How is an RD useful. how does this works in short term and long term.

Sorry to be so lame, but am kind of novice when it comes to savings, bank terms and schemes.

[aargee]

Originally Posted by jp2u

@ aargee: How is an RD useful. how does this works in short term and long term.

This has been discussed in detailed in this thread. See this link & math for point #3. Saving Rs 1000 every month yields to 72890 after 60 months. Use this like a small drop of water makes mighty ocean.

If you've a lumpsum, use the MIS (option 1 in the link) that fetches you a safe 8% returns every month.

Use their combination (POMIS+PORD) on longer terms for safe, lower & decent returns.

[DCEite]

My post office advertises:

Facility to earn higher returns by automatically directing post office MIS returns(monthly income) to recurring deposit.

What is the effective rate of interest in such a scenario ?

[MX6]

Instead of going for a personal loan or an used car loan, I paid upfront when I bought my car (second hand).
And to ensure that I don't waste money, I started an RD (calculated what emi I'd have paid on the personal loan for two years) and set the monthly deposit amount to be the same.

So instead of paying higher interest emi's I'm saving up. There's also a sense of savings involved as the amount going from my salary is towards an RD.

Now one may ask, instead of sinking the principal amount in buying a car, why not put that in some high returns investment and go for a personal loan. Just that I didn't want to go in to a higher risk investment + a loan for my car.

In my case, it's no loan / no risky investment scenario. Old fashioned, but then I just liked it this way.

[aargee]

Originally Posted by DCEite

Facility to earn higher returns by automatically directing post office MIS returns(monthly income) to recurring deposit.

Means, use the MIS to earn interest & deposit the interest to earn interest for the interest.

Originally Posted by DCEite

What is the effective rate of interest in such a scenario ?

I don't know how to calculate the rate of interest, but I'll give an example here to demonstrate & I'd appreciate if someone could let me know the rate of interest. Let's start with principle of 105000 (in multiples of 3 only) for which here's the workout

Originally Posted by MX6

I started an RD (calculated what emi I'd have paid on the personal loan for two years) and set the monthly deposit amount to be the same.

Best way to go about it; had someone adviced me this earlier, I would'nt have lost much money. I learned this the hard way.

Originally Posted by MX6

So instead of paying higher interest emi's I'm saving up. There's also a sense of savings involved as the amount going from my salary is towards an RD.

Also the savings is sligtly less than actuals because a little sum is added up as interest.

Originally Posted by MX6

Now one may ask, instead of sinking the principal amount in buying a car, why not put that in some high returns investment and go for a personal loan.

IF the returns are assuringly higher than the personal loans, then this is advised. If the rate of personal loans are 15.5%, there're few options like Equity market & Mutual funds. But is there're a guarantee on the returns & fixed interest rate? Well its only a chance, which is otherwise called as risk.

Originally Posted by MX6

In my case, it's no loan / no risky investment scenario. Old fashioned, but then I just liked it this way.

Keeping it simple gives peace of mind.

[sathyaprakash]

jp2u >>>>>>>>> one important thing i think u missed is, as you are married now have you not thought employing your spouse which will definetly increase your income also bring equlity & resposibility between you both.

[jp2u]

Originally Posted by sathyaprakash

jp2u >>>>>>>>> one important thing i think u missed is, as you are married now have you not thought employing your spouse which will definetly increase your income also bring equlity & resposibility between you both.

Already thought of it dude, she got placed only this month as a KG teacher with a 4digit salary.

[Dry Ice]

Man, this is some serious gyan you guys are sharing here.
I have surely been living on the edge for past year!

Fresh out of college I started working since Oct, last year. From that month on, I saved whatever I could, only to blow it up 2-3 months later on some 'gadget'. New cellphone, iPod, whatever. I have been saving again for the past 2 months only to blow it up this time on an SLR!!! But guess what, I sure willl rethink about that.

One good thing is that my mom has drilled it quite hard into my mind NOT take any loans as of yet. Recently, when I got my bike, instead of the bank she offered me the amount and asked me to set 2500 aside each month as per the EMIs. She knew I won't do it, so now I have to transfer this money to a new account which she keeps track of!

Anyways the point is, I want to start saving now. I guess, I can take some risks at this stage. Both mom, dad are working and as of now I have just myself to support! 7-8 years down the line I might want to play safe.

Right now, I don't think I will be able to invest in real estate, but do want to consider investing in gold. Will it be a sane choice? and how do I go about it?

What other investment options would you guys suggest for me? Please bear in mind I have zero knowledge about financial instruments etc.

[ampere]

Buying gadgets or call it splurging on them is also a facet of life. No one says dont buy them. In fact if people dont buy stuff, how will new ones come on the horizon?

But the moot point as every one says is not to go overboard.
"Dont truly live on on the edge"

Another problem at the start of the career is that folks think once they are done with the 80C requirements for tax savings, rest all money is rightfully for them to blow away! That thinking has to go. If one has a serious passion for photography, let him/her plan for it for a DSLR and then buy. One should be aware that he is spending his hard earned money for some thing he truly wants and which he will really use. Not that its just a passing fetish or that his peer group has.

[aargee]

Originally Posted by Dry Ice

What other investment options would you guys suggest for me? Please bear in mind I have zero knowledge about financial instruments etc.

Dude, if you're serious asking about this, then blow entire salary into several parts, but only in terms of long term & short term investments, equity, MF, insurance. You got nothing to loose. Pls live shamelessly on parents money. If you still have a guilt, open one the long term investment on your Father's/Mother's name.

By the time your Father retires, your Father's PF + your long term savings added with a small loan amount, you can invest for a new house. And the good thing will be, you still got your Mother's backup.

Try to make the most of it now unless you want to regret later like most of us here.

[ghodlur]

Buying gadgets has always been a fad rather than a requirement. Just coz someone you know owns the latest gizmos does not mean that you should own one too. Decide if its really reqd, if its going to make your life a little more easier, then do buy but after thought market scanning. I know a friend who changes his mobile every two-three months just for the sake of it, no actual needs.

@Dry Ice

Since you have started earning recently, I would sincerely advise you
1) To get adequately insured - Strictly take a term insurance, the premium for your age would be meagre
2) Take a pension plan - I know it would be too early to ask you to do so. but if you start now, you will surely reap benefits post retirement. Lower the age, better the pension earning.
3) Invest small amounts in PPF, PO schemes. This will instill some king of savings discipline. Later you can move into MF's or other options.
4) Last but not the least go in for Hospital cash type medical insurance and not any mediclaim policy. This is just to ensure that you are covered for any medical issues.

Hope I was of any assistance to you.

[aargee]

Originally Posted by ghodlur

2) Take a pension plan - I know it would be too early to ask you to do so. but if you start now, you will surely reap benefits post retirement. Lower the age, better the pension earning.

Why would this be considered early? Though the lumpsum or the money that you get after 10/15 years is going to be peanuts, but the point is to start early; sooner the better. Also one must not forget to invest in the account regularly. Most of us (including me on one account) invest just for just 3 or the minimum period & then forget about it completely. The key is to keep investing into it regularly.

Oh!!! And one more point - do not forget to save in PPF. Hold on to the money for few years, say 4-5 years from now, then you can start reaping the benefits.

[carboy]

Originally Posted by ghodlur

1) To get adequately insured - Strictly take a term insurance, the premium for your age would be meagre

For someone who has just passed out of college, life insurance may or may not be required.

In my opinion, one has to first decide if life insurance is neccessary.
If there people dependent on you whose life will be seriously affected if your income stops because of your death, you need life insurance. Otherwise you don't.

Originally Posted by ghodlur

4) Last but not the least go in for Hospital cash type medical insurance and not any mediclaim policy. This is just to ensure that you are covered for any medical issues.

What is the difference between a Hospital cash type med insurance & a mediclaim policy?

[aargee]

Originally Posted by carboy

For someone who has just passed out of college, life insurance may or may not be required.

In my opinion, one has to first decide if life insurance is neccessary.
If there people dependent on you whose life will be seriously affected if your income stops because of your death, you need life insurance. Otherwise you don't.

Carboy, I was of the same opinion as you, but you see a friend of mine who'd taken a life insurance coverage somewhere during 97 used to pay about 40K per annum for a money back policy of 10L, but just think about the cost now!! Last time I checked for Endowment (same 10L) is somewhere around 66K PA.

So it really makes sense because...
1. Dependants do come obviously in life, if not now, later
2. Starting early helps to keep the premium low for next 15/20/25 years

[ghodlur]

Originally Posted by carboy

What is the difference between a Hospital cash type med insurance & a mediclaim policy?

The basic difference between the two is in case of Hospital cash is not a comprehensive one as compared to Mediclaim and is good for a beginner. It provides daily cash benefits for hospitalization which is fixed considering if someone is in his 20ies and does not expect any major health issues.

This policy needs to be used as a suplement to the Mediclaim policy but can be used as an alternative also.