Many Indias will never reach their dreams of building wealth, being financially secure, and being able to retire in comfort. The reason is most often a combination of these seven biggest money mistakes.
1. Having a Thirty-year Mortgage
Where do you find the money to build wealth? Try looking at your mortgage. Millions of Indians think nothing of paying for their home over 30 years, even though the average homeowner ends up paying two-and-a-half times the purchase price of the home by stretching the payments out this long. Having a 15-year mortgage instead of a 30-year mortgage can save you large sums of money and help you build wealth.
2. Giving Control of Your Money to Someone Else
If you're not involved in your day-to-day family finances, you're putting yourself at risk. If you're married and you let your spouse handle all the financial matters, you're at risk if your spouse dies or becomes seriously ill or if you divorce. Know the details of your family's finances, investments, debts, retirement savings, etc. Don't turn your investments and financial affairs over to a broker or financial consultant without keeping abreast of what is being done with your money and being involved in investment decisions. Never give total control of your money to someone else.
3 Not Controlling Spending Leaks
The reason so many people in India are in so much debt is because they dribble their money away in small, barely noticeable amounts. Like drops of water dribbling through the hole in the dike, the loss is barely noticeable, but over time the hole in the dike gets bigger and bigger. By the time the water is gushing through, the damage is done. The same is true with spending leaks. It's a lot easier to plug a small hole than to ignore the drips and look over your shoulder later and see a huge tidal wave of water coming your way in the form of unmanageable debt. If you're ever going to accumulate wealth, you must control spending leaks.
4 Not Setting Goals
If you don't know where you're headed and how you plan to get there, you'll probably never arrive. To accumulate wealth, you need a plan. To be motivated to save money, you need something specific to save for. To succeed in accumulating wealth, write your goals down and visualize them, whether they're a relaxing retirement, a mortgage-free home, or an unforgettable vacation.
5 Incurring Too Much Debt
If you're spending all your money paying interest on credit cards and installment debt, you won't have enough left for savings. When you buy on credit and don't pay the balance off at the end of the month, you end up paying much more for your purchases. A 25000/- big-screen TV can end up costing you 50000/-, but you'll never know it because the true cost is hidden in your credit card payments. Pay cash and stay away from credit card debt if you want to accumulate wealth.
6 Not Saving Enough for Retirement or Starting Too Late
When you're in your 20s and 30s, it's easy to think you have all the time in the world to accumulate wealth and save for retirement. The truth is, you'll have to save a lot less if you start now and give your earnings time to compound. If you're over 40 and you're behind on your retirement savings, you'll have to save much larger sums to ever catch up to where you should be. Start saving early, and save at least 10 to 15% of your income, and you'll be well on your way to accumulating wealth.
7 Cashing Out Retirement Funds
Half of all Indians end up cashing out their PF balances when they change jobs. Still others take out loans against their PF balances, permanently reducing the amount of earnings they would have accumulated. If you want to accumulate wealth, tax-deferred retirement plans like PF plans are a great way to do it, but resist the urge to tap those funds before retirement.
Avoid these seven money mistakes and increase your chances of successfully accumulating wealth.
Tuesday, August 14, 2007
Monday, August 6, 2007
Which is safe way to using Credit Card on the internet? or Officeline?
Hi All,
I am VenkataRamana, few days back when i asked one of my friend to book the flight ticket on-line he is worried about using credit card online. I would say that is because of lack of knowledge on the subject. Believe me, using Credit Card on the Internet is safer than using it offline!
What happens when you are buying online?
# You will be entering your credit card information on your computer
# The information is transmitted through telephone line to the credit card payment gateway server
# The gateway server verifies and approves your credit card and withdraws money from your account and credits to the seller
# On successful payment, the gateway server directs you (the browser) to the product download page or order acceptance page
Here you can see, when you enter the credit card information, it goes directly to your credit card server and not the merchant.
The security issue here is, a hacker can hijack the data entered on your computer. But since the data is encrypted using 128 bit SSL code before it is transmitted, the hacker cannot get your credit card details.
If you can't understand what is 128 bits encryption, please read the first article listed below. It has been clearly explained in the laymen's language.
The possiblities of losing your credit card information to hackers:
1) By reaching a wrong website and entering your credit card data on a non-secured server.
For example, if you know http://www.ebay.in/ is a reliable website, and the hackers also know that. So they will launch a website like http://www.ebays.in/ or http://www.ebuy.in/ Usually such minute variations go unnoticed.
Thinking that you are paying to ebay, you will be entering the credit card details at a hacker's site. They simply store the information and misuse it later.
Secondly, the hackers pose as if they are the credit card company (or bank) and email you asking the details. You should keep in mind that no genuine company will ask for such details through email or phone.
The most dangerous places to use your credit card are Porn Sites and Gambling Sites. If you are serious about business, never ever visit such sites. Usually these are the sites where viruses and spyware software originate from (though there are few legal sites avialable, we cannot differentiate).
Don't borrow on your credit card! click to know why
2) Through a spyware (virus) on your computer.
There are many viruses that register your keyboard strokes (whatever you type) and keep sending the details to hackers.
To prevent such spywares, there are lots of utilities available today free-of-cost. You can try installing Yahoo tool bar which includes anti-spyware. I believe Microsoft also offers with free anti-spyware software.
In addition to freeware, it is recommended to have a reliable anti-virus package loaded on your computer.
If you have taken care of the above two reasons, you need not worry about using credit cards online. I am not telling you to blindly listen to me. Just visit the links provided at the end of this article and study for yourself.
What happens when you are paying at a hotel?
# You give your credit card to the waiter
# The waiter takes it to the person at cash counter
# The cashier swipes your card on the swiping machine
# The swiping machine transmits the data through telephone line to the credit card server
# The server verifies and approves your credit card and withdraws money from your account and prints the receipt
# The cashier hands over your credit card along with receipt to the waiter
# The waiter brings it back to you and you acknowledge the receipt
Let me ask you one simple question:
What if the waiter or the cashier writes down your name, credit card number, date of expiry and the 3 digit security code (behind the card) and misuses for his/her own benefit or pleasure. He/she could even use it on the Internet, can you control that?
I hope you understand that using credit card online is safer than offline.
Another information, whenever any transaction occurs online, the ip address of the computer (from where it is transacted) is registered (these days even a normal membership sites use this technology). It is very easy to catch the thief using the ip address.
Secondly, in 2001 the first cyber police station was inaugurated in India. Today we have many police stations functioning for cyber crime. Please check this link to know about cyber law and this link about cyber police stations for more information.
Now you can think your self about the way in which you can use your credit card safely, please write you comments about this...
I am VenkataRamana, few days back when i asked one of my friend to book the flight ticket on-line he is worried about using credit card online. I would say that is because of lack of knowledge on the subject. Believe me, using Credit Card on the Internet is safer than using it offline!
What happens when you are buying online?
# You will be entering your credit card information on your computer
# The information is transmitted through telephone line to the credit card payment gateway server
# The gateway server verifies and approves your credit card and withdraws money from your account and credits to the seller
# On successful payment, the gateway server directs you (the browser) to the product download page or order acceptance page
Here you can see, when you enter the credit card information, it goes directly to your credit card server and not the merchant.
The security issue here is, a hacker can hijack the data entered on your computer. But since the data is encrypted using 128 bit SSL code before it is transmitted, the hacker cannot get your credit card details.
If you can't understand what is 128 bits encryption, please read the first article listed below. It has been clearly explained in the laymen's language.
The possiblities of losing your credit card information to hackers:
1) By reaching a wrong website and entering your credit card data on a non-secured server.
For example, if you know http://www.ebay.in/ is a reliable website, and the hackers also know that. So they will launch a website like http://www.ebays.in/ or http://www.ebuy.in/ Usually such minute variations go unnoticed.
Thinking that you are paying to ebay, you will be entering the credit card details at a hacker's site. They simply store the information and misuse it later.
Secondly, the hackers pose as if they are the credit card company (or bank) and email you asking the details. You should keep in mind that no genuine company will ask for such details through email or phone.
The most dangerous places to use your credit card are Porn Sites and Gambling Sites. If you are serious about business, never ever visit such sites. Usually these are the sites where viruses and spyware software originate from (though there are few legal sites avialable, we cannot differentiate).
Don't borrow on your credit card! click to know why
2) Through a spyware (virus) on your computer.
There are many viruses that register your keyboard strokes (whatever you type) and keep sending the details to hackers.
To prevent such spywares, there are lots of utilities available today free-of-cost. You can try installing Yahoo tool bar which includes anti-spyware. I believe Microsoft also offers with free anti-spyware software.
In addition to freeware, it is recommended to have a reliable anti-virus package loaded on your computer.
If you have taken care of the above two reasons, you need not worry about using credit cards online. I am not telling you to blindly listen to me. Just visit the links provided at the end of this article and study for yourself.
What happens when you are paying at a hotel?
# You give your credit card to the waiter
# The waiter takes it to the person at cash counter
# The cashier swipes your card on the swiping machine
# The swiping machine transmits the data through telephone line to the credit card server
# The server verifies and approves your credit card and withdraws money from your account and prints the receipt
# The cashier hands over your credit card along with receipt to the waiter
# The waiter brings it back to you and you acknowledge the receipt
Let me ask you one simple question:
What if the waiter or the cashier writes down your name, credit card number, date of expiry and the 3 digit security code (behind the card) and misuses for his/her own benefit or pleasure. He/she could even use it on the Internet, can you control that?
I hope you understand that using credit card online is safer than offline.
Another information, whenever any transaction occurs online, the ip address of the computer (from where it is transacted) is registered (these days even a normal membership sites use this technology). It is very easy to catch the thief using the ip address.
Secondly, in 2001 the first cyber police station was inaugurated in India. Today we have many police stations functioning for cyber crime. Please check this link to know about cyber law and this link about cyber police stations for more information.
Now you can think your self about the way in which you can use your credit card safely, please write you comments about this...
Sunday, July 29, 2007
The rupee rise: How you are affected?
Reserve Bank of India, the nation's central bank, has had a tough first six months at office -- first to keep inflation under check and then to delicately address the runaway rise of the Indian rupee (against the dollar).
A series of measures linked to curbing credit growth and lowering short-term interest rates twice this year, have pegged inflation to 4.27 per cent for the week ending July 4 from a two-year high of 6.73 per cent in January-end. Currently, India's inflation is within the medium-term range set by the RBI.
A variety of factors are, however, keeping the rupee firm against the dollar, which has risen by nearly 10 per cent between January-July this year. The rupee stands at a near-decade high of 40.3 against the dollar, from 44.2 when the year began.
Rupee appreciation has been the sharpest in three decades in the April-June quarter this year. And analysts expect the rupee to gain further.
The impact of a rupee rise
As the rupee rises against the dollar (or conversely the dollar weakens) Indian exports firms earn less and thus begin to lose their competitive edge -- whether it be textile, jewellery, software, drugs or automobiles.
India's 'big four' in the software pack -- Infosys, TCS, Wipro and Satyam have already seen their net income in the first quarter ending June, fall due to the sharp rupee rise. This is because India's software companies bill several clients in dollar terms.
A weak dollar thus hits currency-linked earnings.
The impact is seen through:
* Lower exports, as exporters are unable to maintain necessary profit margins if their dollar-linked earnings fall. Analysts now predict that India's export target of $160 billion may not be met. A more 'realistic' export target for this year has been pegged at $135-140 billion.
* If the rupee continues to gain against the dollar, India's competitive strength in world trade (which is already negligible) will weaken. This, in turn, shrinks new job avenues.
* Exporters are keener to sell their product/services locally, if possible. This would increase local supplies and lower prices and inflation.
Export lobby groups and trade analysts are now urging the government to act to curb the rupee's rise. The equation is simple. In a competitive business environment where operating margins will determine survival, export houses are in a fix.
FIEO calls for government intervention, government gives relief
The Federation of Indian Export Organisations, in an official statement this month, said that the profitability of exporters in executing existing contracts has been reduced substantially. In certain sectors exports are being executed at loss to honour the contract and maintain the market presence.
"The competitiveness of our exports is eroded and we are losing orders to our competitors like China, Thailand, Pakistan, Sri Lanka, Bangladesh, Vietnam and Indonesia," the statement read.
Last week, the government announced a much-awaited $345 million relief package for exporters. This includes increasing duty drawback rates on most existing export items eligible for this concession, increasing the list of export items eligible for duty drawback, and banks offering shipment credit on easier terms for small and large exporters.
Overseas fund flows key factor
India's economic growth story remains intact, with growth expected to sustain at around the 9 per cent mark for 2007-08. With the outlook global equities and emerging markets improving, India's stock markets are expected to remain robust due to strong liquidity and confidence of positive quarterly earnings going ahead.
The benchmark 30-share Sensex stood at a record close of 15,794.92 on Tuesday, up 14.5 per cent this year, led by strong overseas fund flows.
Overseas fund have so far invested $9.9 billion worth into Indian equities in 2007, well above last year's level of $7.99 billion. Foreign direct investment rose to $17.7 billion in 2006-07 from $7.7 billion a year earlier.
As buyers, overseas funds convert dollars and buy rupees to invest into Indian companies. This will keep the demand for the rupee up.
What the RBI says
Well, in this case, not much. The RBI has said that the rupee will continue to find its true value based on pure market dynamics. The bank has officially declined to comment on any intervention to curb the rupee surge, but traders said that in recent weeks the RBI is widely believed to have bought dollars to prevent the rupee from rising beyond 40.30 levels.
A theory doing the rounds is that if the RBI intervenes to stop the rupee from appreciating further, it may increase the profitability of export-oriented units and create more jobs, which in turn could increase the inflationary tendency in the market.
But jobs may be lost
However, on the other hand, if the rupee keeps strengthening, a lot many people may actually lose jobs. Exporters are also considering layoffs, which may eventually affect 275,000 jobs by the year-end.
Yet another fallout of the rupee rise is the proposal by the IT and BPO companies in India which plan to increase the working hours of their employees and doing away with a 5-day week and making them work on Saturdays too.
According to a study by the Union commerce ministry, the worst hit sectors are infotech, textile, leather, handicrafts, marine products, engineering, sports goods, toys and agri products.
Analysts predict firm Rupee trend going ahead
Most analysts predict a firm trend for the rupee going ahead. Local brokerage firm Ambit Capital has revised its assumptions for the rupee-dollar to 40.58 for FY 2008 (estimates), 40 for FY09(E) and 39 for FY2010(E).
However, a stronger rupee will benefit importers such as the oil marketing companies and airlines. While exporters like software, textiles, drugs and auto components will be adversely impacted by the stronger rupee, for global cyclicals, lower prices of landed imports will create downward pressure on local prices, the brokerage told its clients, in a latest note.
According to the equity research outfit of French Bank Credit Lyonnais, companies like Hindalco, Wipro, Infosys and Tata Steel will be negatively impacted by currency appreciation. Earnings of textile and hotel companies will also see downward revision in earnings due to strengthening of rupee, it said.
How will the Rupee surge impact you?
With factors suggesting that the rupee could rise, we could see a scenario of an increasing percentage of goods and services being offered locally, which would lead to lower prices and hence curb inflation further.
Industries, where domestic prices are linked to the cost of imported raw material -- like metals, have and will lead to further lowering of input cost of imported aluminium and copper. A reduction in the domestic prices is expected. Obviously, importing price-sensitive electronics and gadgets would also be cheaper, as would other retail items.
An appreciating rupee shows the strength of the economy, which can be seen when one travels overseas, if you try to convert what the dollar is worth. So maybe you should plan your overseas trip now, if you have enough disposable income.
You obviously have concerns if you are an exporter or work in an export-house. Another groups of people who may not be happy to see the rupee rising, would be those who hold dollar-denominated accounts.
A series of measures linked to curbing credit growth and lowering short-term interest rates twice this year, have pegged inflation to 4.27 per cent for the week ending July 4 from a two-year high of 6.73 per cent in January-end. Currently, India's inflation is within the medium-term range set by the RBI.
A variety of factors are, however, keeping the rupee firm against the dollar, which has risen by nearly 10 per cent between January-July this year. The rupee stands at a near-decade high of 40.3 against the dollar, from 44.2 when the year began.
Rupee appreciation has been the sharpest in three decades in the April-June quarter this year. And analysts expect the rupee to gain further.
The impact of a rupee rise
As the rupee rises against the dollar (or conversely the dollar weakens) Indian exports firms earn less and thus begin to lose their competitive edge -- whether it be textile, jewellery, software, drugs or automobiles.
India's 'big four' in the software pack -- Infosys, TCS, Wipro and Satyam have already seen their net income in the first quarter ending June, fall due to the sharp rupee rise. This is because India's software companies bill several clients in dollar terms.
A weak dollar thus hits currency-linked earnings.
The impact is seen through:
* Lower exports, as exporters are unable to maintain necessary profit margins if their dollar-linked earnings fall. Analysts now predict that India's export target of $160 billion may not be met. A more 'realistic' export target for this year has been pegged at $135-140 billion.
* If the rupee continues to gain against the dollar, India's competitive strength in world trade (which is already negligible) will weaken. This, in turn, shrinks new job avenues.
* Exporters are keener to sell their product/services locally, if possible. This would increase local supplies and lower prices and inflation.
Export lobby groups and trade analysts are now urging the government to act to curb the rupee's rise. The equation is simple. In a competitive business environment where operating margins will determine survival, export houses are in a fix.
FIEO calls for government intervention, government gives relief
The Federation of Indian Export Organisations, in an official statement this month, said that the profitability of exporters in executing existing contracts has been reduced substantially. In certain sectors exports are being executed at loss to honour the contract and maintain the market presence.
"The competitiveness of our exports is eroded and we are losing orders to our competitors like China, Thailand, Pakistan, Sri Lanka, Bangladesh, Vietnam and Indonesia," the statement read.
Last week, the government announced a much-awaited $345 million relief package for exporters. This includes increasing duty drawback rates on most existing export items eligible for this concession, increasing the list of export items eligible for duty drawback, and banks offering shipment credit on easier terms for small and large exporters.
Overseas fund flows key factor
India's economic growth story remains intact, with growth expected to sustain at around the 9 per cent mark for 2007-08. With the outlook global equities and emerging markets improving, India's stock markets are expected to remain robust due to strong liquidity and confidence of positive quarterly earnings going ahead.
The benchmark 30-share Sensex stood at a record close of 15,794.92 on Tuesday, up 14.5 per cent this year, led by strong overseas fund flows.
Overseas fund have so far invested $9.9 billion worth into Indian equities in 2007, well above last year's level of $7.99 billion. Foreign direct investment rose to $17.7 billion in 2006-07 from $7.7 billion a year earlier.
As buyers, overseas funds convert dollars and buy rupees to invest into Indian companies. This will keep the demand for the rupee up.
What the RBI says
Well, in this case, not much. The RBI has said that the rupee will continue to find its true value based on pure market dynamics. The bank has officially declined to comment on any intervention to curb the rupee surge, but traders said that in recent weeks the RBI is widely believed to have bought dollars to prevent the rupee from rising beyond 40.30 levels.
A theory doing the rounds is that if the RBI intervenes to stop the rupee from appreciating further, it may increase the profitability of export-oriented units and create more jobs, which in turn could increase the inflationary tendency in the market.
But jobs may be lost
However, on the other hand, if the rupee keeps strengthening, a lot many people may actually lose jobs. Exporters are also considering layoffs, which may eventually affect 275,000 jobs by the year-end.
Yet another fallout of the rupee rise is the proposal by the IT and BPO companies in India which plan to increase the working hours of their employees and doing away with a 5-day week and making them work on Saturdays too.
According to a study by the Union commerce ministry, the worst hit sectors are infotech, textile, leather, handicrafts, marine products, engineering, sports goods, toys and agri products.
Analysts predict firm Rupee trend going ahead
Most analysts predict a firm trend for the rupee going ahead. Local brokerage firm Ambit Capital has revised its assumptions for the rupee-dollar to 40.58 for FY 2008 (estimates), 40 for FY09(E) and 39 for FY2010(E).
However, a stronger rupee will benefit importers such as the oil marketing companies and airlines. While exporters like software, textiles, drugs and auto components will be adversely impacted by the stronger rupee, for global cyclicals, lower prices of landed imports will create downward pressure on local prices, the brokerage told its clients, in a latest note.
According to the equity research outfit of French Bank Credit Lyonnais, companies like Hindalco, Wipro, Infosys and Tata Steel will be negatively impacted by currency appreciation. Earnings of textile and hotel companies will also see downward revision in earnings due to strengthening of rupee, it said.
How will the Rupee surge impact you?
With factors suggesting that the rupee could rise, we could see a scenario of an increasing percentage of goods and services being offered locally, which would lead to lower prices and hence curb inflation further.
Industries, where domestic prices are linked to the cost of imported raw material -- like metals, have and will lead to further lowering of input cost of imported aluminium and copper. A reduction in the domestic prices is expected. Obviously, importing price-sensitive electronics and gadgets would also be cheaper, as would other retail items.
An appreciating rupee shows the strength of the economy, which can be seen when one travels overseas, if you try to convert what the dollar is worth. So maybe you should plan your overseas trip now, if you have enough disposable income.
You obviously have concerns if you are an exporter or work in an export-house. Another groups of people who may not be happy to see the rupee rising, would be those who hold dollar-denominated accounts.
Thursday, July 5, 2007
5 things to know about fixed deposits
With interest rates rising over the last one year, fixed deposits have become popular again.
But there are certain things that you should know about fixed deposits before they go around investing in them. Here are five must-knows about fixed deposits:
1. Interest paid either monthly or quarterly
The interest on a fixed deposit is usually paid out either monthly or quarterly depending on the option that the investor chooses. So an individual investing Rs 1.5 lakh (Rs 150,000) in a one-year fixed deposit paying an interest of 8% per annum will get Rs 1,000 per month (8% of Rs 1.5 lakh divided by 12; or Rs 3,000 per quarter (8% of Rs 1.5 lakh divided by 4).
Other than this, those depositing money in a fixed deposit also have the reinvestment of interest option available.
2. The yield or return on a fixed deposit is different from interest.
An interest of 8% in a year would mean a return of 8.24% in a year for those individuals who opt for the reinvestment of interest option.
What this means is that Rs 100 invested at the beginning of the year will amount to Rs 108.24 by the end of the year. This is because the interest earned is compounded every quarter.
An interest of 8% in a year would imply an interest of 2% in a quarter. Hence Rs 100 invested by an individual would earn an interest of Rs 2 (2% of Rs 100) at the end of three months. So the Rs 100 investment made by an individual would have amounted to Rs 102 by the end of three months (Rs 100 + 2% of Rs 100). Since this interest is reinvested, the individual earns 2% interest on Rs 102 for the next three months. The interest earned for the next three months is Rs 2.04. This interest is also reinvested and the individual earns an interest of 2% on Rs 104.04 for the next three months.
Repeating this process at the end of the year, the individual has accumulated Rs 108.24 and hence a return of 8.24%, which is higher than the interest of 8%.Given this individuals putting money in a fixed deposit who do not need a regular income from the fixed deposit, it makes more sense for them to opt for the reinvestment of interest option and earn a greater return.
3. Want to break a fixed deposit? Careful
At times it might become necessary to break the fixed deposit either because the money is immediately required or for the fact that other banks have started offering a higher rate of interest on the deposit.
Breaking a fixed deposit has a cost attached to it. Most banks, on premature withdrawal, give an interest which is 0.5% lower than the interest applicable for the period for which the deposit has remained with the bank.
Let's try and understand this through an example. An individual makes a three-year deposit, paying an interest of 9% per annum. Due to urgent need of money he may have to break the deposit at the end of one year. The bank for a period of one year pays an interest of 8.5%. The individual will be paid an interest of 0.5% less than 8.5% which is 8%.
4. The interest earned on a fixed deposit is not tax free
The interest earned from a fixed deposit gets added on to the income for the given year and is taxed according to the tax bracket that an individual falls into. Hence, for those falling in the top tax bracket the interest earned from a fixed deposit is taxed at the rate of 33.99%.
5. It is possible to take loans against fixed deposits
This works out to be cheaper and involves less paper work vis a vis taking a personal loan.
By -- Chandnee Sinha
But there are certain things that you should know about fixed deposits before they go around investing in them. Here are five must-knows about fixed deposits:
1. Interest paid either monthly or quarterly
The interest on a fixed deposit is usually paid out either monthly or quarterly depending on the option that the investor chooses. So an individual investing Rs 1.5 lakh (Rs 150,000) in a one-year fixed deposit paying an interest of 8% per annum will get Rs 1,000 per month (8% of Rs 1.5 lakh divided by 12; or Rs 3,000 per quarter (8% of Rs 1.5 lakh divided by 4).
Other than this, those depositing money in a fixed deposit also have the reinvestment of interest option available.
2. The yield or return on a fixed deposit is different from interest.
An interest of 8% in a year would mean a return of 8.24% in a year for those individuals who opt for the reinvestment of interest option.
What this means is that Rs 100 invested at the beginning of the year will amount to Rs 108.24 by the end of the year. This is because the interest earned is compounded every quarter.
An interest of 8% in a year would imply an interest of 2% in a quarter. Hence Rs 100 invested by an individual would earn an interest of Rs 2 (2% of Rs 100) at the end of three months. So the Rs 100 investment made by an individual would have amounted to Rs 102 by the end of three months (Rs 100 + 2% of Rs 100). Since this interest is reinvested, the individual earns 2% interest on Rs 102 for the next three months. The interest earned for the next three months is Rs 2.04. This interest is also reinvested and the individual earns an interest of 2% on Rs 104.04 for the next three months.
Repeating this process at the end of the year, the individual has accumulated Rs 108.24 and hence a return of 8.24%, which is higher than the interest of 8%.Given this individuals putting money in a fixed deposit who do not need a regular income from the fixed deposit, it makes more sense for them to opt for the reinvestment of interest option and earn a greater return.
3. Want to break a fixed deposit? Careful
At times it might become necessary to break the fixed deposit either because the money is immediately required or for the fact that other banks have started offering a higher rate of interest on the deposit.
Breaking a fixed deposit has a cost attached to it. Most banks, on premature withdrawal, give an interest which is 0.5% lower than the interest applicable for the period for which the deposit has remained with the bank.
Let's try and understand this through an example. An individual makes a three-year deposit, paying an interest of 9% per annum. Due to urgent need of money he may have to break the deposit at the end of one year. The bank for a period of one year pays an interest of 8.5%. The individual will be paid an interest of 0.5% less than 8.5% which is 8%.
4. The interest earned on a fixed deposit is not tax free
The interest earned from a fixed deposit gets added on to the income for the given year and is taxed according to the tax bracket that an individual falls into. Hence, for those falling in the top tax bracket the interest earned from a fixed deposit is taxed at the rate of 33.99%.
5. It is possible to take loans against fixed deposits
This works out to be cheaper and involves less paper work vis a vis taking a personal loan.
By -- Chandnee Sinha
Monday, July 2, 2007
They built billion-dollar empires from scratch
While inheriting a billion dollars is still the easiest way to land on our list of the world's wealthiest, it certainly isn't the most common. Almost two-thirds of the world's 946 billionaires made their fortunes from scratch, relying on grit and determination, and not good genes.
Fifty of these self-made tycoons are college or high school dropouts. The most famous billionaire dropout is Microsoft's Bill Gates, who finally got his honorary degree from Harvard University in June, 30 years after quitting the prestigious school to sell software. ''I did the best of everyone who failed,'' joked the world's richest man in his official graduation address. With failure like that, who needs success?
Other billionaires, such as media maven Oprah Winfrey, made their fortunes against far greater odds. Born in rural Mississippi, she spent her early years living in poverty on her grandmother's farm. Wanting a way out, she moved to Wisconsin to be with her mother, but was sexually molested by her male relatives. At age 14, she reportedly gave birth to a premature baby who died. Only after moving to Nashville to be with her father did her luck finally start to turn.
In honor of the world's self-made billionaires, we're recounting 10 of our favorite real-life Horatio Alger tales.
The stories of these bootstrapping billionaires are as diverse as the 10 individuals themselves. They range in age from 40 to 91, hail from diverse industries such as fashion and oil, and live in five different countries. Russia's richest man, Roman Abramovich, was an orphan. Apple's iconic Steve Jobs was adopted. Jobs dropped out of Reed College when he couldn't pay the tuition; his net worth today could support nearly 40,000 students at Reed for four years. Three others, including Ralph Lauren, are also college dropouts.
Another five are high school or grade school dropouts, proving that street smarts can often trump book smarts. The U.K.'s publishing magnate Richard Desmond, for instance, quit high school when he realised he could make more money working in the cloakroom of a club; at age 16, he borrowed his older brother's suit to get a sales job. He's been selling ever since, peddling music, porn and celebrity titles including OK! magazine.
Asia's richest man, Li Ka-shing dropped out of school at age 15, after his father died, to work in a factory. Kirk Kerkorian quit during the eighth grade to take up boxing. He later flew airplanes on daredevil missions across the Atlantic during World War II, before sinking his money into his own airline and reinvesting profits in Las Vegas.
Sin City has also been good to Sheldon Adelson. The son of a Boston cabdriver borrowed $200 at age 12 to start selling newspapers; he later held stints as a mortgage broker, investment advisor and financial consultant. The high school dropout and Broadway enthusiast studied voice in his teens, but it was another kind of stage that called him--trade shows, where he made his first fortune.
Adelson later gambled on casinos in Las Vegas, Macau and Singapore, and took his Las Vegas Sands public in December 2004. Says Adelson, ''I loved being the outsider.''
Good luck and good timing is also helpful when creating vast fortunes from scratch. James Cayne, for instance, moved to New York to play bridge full-time; he was spotted by Wall Street legend Alan "Ace" Greenberg, who was impressed by Cayne's card skills and hired him to be a stockbroker at his firm Bear Stearns. Cayne is now chairman.
The world's wealthiest novelist, J.K. Rowling, was on welfare raising her little girl when her agent called to tell her that Bloomsbury would publish her book about an adolescent wizard named Harry Potter.
One thing is for sure: There is no lack of chutzpah among our rags to riches bunch.
Fifty of these self-made tycoons are college or high school dropouts. The most famous billionaire dropout is Microsoft's Bill Gates, who finally got his honorary degree from Harvard University in June, 30 years after quitting the prestigious school to sell software. ''I did the best of everyone who failed,'' joked the world's richest man in his official graduation address. With failure like that, who needs success?
Other billionaires, such as media maven Oprah Winfrey, made their fortunes against far greater odds. Born in rural Mississippi, she spent her early years living in poverty on her grandmother's farm. Wanting a way out, she moved to Wisconsin to be with her mother, but was sexually molested by her male relatives. At age 14, she reportedly gave birth to a premature baby who died. Only after moving to Nashville to be with her father did her luck finally start to turn.
In honor of the world's self-made billionaires, we're recounting 10 of our favorite real-life Horatio Alger tales.
The stories of these bootstrapping billionaires are as diverse as the 10 individuals themselves. They range in age from 40 to 91, hail from diverse industries such as fashion and oil, and live in five different countries. Russia's richest man, Roman Abramovich, was an orphan. Apple's iconic Steve Jobs was adopted. Jobs dropped out of Reed College when he couldn't pay the tuition; his net worth today could support nearly 40,000 students at Reed for four years. Three others, including Ralph Lauren, are also college dropouts.
Another five are high school or grade school dropouts, proving that street smarts can often trump book smarts. The U.K.'s publishing magnate Richard Desmond, for instance, quit high school when he realised he could make more money working in the cloakroom of a club; at age 16, he borrowed his older brother's suit to get a sales job. He's been selling ever since, peddling music, porn and celebrity titles including OK! magazine.
Asia's richest man, Li Ka-shing dropped out of school at age 15, after his father died, to work in a factory. Kirk Kerkorian quit during the eighth grade to take up boxing. He later flew airplanes on daredevil missions across the Atlantic during World War II, before sinking his money into his own airline and reinvesting profits in Las Vegas.
Sin City has also been good to Sheldon Adelson. The son of a Boston cabdriver borrowed $200 at age 12 to start selling newspapers; he later held stints as a mortgage broker, investment advisor and financial consultant. The high school dropout and Broadway enthusiast studied voice in his teens, but it was another kind of stage that called him--trade shows, where he made his first fortune.
Adelson later gambled on casinos in Las Vegas, Macau and Singapore, and took his Las Vegas Sands public in December 2004. Says Adelson, ''I loved being the outsider.''
Good luck and good timing is also helpful when creating vast fortunes from scratch. James Cayne, for instance, moved to New York to play bridge full-time; he was spotted by Wall Street legend Alan "Ace" Greenberg, who was impressed by Cayne's card skills and hired him to be a stockbroker at his firm Bear Stearns. Cayne is now chairman.
The world's wealthiest novelist, J.K. Rowling, was on welfare raising her little girl when her agent called to tell her that Bloomsbury would publish her book about an adolescent wizard named Harry Potter.
One thing is for sure: There is no lack of chutzpah among our rags to riches bunch.
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