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Introduction

The stock market is quite accessible, making it very tempting for many people to want to invest in it. After all, we’ve all heard stories of people making it big by simply investing in stocks. These days there are plenty of stories of people in their early twenties becoming millionaires by investing in the stock market. This raises a desire in all of us to do the same.

After all, if they can do it, then so can we. Right? Unfortunately, it’s not that simple. On the opposite end of the spectrum, we have people who firmly believe that investing in the stock market depends on luck.

However, that is not the case. In order to benefit from the resources available, you can depend on factors much more reliable than luck. Success in the stock market depends more on knowledge and experience than sheer luck. Knowledge can significantly impact your experience when investing in stocks. So, exactly what do you do?

That’s a good question and one that many beginners often overlook. This is what we call as a rookie mistake. Any experienced investor will tell you that downplaying the role of experience is actually what causes many people to lose their money. It’s too easy to blame luck when it comes to trading stocks. But you don’t need to do that because we’re going to tell you all about buying stocks.

As we said, the biggest disadvantage that new investors have is the lack of experience. For many people, trading stocks can be all based on the knowledge that other people possess. That’s the first rule of investing: you don’t have to listen to what others say. Just because someone wants you to buy stocks from a particular company because it’s ‘booming’, doesn’t mean that you have to do it.

You have to look at the companies you’re investing in by yourself. Different people look at things differently, and you will succeed only when you do it yourself. With that being said, let’s move on to the main purpose of this article.

In this article, we’re going to explore the factors which you should note before buying stocks of certain companies. We’re going to give you tips and pointers which you should look at before making your decision. So, let’s begin!

Looking at Companies and their Products and Services

As we said, you have to look at the company you plan on buying stocks of in detail. It may be wise to look into the overall profile of the company. You may want to ask around about the company’s reputation in the market. For beginners, we recommend that you buy stocks after understanding your circle of competence. The concept of the circle of competence has been used widely as a way for investors to focus on areas they knew best. In simple terms, a basic understanding of the operations and economics of a particular company helps an investor to evaluate the performance of its stock in the market. In such a case, there is no need for one to be an expert on every company. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital. Therefore, we urge our readers to buy stocks from companies in their own circle of competence.

Pictorial representation below will help you to understand the concept better:

Outer Circle: Share Market

Inner dark circle: Circle of Competence

 

When an investor is targeting a group of companies within his circle of competence, not only it is easier to keep track of the company’s progress in the market, but it also lowers the risk of losing money. After all, no matter how inexperienced you are with the stock market, you most definitely will know more about the market around your set of companies. This just makes the decision of investing easier.

Think of it this way. We know that the consumer durable and IT sector in India has been growing significantly in the last few years. In fact, these are one of the fastest growing sectors in the country. This is followed closely by the banking and FMCG industry. The auto sector is also on the rise in India. These are a few favorable industries to think about investing in. (Refer graph below from Wealth Insight May 2019 edition)

Compared to these sectors, telecom and realty industries aren’t growing that much in fact. Even the traditional manufacturing industries in India are quite stagnant when it comes to growth potential. We have an oligopoly in these industries which makes it difficult for new companies to make it into the market. This isn’t a bad thing; it has actually helped the government to regulate standards.(Refer graph below from Wealth Insight May 2019 edition)

Considering both, companies touching highs and lows of the market, an investor has to see and analyze the potential of growth in the company per se. As there can be various short term or specific factors for the growth or decline of the stock of a particular company. Therefore as an investor, one has to see the long term prospect of growth and potential capability of companies business in the time to come to analyze the investing opportunity. Further, the most important thing, thinking long term is the key.

Also Read: Value Investing: The Butterfly Effect

Also from an investor’s perspective, underperforming industries will have to be analyzed from their ability to optimize their sales by reaching a high user base of India.

Are the products or services selling? Is there a decline in the demand for them? These are the kinds of questions you need to be asking before you make the decision to invest in a company. It doesn’t matter how big or small the investment is. As an investor, your focus should be on making money and these questions put you on the right track.

You need to do the research yourself. Don’t follow anyone else’s advice. Most importantly, don’t make decisions based on ‘gut feelings’. While you may get profits once or twice by choosing companies on a whim, this isn’t always the case.

If you want to get the most profit from the stock exchange, then you have to make educated decisions. One of these decisions that you will have to make is how quickly you want your money back. Some people buy stocks of start-ups as their market shares are increasing rapidly because they think this is how they can make a lot of money quickly.

But which companies and startups do you choose? More importantly, how do you decide which company’s stock to buy? If these questions came into your mind, then you’re on the right track because this is where we’re headed to. Up next, we’re going to tell you how to decide which company’s stock to buy.

The profitability of the Company

One of the first things you should look at when thinking of buying stocks of any company is its profitability. This means that you need to look at how much potential each company has to turn in a profit on a quarterly or yearly basis. Depending on how quickly you plan to sell stocks, the profitability of the company can be very high or stable.

Some investors prefer investing in companies which may not necessarily have a very high-profit margin, but which makes an overall net profit on a yearly basis. These kinds of companies are very good for long term investment as they will give you a profit whenever you decide to sell stocks. These companies will not give you a lot of profit immediately but, in the long run, they are worth investing in.

Also Read: 12 Ways You Can Save Tax in 2019

However, the kind of companies you decide to invest in will again depend on how quickly you want to get a profit from them. If this is the case, then it is advisable that you research the company’s market potential.

As a beginner, you probably don’t have enough experience to tell exactly when to buy and sell stocks to get maximum profits. If this is the case then you should definitely look at the market trajectory. Sometimes, some companies make a lot of money during the first few quarters but then as time goes on, their profits begin to fall.

If you miss the peak season to buy or sell stocks then you will find yourself facing a loss. So, in order to prevent this, you will want to keep an eye on the market. The stock exchange in India is subject to changes depending on the political climate as well. New policies can greatly influence stock prices.

The idea behind smart investing is getting familiar with studying the fundamentals of the company and maintaining a strategy around it. Adopt a long term perspective as long term investing is essential to greater success. Also, it’s important to invest based on future potential. As an investor, one might consider the stock market attractive when it tends to rise just before the new yearly budget or during election cycles. However, all these are temporary deals in the market and may not turn up into a very smart investing decision. Therefore, the basic ideology of evaluating a company’s past performance, say for last 10 years, reading annual reports and following the company with its ups and downs, major decisions taken in the past, diversification, its area of operations, expansion plans, etc, is the key to smart investing. Short term investing is not smart investing.

’Lastly, it’s very important that you look at the potential risks involved with the companies you’re investing in. Sometimes, smaller companies which have been doing consistently well in the market, suddenly face a loss or go bankrupt. This is because they’re not equipped to deal with their competitors. Therefore, you also need to look at the company’s initiatives as well.

You should also compare the profitability of multiple companies within an industry. Below you will find a chart of the various companies in the paint industry. As you can see, looking at their business model and their profitability makes it quite clear which company you should choose to invest in.

Future Initiatives of the Company

This brings us to the second section of our article which focuses on the initiatives of the company. It is very important to know about the managerial intent of the company you are investing in. This is actually quite easy to determine.

Also Read: 10 Secrets That’ll Boost your Money Saving

All you need to do is, look the intent of the company and the amount of effort it is making to identify new geographic regions for expansions, investment in the new product lines, expansions by acquisitions, entering into different product line or market. All this shows a keen interest of the company to grow and provides for a growth in the returns to the investors, exponentially, needless to say, if all goes well.

These are red flags that management does not care to grow the company. They may be happy with where it is right now, and this reveals that very soon, the company will be stagnant in terms of making a profit- something which is not good news to investors.

This will cause stock prices to fall over time and you may find yourself getting the short end of the stick. It’s not just the telecom industry you should be wary of either. Any company in any industry shouldn’t spend too much time without new releases because this increases the risk of losing their customers.

India is one of the fastest growing economies in the world. And there’s a lot of investment coming into the country from all fronts. Investors everywhere have realized that there’s untapped potential in the country, so naturally, companies are pushing out products as soon as they can to attract investors.

If a company isn’t doing this because it’s happy where it is right now, it’s actually setting itself up for losses in the long term. It’s shouldn’t be about how the management is ‘happy’ about their company’s share of the market. That is not how business is done.

A company with a serious intent to stay in the market will do everything it can to keep its current audience as well as to attract more customers. So, no matter what anyone says about such a company, it is a bad idea to invest in it.

 How much money Should You Put in Stocks?

Now that you have an idea of the kind of companies you should be investing in, let’s move on to the more technical side of it. While there is no set rule as to how much you should be putting into stocks, as a beginner, you should not expose yourself too much to stocks. This is done primarily to help preserve capital.

Since this article is aimed at those who are just starting to buy stocks, it is important that you will be financing your investment yourself. So what will you do? As a standard recommendation, at least 25% of earnings should be invested in the stock market. Regarding the mix of the investment, a commonly cited rule of thumb says that individuals should hold a percentage of stocks equal to 100 minus their age. So, for a typical 30-year-old, 70% of the portfolio should be equities. The rest would comprise of high-grade bonds, government debt, and other relatively safe assets. Further, as you gain more experience and find yourself studying and understanding the rise and fall of stocks more accurately, you can adjust this amount. Also, as the knowledge and experience grow, one may find fundamentally sound companies to invest in.

The Difference between Index Funds and Individual Stocks

A lot of people find it hard to distinguish between these two concepts. In this section, we’re simplifying these two terms for you so that you clearly understand the difference between them. An Index Fund enables you to put resources into numerous stocks by acquiring all the stocks in the same proportion as in a particular index.  This means that it essentially gives you access to all the stocks in that particular index. For example, a particular Sensex index fund scheme will invest in all the 30 companies of Sensex and will perform in tandem and deliver returns. Here, as you see the below graph, the index should deliver returns according to the growth of Sensex.

Individual Stocks, on the other hand, do not generally have the ability to decrease the risk your portfolio is carrying. However, if your investment is spread across several stocks and in case of one stock crash, the effect on your general portfolio is not life altering. Hence, maintaining the right portfolio allocation is important. Also, if we talk about diversifying your circle of competence, an investor can expand it by studying and understanding various other industries and companies and expand its circle of competence over a period of time.

As Warren Buffet said, “Never invest in a business you cannot understand”.

Choosing between these two types (Index fund or individual stocks) can help you make a lot of profit and cut down risk. You should try using both, and depending on what works for you. Also, many investors get lucrative towards individual stocks but it requires a great deal to identify the right set of stock on which you can bet. However, an Index fund can give you a good return if SIP mode is followed.

Also Read: How to Strengthen Your Value Investing

Numerous companies distribute their profits to investors as dividends, while others may prefer to use their profits to reinvest. Financing the purchase of future stocks with the profits made is a good idea as it can help you reduce risk.

Stock Volatility

Before you purchase a stock, it can be useful to know how volatile you can anticipate it to be. This is why we recommended you to look into the company’s history before investing. This helps you to understand how volatile the stock is.

Another thing which you should notice while doing your research is past trends. There are some patterns that emerge when you look at the rise and fall of the company. However, stocks with a background marked by profits give no assurance that they will always make profits. Here the knowledge and the understanding of the investor about the company and the market around it play an important role. A complete analysis is suggested to the investors that include the study of at least 5 years annual report, con calls, presentations, etc needs to be done for better understanding of the company.

This is because stocks with a solid history of profitability may fall for a time being. This is particularly true for big companies. In 2018, HDFC Bank’s stock went down by 15%. Now, any inexperienced investor might have panicked when seeing the trajectory and indeed, many people did sell their stocks. However, this was all in vain, because, by the next quarter, stocks were up by 12%.

This is what we said about timing. You need to do thorough research to make sure that you’re acquitted with the company’s history and profitability well. If you don’t know much about a company and buy or sell stocks based on patterns you see in real time alone, you may find yourself suffering losses. You have to look at both past and future trends to determine when to buy and sell stocks.

Bottom Line

Both professional and novice investors have their preferred method for the measurement of profit margins and value, which they develop by looking at dividends and overall net revenue. However, it is important to note that even with all of these tips, there is no singular way of distinguishing good stocks from bad ones.

There is no denying that people do try to influence the market so you will find a lot of people hyping a particular company because it sounds good. Even in stocks, the saying ‘too good to be true’ exists. If something looks too good, then it is very important that you look further into it. As we have said multiple times through the course of this article, you shouldn’t follow what anyone says.

It doesn’t matter how good they are at trading. Since you are the one investing, you should take a look at companies you plan on buying from yourself. However, at the same time, a stock that looks profitable with double-digit profit margins can easily fall down to losses instantly, and a new tech startup that looks like a risky venture can give you twice the profit.

Also Read: Secret of Value Investing

The cost of a single share isn’t the correct number to assess when choosing if a stock is a decent purchase or not. While triple-digit prices may be unreasonably expensive for one investor with restricted assets, stacking up on penny stocks isn’t really a brilliant idea either.

Conclusion

As you can see, investing in stocks can be a very tricky process. However, if you keep these points in mind as you begin your research, you should be good to go. We would once again like to remind you that luck doesn’t play a big role when it comes to buying stocks. What you need to do is your research in the company you plan on investing in.

You need to make sure that the industry you’re planning on investing in has an overall positive growth potential so that you don’t face any losses in the future. As we have already mentioned, one way of doing this is by making sure that there are no market forces acting against the company you’re investing in. These are a number of factors which we have discussed in this article in detail.

Local and national elections, as well as a crisis in the country, can greatly affect the stock market. Government policies also have the power to influence stock prices so it is very important that you look into legislation and policies before making an investment. Remember, Knowledge with the right set of research and information around company’s current performance and its future potential is the key to making profits because if you are buying the stock at the right price then you can create good value in the stock market. As Warren Buffet said, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price

Lastly, we’d like to end by reminding you once more that you should not let anyone influence your decision to invest in particular companies. Sometimes, certain individuals overhype some companies to influence people to invest in them. Be cautious of such schemes and use your own mind when making an investment. You’ll do fine when you do your own research!

Hospitality and Real Estate are two such sectors which have large number of players in them but are still highly unorganised up to a large extent. Quality living spaces are something on which still people have to compromise these days. This is a socio-economic problem, which has been taken up by OYO for proper fixing with the help of technology.

With a promising mission of creating great quality living spaces, OYO has completed the target of becoming a 100% leased & franchised hotel chain in the year 2018. In which they tie up with an existing and not-so-well-performing hotel building for their renovation. The entire renovation is done as per OYO’s branding and quality standards & promises to deliver core services are fulfilled.

Currently, OYO is offering an array of services under their bucket, namely:

  • SilverKey (Corporate Apartments)
  • OYO Living (millennial housing)
  • Pallete (Resorts)
  • OYO Homes (Vacation rentals)

It’s been observed in the year 2018 that number of room nights stayed has increased from 6m in December 2016 to 13m in December 2017 to 75m in December 2018 globally. This shows the growth to be at 5.7x on y-o-y basis.

Here in this visual, I have tried creating a glimpse of the recent journey of OYO taken. OYO aspires to become the largest Hotel Company in the world and this seems pretty evident from the visuals herewith.

Analysis of OYO Business Model

You would have heard the term “Butterfly Effect” from someone or read somewhere, particularly to refer the sensitive dependence on initial conditions. This explains that a minor change in one state of a determining nonlinear system can result in large differences at a later stage. The Butterfly Effect is a thought developed by the American meteorologist Edward N. Lorenz to emphasise the likelihood that small causes may have significant effects. It simply refers that small decisions can have big impacts down the line.

Vikas, who is one of the bloggers at dhandhoinvestor.com is a firm believer of Value Investing. He believes on the investment philosophies of Sir Warren Buffett. He has learnt investing in share market and mutual funds via the theories and guidelines outlined by some great investors. Let us unfold a few sides of his life to know what events played big role at a later stage of life though seeming quite small while in actual existence. In short, let’s reveal the butterfly effects of Vikas’s Investing journey.

DISCOVERY OF THE STOCK MARKET

My journey to the introduction to stock market begun in my college days. This is I believe one of the most prominent butterfly effects of my life which still holds the core of it.

During my IIT days, I was not new to internet but yes really fast internet was something fascinating. My hostel roommate used to play a lot of games online. I too searched for a game for myself and came across Dalal Street Investment Journal (DSIJ) online stock market & Virtual Money Game. In this game, I used to get a sum of INR. 10 lakh virtually to make my investments on the gaming platform. This virtual money was used to buy stocks of companies that were virtually trading on the platform.

Future First Pvt. Ltd. was running similar type of platform. There too I could only invest in commodity, crude, oil and future market etc. I was learning the basics on how to make investments on a trading platform in reality. I was learning new concepts for evaluating which share to be chosen on the basis of several parameters learnt. That was a journey full of learning for me.

Also Read: The most essential stock trading & investment tips

There came a competition announcement in my college, and I couldn’t resist myself for not taking part in the same. It was organised by Future First Pvt. Ltd. which is a company that provides research and advisory services in global derivatives markets. And, guess what I topped that competition for the first time from my branch. It was a booster for me in a lot many ways.

LEARNING: Though I loved every minute spent while playing the online trading game on DSIJ. I could gather, I was not much interested in commodities. I was able to understand the business dynamics etc. but did not like the commodity or the future markets. This experience gave a fruitful lesson for my lifetime. It taught me that I LOVE BUSINESS. I loved reading on businesses, understand their management’s decisions, their ups and down (and the reasons behind the same) and up to some extent I was able to analyse their financials too (though as a beginner only).

FIRST FEW PANICKED SALE OF STOCK

Way back in college I learnt investing online, but via virtual money. Now was the time to invest some real money when I was in my first job. Let me remind you, I began my investment with only INR. 1000/-

Why do I keep saying and reminding this (even to myself), because if I could save and invest money; anyone in the world can. I started to read a lot about Warren Buffett, the God of Investing. Just like any other investor, I too have made wrong choices due course of my investing journey. But always learnt few lessons which could not have been taught to me by any book or philosophy. I’ll brief on few of my mistakes and learning learnt here,

Maruti Suzuki India Ltd. (MARUTI): Almost six years ago when I had begun investing, I had bought few shares of MARUTI at INR.1500 only. Right now, I’m adding “only” to it, but at that time frame this was like OMG INR. 1500! Since I was new to investing and was not understanding the importance of long term holding for greater benefits etc. I sold off all the shares I had of MARUTI at INR.2000. This was my first PANIC SELLING!

You must be thinking I made a good sale (at a profit of INR.500 per share), then why am I calling it as a wrong decision of mine? Because the same share reached even to INR. 10000 later on. If I would have stayed with this company for longer period of time, I would have made huge profits. I was not at a profit of INR.500 per share, instead I was at loss of INR. per share (which is huge!).

LEARNING: If you have invested in good companies, believe in them (not blindly, keep a regular read on their quarterly reports for their financials). Do not panic at a stage when the shares are down, they’ll rise if they’re fundamentally good. In fact, when it falls buy it in good quantity and hold it for long time. Compounding is what will benefit in longer run. Keep reviewing the company’s performance quarter by quarter.

Suzlon Energy Ltd. (SUZLON): I was intrigued by this company for its promises made in the annual reports. I started to buy Suzlon’s shares at INR. 12 when the renewable energy sector was at boom. Sometime later Mr. too made an investment in Suzlon’s share at INR. 18 per share.

Also Read: 12 Ways You Can Save Tax in 2019

It took me some time to understand the fundamentals of the company, and by that time I had accumulated a lot of this company’s shared. I observed during one of their conference calls, that whatever promises they make are never being followed in reality. I immediately decided that I should quit this company’s shares as the management isn’t trustworthy. So I quit by making a profit of INR 2 per share.

LEARNING: We should never be barging behind a big investor blindly. Even a big investor sometimes enters wrong deals. One should avoid such “Hot Stocks”, which are a talk of every news channel. Also, one of the greatest learning that followed was: Never to go with a debt company. Suzlon had huge debt and always made promises for repaying back but God knows when they shall be debt-free.

Amtek Auto Ltd. (AMTEKAUTO): I had begun to buy this share when it was around INR. 120. It kept doing well for few quarters and even reached to INR. 150, when I booked some of the profits as well. All of a sudden a news flashes in that AMTEKAUTO has defaulted their bond’s payment. With the flash of this news, the share crashed down to INR. 50 in a single day.

While buying this company, I considered their debt to equity ratio too which was fairly good. But the problem was they kept acquiring businesses and the loan surged a lot. They possessed a lot of assets but did not have real cash in pocket i.e. a sound cash flow was missing.

LEARNING: A clear and loud message came out from this experience, “look for companies having no to low loans and have good cash flow”.

FINDING THE GEM

Deepak Nitrite Ltd. (DEEPAKNTR): I was keeping this company on my radar since a long time but I wanted to invest in the same only after being sure of its fundamentals. When I was assured of their commitments and adhering performances, regular growth, no to less debt, deliberate management choices and good cash flow I decided to make their shares’ purchase. And, I’ll say this has been my best buy ever till date. Almost four years ago I began to buy DEEPAKNTR shares. Initially I bought them at INR 65 per share and then the prices slashed down to INR 55. I again bought it when it slashed down to bring my average price to INR 59. It has shown good growth by the time and when it reached to a level, I started to book profit at INR 80-90 just out of fear of not losing it all. My average price still was maintained at INR 70.

There came a time when its share prices touched INR 300. And I could observe there is no turning back from there. Meanwhile I kept on investing in this share (even bought at INR 180-200 per share). Still, I’ll proudly announce that my average price for DEEPAKNTR is below INR 100. Today the price is around INR 280 and his holds 25% of my portfolio.

LEARNING: When you believe in the company, keep averaging out your buying price whenever you get a chance by the market’s lows. Invest for long term, compounding is going to give great results.

CASHING OUT A CHUNK FOR THE BETTER GOOD

Someone has very rightly quoted, whatever happens in life happens for a reason. I had to start a business in the Education industry and needed some immediate cash. Selling off Suzlon Energy was the first thing that popped in my mind. I was anyways not convinced with their business ethics or style of working and was (may be) seeking for a solid reason to quit their shares.

I found a rock-solid reason to cash out my INR 10 lakhs from Suzlon Energy and invested in a business which is earning me good money. That money would otherwise would be lost with Suzlon, which is trading these days at INR 5 per share. So, sometimes stepping firm and exiting at an appropriate time is also very much significant. You must be able to do your research and decide for when to exit.

Also Read: 10 Secrets That’ll Boost your Money Saving

Since many a times it’ll happen that such small incidents will leave a big impact on your future. Sum of such small events draw up a big and successful life’s painting. The decision of taking out my money and investing in something which too was risky (the education business), has reported well till date. Hopefully the future shall bring even better ways for diverse investments which are further fruitful.

LET’S ENCAPSULATE

These Butterfly Effects have added a lot to my life’s learning. And, obviously have made my portfolio grow day by day. Such butterfly effects only have made me capable of having multiple sources of income today. I can confidently say if these small incidents would not have happened to me, I would never have achieved what I have today. A well-structured investment portfolio to live a wealthy life, a business in education industry and blogging.

It happens with all of us, that we see or treat an event momentarily. We many a times fail to see the long term impact or choose to ignore but every incident acts as a butterfly effect in our life. The same applies to investing as well. Today, and for the generations ahead us, we need to make sure that investing is clear in purpose, stranded in the facts, and followed with the topmost potential competence.

The tax imposed on income generated by any individual or company is called income tax. Every year tax is taken. But do you know there are ways to save up your tax bill? Have you ever thought that investments can provide a deduction on tax? Are you looking for some investment options which can save your tax? Are you looking for better tax planning in 2019?

You are at the right place if the answers to the above questions were affirmative in your case. There are some tax-related rules and laws that may benefit you. You could plan your tax bill wisely and enjoy the benefits under the sections like 80C, 80D, 80CCD, etc. We have come up with the ways to save your tax bill this year by investing wisely.

Before investments, you should be aware of every benefit that can be taken.  We have got you some investment ideas that can take up the burden of the tax. Here, is the list of investments a common man can make and get relief on taxes. The individual can apply for the tax deduction under income tax act section 80C. There is a tax deduction up to ₹1,50,000 per financial year. Deductions are not applicable to companies and corporate bodies. These deductions should be claimed by 31 July each year in your income tax return (ITR). Deduction under this section reduces the gross annual income by ₹1,50,000.

Deductions are applicable under 3 sections:

  • Section 80C: Deduction by mutual funds in ELSS, insurance premium tax saver or PPF
  • Section 80CCC: Reduces the tax on the payment of pension or annuity
  • Section 80CCD: Deduction by Indian National Pension System

The chart below covers the returns that you can earn from these tax-saving instruments over a period of 20 years. You can find a detailed analysis of these tax-saving instruments when you read below.

Return on Investment

Below you’ll not only find out about the ways you can save tax in 2019 but you’ll also get a better understanding of the sections and the slabs in the sections under which you can save through these instruments and other ways:

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  • Insurance Policies

The premium payment of insurances gives tax benefits under Section 80C and Section 80CCC. Life insurance can be the most effective way to avail tax payment benefits. This provides long term saving and tax planning. ELSS and Insurance policies are considered as the best tax planning tools while ELSS is discussed in detail below, the Insurance Policies enable you to claim deductions up to an amount of ₹1.5 lacs under section 80C. Deduction claimed earlier will become taxable, once the insurance is terminated by the policyholder for payment of premium. The premium of insurance can be paid for insurance that ensures the life of the policyholder, spouse, and dependent children. Premiums paid for brother-in-law and sister-in-law cannot be taken into consideration for tax benefits. Premium paid for insurance to private companies can also save taxes of policyholder. Under Section 10(10)D, there is also a provision for the policyholders to claim exemptions from tax on the maturity benefits of the policy.

 

  • Provident Funds

This includes employee provident fund (EPF) and public provident fund (PPF). The employees can put funds by voluntary contribution. This EPF is paid at the time of retirement in the lump sum total. 8-9% interest is set on EPF by government. Tax benefits by EPF are under Section 80C. Public provident fund is an investment lock for 15 years with 7-8% interest. Any amount can be invested but the deduction will only be of ₹1,50,000 under Section 80C.

These are supported by the government. This is a long term deposit plan. A PPF account cannot be opened by HUF. EPF can be opened by an employee with a basic salary greater than ₹15,000. PF can be withdrawn after 2 months of leaving a job. Employer and employee contribute 12% of basic pay and DA in the EPF.

Also Read: 10 Secrets That’ll Boost your Money Saving

  • Sukanya Samriddhi Yojana

The scheme of government aims to help parents of the girl child with her education and marriage expenses. Under Section 80C, deposits in this scheme give tax benefits. An account on Sukanya Yojana can be opened with an initial deposit of thousand and then multiple of hundred can be added. The deposit can go from ₹1,000 to ₹1.5 Lakh per year. Till 14 years from the date of opening the account, deposits can be made. An account where the minimum balance is not maintained per year a fine of ₹50 per year is taken. The account is opened by the guardian of the girl child and managed until she reaches 10 years of age. After 10 years girl may operate her account personally.

 

  • National Pension Scheme

This is a retirement planning scheme. Money in NPS is contributed to equity funds, corporate funds, and government funds. This scheme provides deduction under Section 80C and additional deduction of ₹50,000 under Section 80CCD. This scheme is under the Pension Fund Regulatory and Development Authority and Central Government. The scheme is for investment in a pension account at regular intervals during their employment time. An amount of 40% of the corpus needs to be utilized for the buying of an annuity income from any insurance company which is listed in PFRDA at the age of 60. Other 40% of the corpus can be withdrawn tax-free and the remaining 20% can be withdrawn with a tax or can further be used to buy an annuity. Earlier the NPS was only for Central Government employees, but now PFRDA has made it available for all Indian citizens on entry basis. Employees from private-public and even organized sector can deposit & claim tax benefits under section 80C and section 80CCD.

National Pension Scheme or NPS

  • Home Loans

Payment of the principal amount of home loan deducts the tax under section 80EE. On the purchase of property, the paid stamp duty and registration charges an individual can avail tax benefits under section 80C.

There is a limit of ₹2,00,000 on paying the EMI of a house loan, it has two components, the interest payment, and the repayment of the principal amount. An amount of ₹1,50,000 of the principal amount is covered under section 80C. Also, section 24 covers the interest you pay on the home loan and you can claim a deduction of ₹2,00,000 provided the construction work has been completed within 5 years. Let’s assume it is your first house then apart from these deductions of interest and the principal amount that you would be claimed under section 24 and 80 C respectively, you can claim an additional amount of up-to ₹50,000 if your property is valued at less than ₹50,00,000 and the loan amount doesn’t exceed ₹35,00,000 and the loan was taken between the beginning of April in 2016 to the end of March in 2017. If you wish to calculate the tax savings on a home loan you need to separate the principal amount and the interest amount from the EMI.

 

  • Tuition Fee for Children

Section 80E of income tax act deducts tax on payment of tuition fee of children. Under UPTU ₹1.5 Lakh can be taken as tax benefit under this section. Fees paid at the time of admission during the financial year of a university, college, school or educational institute in India can give tax benefits. The institutes can either be private or government. The benefits can be applied for the fees paid for 2 children. If both parents are working both can file a claim for a tax deduction depending upon their part of share in the child’s tuition fees.

In India, to promote literacy rate and children’s education these tax benefits are given. This deduction is only available for full-time education courses and also contains nursery schools, crèches and play school. This can also be claimed by unmarried or divorced parents. An adopted child is also eligible for this benefit. Development fees, donations fee or charity, private coaching center can’t be availed under this, part-time courses cannot be included in this as well and foreign studies are not eligible for deductions either. The only condition is that the child should be in India to avail the benefits of tax under section 80E. The annual fees receipt has to be submitted in the financial year of the employment.

 

  • Money in a Savings Account

Under the section 80TTA interest on a savings account is tax-free up to ₹10,000 per year. For a senior citizen, the limit is ₹50,000 for both FD and savings account under section 80 TTB. This deduction can be claimed by individuals and HUF. To get a complete exemption, the annual interest income should be less than ₹10,000.  Even if the person owns several accounts the collective income from interest should be less than ₹10,000 for getting a complete exemption. This gives relief from tracking small amounts of interest which are included in taxable income. Section 80TTA gives the advantage in penalties on some petty tax issues. People with lower to medium income are paying some marginal amount of tax and get the benefit of ₹10,000. Under Section 80TTB, senior citizens get adequate relaxation in the form of tax deduction. Thinking of the old age, the government introduced benefits for senior citizen. One such is 80TTB, where citizens over 60 can claim for deduction and relaxation of ₹50,000 is given to them.

 

  • Equity-Linked Savings Scheme

The Equity-Linked Saving Scheme has two main advantages. One is investing money under section 80C of Income Tax Act and getting a tax benefit up to ₹1.5 lacs, the second is it is the only scheme which provides the lowest lock-in period which is just 3 years. The cherry on top in the ELSS schemes is a return of around 12-15% which makes it even more worthy.

Another benefit of ELSS is that the amount can also be withdrawn by just one click and no paperwork. Though it is one of the most overlooked options it can be really very promising. The tax benefit of ₹1.5 lac can be availed only through investing in ELSS and not any other scheme of mutual funds. The first chart at the beginning of this article shows a comparative analysis between the various investment avenues and describes very clearly about the kind of returns you can expect from ELSS schemes apart from availing the tax benefits.

Also Read: It is never too late to reduce your taxable income

  • Unit-Linked Insurance Plan

This is a mix of insurance and investment. This plan is the definition of production and saving. This is suitable for all investors. The premium paid is invested in equity debt, or money market instrument. The premium paid in this policy can be claimed for tax deduction under section 80C of the Income Tax Act. ULIP premiums deduct tax up to ₹1.5 lacs. Premium amount should be less than 10% of the sum assured in ULIP. This scheme allows the policyholder to choose Asset class. The investor can switch from one class to another very easily. Benefits paid under ULIP are tax-free in case of death of the policyholder. The only thing you should ensure is to have a minimum lock-in period of 5 years, partial withdrawal can be done after this. The withdrawal limit is 20% of the fund value which are completely tax-free. ULIP can be an ideal investment option considering the plans for marriages, buying a home, and education.

 

  • House Rent Allowance (HRA)

If a part of your salary is going on house rent, you can claim a deduction. Under section 80GG of Income Tax Act rent paid, you can get a tax deduction on the rent paid. There can be a maximum deduction of ₹60,000 per annum depending upon the class of your city, your salary and the state you are living in.. Basically, HRA was decided to be on the basis of salary but later other factors also came into existence. The place where one lives is the major factor. If in case, the person is in a metro city, the HRA amount is 50% of his salary. Cities other than metros gives 40% of salary. Actual rent should be less than 10% of the basic salary. Allotted HRA cannot exceed 50% of the salary. In case you live with your parents, you can get into an agreement with them and pay monthly. The receipts should be given by parents to claim HRA. HRA can be availed even with home loans. For instance, if a person lives in a rented flat and pays 10,000 a month as rent and gets an HRA of 15,000 along with a basic salary of 40,000 and pays a monthly installment of 20,000 for his home loan then he can claim the benefits as follows

  • On the HRA received which was 15,000
  • On the 40% of Basic Pay which comes out to be 16,000
  • On the rent paid – 10% of basic Pay which comes out to be 6,000.

The exemption on the HRA comes out to be 6,000 in this case an amount of 9,000 would be considered to be part of his taxable income. If annual rent is more than ₹1,00,000, landlord’s verification is needed. If the landlord is an NRI, then 30% of the rent amount is deducted as tax.

Also Read: Comparison of ELSS Funds with Tax Saving Fixed Deposits

  • Medical Insurance

The premiums paid for Medical Insurance of self and dependents can be claimed and deductions can be availed under section 80D. A maximum amount of ₹25,000 can be claimed for the premiums paid with an inclusive amount of ₹5,000 for preventive medical checkups for self, spouse, and children. An additional amount of ₹25,000 can be claimed for the premiums paid for the medical insurance of parents below the age of 60 which can go up to an amount of ₹50,000 if the age of parents exceeds 60. The same happens, in case you or your spouse is also above the age of 60 and the maximum limit of claim can be ₹50,000. So, in total, an amount of ₹1,00,000 can be claimed under section 80D for medical insurance premiums.

  • Donations

The amount of money that you spend on donations and charity can help you get an exemption on tax as well. Recognized charitable Institutes are allowed as a deduction under the section 80G. A deduction can be of 50% or 100% of the total amount on the charity.

Charities which allows 50% donation as tax-free deduction are.

  • Prime Minister drought relief fund
  • Indira Gandhi Memorial Trust.
  • Jawaharlal Nehru Memorial Trust
  • Charities which allow 100% to Nation as deduction are.
  • Prime Minister’s national relief fund national
  • Defense Fund.

Someday while cleaning your wardrobe if you find some notes lying (not the old thousand rupee notes obviously but the pink ones). How happy does it make you feel? What feelings strike to your head immediately? You can keep this money for your next vacation planning or you may keep it safe as an emergency fund etc. We want you to save money not just accidentally but purposefully.

“The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind.” —T.T. Munger”

There are no trees bearing free cash or there are no rains of rupee happening from the open sky into our wallets. This reminds that we have to live in our budgets and save money for the future. For this very reason, we are listing a few ways of making you start saving money today itself. Some of them might just take a minute to implement. While others may require serious efforts from your side. But we’ll say try these tactics at least once and mark the difference in your monetary lives.

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10 Ways to Save Money

1. Turn your TV OFF

TV according to us is an evil necessity of today’s society. We never ever had a TV in our home, not even in the living room. It saves us our money and our time which we utilize in doing something productive. Maybe if we had a TV set at home, we would not have worked on our blogging projects such as DhandhoInvestor & SoftParenting.

We remember our parents’ habits on TV. The moment they used to enter home from the office, they used to switch on this box until they fell asleep. Was merely sitting on the couch and changing channels helping anyways at all? In fact, was only contributing to our household monthly bills (cable plus electricity both).

Let us share some data with you all. The renowned rating agency CRISIL, in a report in February 2019 said, that the new TRAI regulatory framework is estimated to surge the monthly TV bills of the majority of subscribers by around 25%

Let’s do an exercise for you. Please check how many total TV channels are there on your TV. You’ll be surprised to find it close to hundreds. And, you’ll not be able to count even ten that are of interest to you. You may decide to cut off the cable expense and put the TV in the store room. Or sell it to someone who needs it and earn money instead.

2. For shopping, Always make list and stick to it

We know this could be tough, especially for a gentlelady. But trust us, once you begin to apply this rule of shopping you’ll start seeing the changes yourself.

Also Read: The Reality of Being Self-Employed

Make a list of items to be bought before going shopping and please for God sake STICK TO IT! You’ll observe yourself being away from any impulsive buying and looking only for the articles mentioned in your list. This saves your money and wandering around time too.

3. Invite Friends home instead of Chilling out

Friends are everybody’s lifelines. In our good or bad times, they are the ones always ready to be there.

Call the friends to your home for occasional get together instead of meeting outside in a café of a mall. This way you can spend more quality time with your friends without any external disturbance. Your expenses are also cut down to a large extent when you plan your gatherings at home.

4. Drink Plenty of Water

Drinking water in huge quantity has a lot of benefits to our health, skin, and metabolism. Did you know it can also make you spend less money?

Let us share our own story. There was a time when Vikas used to feel hungry and empty stomach at lesser intervals of time. He wanted to munch on something at those times. When he was in office, he could not grab something from the kitchen and satiate himself as at home. Being outside he used to end up buying some packaged food or ordering from an eating joint. Firstly he used to stuff himself with junk food and secondly he spent unnecessary money on the same.

To counteract the same, he began drinking lots of water and he would not feel empty all the time. He is able to avoid the little hunger pangs easily. And of course, avoids the thoughtless ordering of food as well.

5. Maximize the End of Season Sales

Plan your shopping such that you visit your favorite brand store when they offer End of Season Sale. Here also you may follow the shopping list rule. Prepare a list of items needed and stick to them only. Just try to go to store well early during the season’s end sale, or you might face little problem finding the best sizes.

6. Avoid Mall for Grocery Shopping

Grocery is something that we require bi-weekly/monthly (as the buyer prefers). When we go to the fancy super-marts in big malls and we see all the racks stacked beautifully with some random items. We tend to buy more than what we had gone to buy exactly. Sometimes completely irrelevant shopping is made at super markets which are not our need at all.

Also Read: Importance of Books for Investors and Entrepreneurs

It’s advisable to do online shopping for grocery. It saves time, gives a big discount on the retail price, door step delivery and most importantly helps you avoid impulsive buying.

We also used to love doing our grocery shopping at Spencer’s. But when we realized that we have stacked out kitchen and store room shelves just as to make it look like mini spencer’s. We quit!

We now buy your grocery from amazon pantry from 1st-7th of every month.

7. Apply 10 Seconds Rule for Impulse Buying

When we go to a market, it happens with all of us that we want to buy something.

Before making the final purchase, just think for ten seconds for what’s the need and use of the item immediately. Straightaway, you’ll have your answer in mind. And we can bet, 85% of the times you’ll walk away after exercising this on every such impulse.

8. Take your lunch along at Work

How many of you take your lunch along or it is provided in the pantry at work? If you do take your lunch along at work, you’re saving $65-70 every month.

When we buy the lunch outside, it always costs hefty as compared to a home-made meal. While eating outside, we’re not considerate of the amount of junk you consume. Later on, the health problems that junk food brings in costs another bill at the hospital. So, packing lunch for work has double benefits in terms of health and money.

9. Start Gardening

We both love gardening. We have a small garden but we have so many vegetables growing in it. We have tomato, spinach, fenugreek leaves, coriander leaves, chilies, lemon, curry leaves, Chinese oranges, etc. growing in our garden. We don’t buy them from outside at all.

Also Read: Don’t Try to Saw Sawdust

We are eating organically home-grown vegetables that too for free.

 10. Use Public Transportation or CarpooL

We know this is a bit of a hassle initially, but trust us this method of commuting is the best. You save a lot of money spent on your car’s insurance and continuous maintenance.

By using public transport, you are lessening the pollution and contributing one less car to the traffic on roads. The cherry on the cake is: you save a lot of money at the end of the month.

Okay so, these are few simplest ways via which we save money and invest for a greater good. Let us know your saving tips and tricks in the comments section below.

We’ll love to hear your tricks too.

Keep Saving, Keep Growing!

 

Vikas & Khushboo

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“Books are a uniquely portable magic.”

― Stephen King

We were thinking of what should be the topic for this very article which puts itself forward to tell you what we love talking about. Three things popped up straight to mind: Investment, Business, and Books. So, we’ll tell you about a few books that have proved to best suit for the Investors and Entrepreneurs in both of us.

“Outside of a dog, a book is a man’s best friend. Inside of a dog, it’s too dark to read”

This wise quote is given by Groucho Marx emphasizing on the importance of books in one’s life. When books on money matters are read, people understand that nothing could become a better friend of an investor than a Finance Book.

We read a lot of books and share knowledge with each other. Very often it happens that we’re asked for recommendations for the same. As when you enter a search on Amazon for finance books, you’ll get around thousands of search results coming up. This will certainly make you confused as to where in the world do you begin from.

We’re trying to list down some of the books that have a really good influence on our lives in terms of investments and businesses that we’re carrying on. We’ll keep updating this list whenever we find a must-read, make sure to come by in the future and check what’s new has been added for you to explore.

The Dhandho Investor: This is a small book which lays out the framework for value investing very strongly. This book explains a comprehensive guide on how the Patels of India are doing the asset allocation into their businesses and how the same guidelines can be successfully applied in the stock market as well. The Patel community, which is proven to be the best businesses men of all in India have some real good sense of conducting businesses and allocating funds in them.

This quality is a lot crucial to an investor as well while investing in the stock market because value investing is about seeing things everywhere in life as risks vs rewards. When the reward of taking action is much greater than the risk, it makes sense to do it. Heads you win, Tail you don’t lose much. It is true in investing. It is true in entrepreneurship. It is true in business.

Buy Here

Rich Dad Poor Dad: The first feeling you’ll have after reading this book is, “I’m Inspired”. Rich Dad, Poor Dad makes you completely rethink of how money works. For example, instead of seeing an asset as something with value, this book describes an asset as something that generates cash flow in turn. In short according to this book, your home can not be considered as an asset. This book basically talks of a child who have had great influence of two men in his life. The lessons he learns from his idols are as follows:

Also Read: 5 of Our Favourite Money Hacks

Lesson 1: The Rich Don’t Work For Money

Lesson 2: Why Teach Financial Literacy?

Lesson 3: Mind Your Own Business

Lesson 4: The History of Taxes and the Power of Corporations

Lesson 5: The Rich Invent Money

Lesson 6: Work to Learn – Don’t Work For Money

Buy Here

7 Habits of Highly Effective People: This is one such book which leaves a great impact on one’s mind and soul as to identify their own vision, principles and values of life and how does it affect our life once it has been made a part of our habits. This books of seven great habits that make anyone successful in their lives and these are:

  • Being Proactive
  • Begin with the end in mind and behave/react
  • Put first things first
  • Think of Win/Win
  • Seek to Understand first and then to be Understood
  • Sharpen the ‘Saw’

Buy Here

The One Thing: FOCUS, what do you understand by this word? We believe you’ll all say determination to do something. Yes, it’s determination to do that “One Thing” so nicely and precisely that you become a master of the same. You don’t see Mark Zuckerberg busting through his shirt because if he dedicated his daily hours and focus to his workouts, he just would not be Mark Zuckerberg. This book forces you to find that “One Thing” of your life and just hammer on it. We personally like few lines of this book, these are:

  • “It’s not that we have too little time to do all the things we need to do, it’s that we feel the need to do too many things in the time we have.”
  • “When I first began to time block, the most effective thing I did was to put up a sheet of paper that said, “Until My ONE Thing Is Done—Everything Else Is a Distraction!”
  • “FOUR THIEVES OF PRODUCTIVITY Inability to Say “No,” Fear of Chaos, Poor Health Habits, Environment Doesn’t Support Your Goals”

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The Intelligent Investor: When Sir Warren Buffet describes a book as “by far the best book ever written on investing”, it is probably the most important and influential value investing book ever written by Benjamin Graham. Benjamin Graham via this book has tried putting hard core concepts of investing in simple terms that can be understood and more importantly can be implemented as well by an average investor. This book talks on six key principles of intelligent investing as Graham details six key ideologies of “intelligent investing”:

Also Read: Investing in Equity Mutual Funds vs. Individual Stocks

  • Know the business you’re investing in
  • Know who runs the business
  • Invest for profits over time, not for quick buy-and-sell transaction profits
  • Choose investments for their fundamental value, not their popularity
  • Always invest with a margin of safety
  • Have confidence in your own analysis and observations

Buy Here

The Richest Man in Babylon: This book takes you through different stories in the Babylonian days, which are full of learning as to how a man grows in life with their right investment decisions. There is a story of a young man who is seeking to learn how to become rich from a millionaire, in the process he learns of some timeless and ever applying rules to wealth which anyone can learn and apply to theirs as well. The young boy actually gets rich at a point in life and thanks the rich guy for his lessons. We would like to share some lessons learnt with you all too:

  • Spend Less Than You Make. Save and Invest The Difference.
  • Use Saved Money To Make More Money
  • Only Take Advice From People Skilled In That Field
  • Only Invest Your Money In Industries and Skills You Are Very Familiar With Or You’ll Lose Your Money
  • Don’t Wish For A Lump Sum of Cash. Work To Achieve A Consistent Cash Flow Instead.
  • You Will Lose Money If You Put It To Foolish Use
  • Put Away 10% of your Earnings and You Won’t Even Notice A Difference in Quality of Living
  • Invest in Your Ability To Earn More

Buy Here

The One Minute Millionaire: This book when you start reading at first may get you confused because of its two sides: one fictional and one non-fictional. Both the sides have a similar motive for the readers to acquire a clear mind-set of an enlightened millionaire in order to achieve wealth and financial freedom.

Also Read: Do’s and Don’ts while investing in Share Market

The story takes you through the journey of a woman who at the moment starts feeling good about her decisions begins to make one. The book talks primarily about the importance of ‘generics’ for example personal attitude, influence, networks and marketing. The phrase “Attitude Matters” is the shortest summary for this book and is a must possessed quality for everyone who wants to become successful in life. This book has personally altered both of ours attitude towards life and success in life.

Buy Here

One up on Wall Street: The ultimate knowledge that I could receive from this book is the basis of practically every big investor. All of them recommend for focusing on what you know. Look for investment in companies and industries that you’re familiar with. Listen to every body’s recommendation but follow your own beliefs and knowledge.

This book written by Peter Lynch provides a fair knowledge on investment for people who don’t know the ABC of business or investing. As he always emphasises on the daily observations of life for selecting a good stock. The book focuses on observing the companies that look promising to surge in areas of products widely used. And, eventually investing in those companies’ stock only.

Peter Lynch’s book also believes on the idea of “ten baggers”. This represents those stock which increased tenfold from the time of their investment. He recommends an investor to look for such ten bagger stocks.

Buy Here

Common Stocks & Uncommon Profits: Philip A Fisher is the writer of this book on the topic of investment. He believes in buying the quality stocks, and does not mind paying a fair price for them. He holds the stocks for several years (sometimes decades) and relishes the benefits of compounding.

Fisher’s approach to investment is known as ‘scuttlebutt’. This means applying detailed interviews with shareholders, the suppliers, customers, investors and employees, and competitors about a company’s forecast. The author in this book, explicitly mentions “What to Buy” and “When to Sell” chapter wise.

Buy Here

Hoping this write up shall surely bring some positivity in its reader. If you’re an investor or a business personnel, you should consider having these books in your bookshelf. Sometimes these books become the driving force for us to do something good with our business and investments. Sometimes, a learning from the book touches your heart and soul so deeply that you want to change the way you’ve been living till the time. Books are life-changing. Experience them by embracing them in life.

Good Luck!

“All progress takes place outside the comfort zone.” – Michael John Bobak

That sounds more like a trade-off. The essence of working for self provides me every opportunity that I may not have been exposed to when I was underemployment. However, getting to self-employ requires a lot of work hours and responsibilities than what I would spend on a traditional job.

The life a self-employed person creates for themselves is a serious blessing. It’s something that a person works hard for many years and dreams about every day & night. A self-employed person sets themselves up in a way that they can take care of themselves, do what they love, make a living doing what they love, and still have time to experience their life.

We’ll mostly be speaking about the “WE” part of ourselves. Let us introduce to the “SHE” part, as she’s into self-employment now.

Every good opportunity comes with some sacrifices along, and self-employment doesn’t remain untouched from this fact. Before launching herself into self-employment and becoming her own boss or abandoning the life of employee-hood, there were some seriously considerable realities of self-employment. These were non-negotiable and were totally out of her comfort zone.

You Reap What You Sow:

As an employee, sometimes I used to wonder sitting in my office cubical as to when the clock will tick 5:00 PM and I’ll leave the doors & sometimes it has happened that I have carried lots of work to home and skipped dinner and submitted the assignment late night or early in the morning. One thing is noteworthy here that in either of the two scenarios, never have I been ever asked for why I’m just counting the hours clicked on the clock or was applauded for my extra hours put in to deliver an assignment perfectly.

On the other hand, I never get paid just for showing up and marking my presence marked at my business/freelancing. Every single minute worked upon my business or anything that I do as freelancers count something. If I run out of clock any day and don’t do my best I hurt just one person and that’s ME. Starting employment for myself made me realize that I’m the maker of my destiny, and if I want extraordinary results in my life it would not happen by putting ordinary efforts into it. And, that’s exactly what I’m learning and trying to practice now.

No Job is Perfect:

It is true in almost every sense, either it is a job as an employee or you work for yourself. But self-employment lets me bet on myself every day. When I win that’s the happiest day, and when I do not that teaches me something. I’m loving every day’s challenges and how every time I have to come up with unique and comforting solutions. I still remember my first day at my venture, where I wasn’t confident enough to be making eye contact properly with one of my clients.

Since I have turned self employed, the cherry on the cake has been the happiness of making more money by working hard my way rather anyone else deciding how much should I take home every paycheck. Though my income varies (and that’s how it plays in business). But I’m happy living my life at ease, with freedom, and with much better work-life balance. I know self-employment too isn’t perfect, but still, I would never want to go back to my employment life.

Also Read: Multiple Streams of Income: What it is?

Long Working Hours:

When I was working as an employee, I used to see Friday 5:00 PM with a feeling of relief and freedom. But this happiness of freedom lasted only until the clock used to tick 9:00 PM on Sunday night. Mostly the working hours are 40-45 hours per week at the job.

Self employment generally asks for 50 or sometimes more than 50 hours a week. The self-employed people don’t get a weekend off, they work full time on weekends as well. You must be wondering, if self employment comes with so many disadvantages why would I chose this. Simply because of the one single perk that probably is beyond everything for me, and that’s personal freedom.

Wear All Hats Yourself:

When I take the responsibility of being self-employed, I wear multiple hats at a time. I am in charge of accounting, financials, operations, marketing, client engagement etc. I’m the boss and I’m the employee as well. And I have to do all of these jobs at once, and do them well, to make self-employment actually work.

It may happen that someday almost half of my employees have sat back home and haven’t shown up for the job. Well, that’s the hell of a task then and I have to manage each one of theirs’s job. Some by doing myself and some by delegating to others but covering up for the day’s task.

No Real Vacation:

During my employment, I used to shut down the laptop at my work station at 5:00 PM. I was free (completely) from the jobs that were to be delivered for that day. Every day, I used to walk out of those doors carrying no stress of office work further.

I have kissed my paid vacations Goodbye and left aside the hope of “real vacation”. Of course, being self-employed enables me to plan my vacations whenever I want. But the real problem that arises is, the customers don’t like waiting upon something or I not readily being available over calls as per their requirements. Gradually my relaxing vacation turns into a working vacation.

Still, I love it when I can plan according to my schedule as to when I’m free. Instead of asking for anyone else’s approval for the same for the sake of “planned holidays”. The control over my life is mine, not someone else’s.

Also Read: 5 of Our Favourite Money Hacks

Get Ready for Bank’s Turn Down:

Bank distributes Loans to almost anyone having a decent monthly income as an employee. But it doesn’t consider the application of a Self-Employed person until they have completed 3 years into that business and an ITR has been filed for the same. I have been turned down by 3 banks when I was looking to raise some money at the initial stage of my business. Although I had enough capability for getting the payment settled clearly. All the three banks wanted me to have (as assurance) is a steadily flowing paycheck every month.

You’re all by yourself:

Bidding the last goodbye at my job made me realize that there are few pieces of this job puzzle that I am actually going to miss. Such as: being able to look forward to guidance & suggestions from your boss, sharing warmth/frustration/companionship with your colleagues, being able to learn a new technique from a colleague who just got a course certification done/sharing of knowledge on the big meeting table etc.

Along with these, I was also losing the company’s other benefits like health insurance, the MacBook, the cell phone, the gym membership etc. I had to manage everything on my own now during my self-employment. A weird thought constantly nudged inside my head,  what if I’ll be ill-equipped to provide all of this for me? I might be in trouble!

But fortunately, things have turned out nice. The passion for conducting business on my own has synced deep inside me during the last two years.

Taxes can be bit Overwhelming:

The best part which I’d found during my employment that whatever amount was to be paid by me as tax, was deducted while the disbursement of my subsequent monthly paycheck towards the tax submission. I did not have to worry about the tax submission and arrange a surplus for the same when the financial year was closing.

However, now when I’m self-employed I do tend to worry at the financial year end as to what amount will my chartered account ask for tax payment. Also the CA’s charges for working on my balance sheet and tax accounting. I still haven’t got the habit of doing it every three months. This habit is obviously going to make a lot easier for me and my CA as well. Assessing financials quarterly is a better option than doing it annually, I’ll try to get this implemented soon enough 🙂

Well, taking into account the advantages and the disadvantages of self-employment, people like me any day prefer becoming their own boss. You may read about those people who are into self-employment for sometimes now. You’ll get to know of their experiences on successes and failures to be unique and addictive. Once a person starts to create their own success stories, it is difficult to go back in the course.

While I was in my job, it was a thought in the back of my mind that I’ll get a handsome annual raise from the employer. And once this raise was not as expected, I used to feel detached from the company. Whereas as a self-employed person getting a raise is directly proportionate with my business’s performance.

I want a raise – I have to bring more clients, sell more products/services, better my services, hike my rates and take whatever raise I want. I think for almost every entrepreneur the opportunity of making unlimited money is something that they keep working hard every single day. Once you succeed in self-employment, you’ll have the life you have always dreamt of professionally and personally as well. And, you keep thriving for more and more every time you touch new heights of achievement.

We hope to have touched the chord of your heart with our drafting.

Much Love!!

Khushboo & Vikas

Life is good in retirement, the early you achieve it the better it is. We’re thrilled to be working progressively towards the same which enables us to live our life on our own set terms. Instead of answering to Mr. Boss, we can wake up and do whatever we want.

On some fine day, I would just ride a bicycle for hours. On others, I’ll spend hours in a library or go on a never-ending car ride with my play-list on. Money in all of them is going to play the role of a magnificent expediter if some hacks are applied while using the same. Once we’re stuck in our ways, we all become intellectual idler sometimes, to not doing this we always thrive towards learning something out of everything.

We may have enough money so that we do not have to pay attention to trivial things of life, but we’ll never stop learning. Money is something that we discover new things about every week or month which makes us wiser saver/investor. This read of ours is going to share our favorite money hacks with you:

Money Hack 1. Write Down Every Transaction:

Until recently, we knew how important it is to track out every expense that we make but didn’t bother to actually record it. But then a couple of years ago we have begun to make a record of every rupee going out or coming in. It would be an understatement to say that we were in shock to see where all the major chunk of our income used to go.

We were able to categorize our expenses into three categories: Fixed Expenses, Variable Expenses and Periodic Expenses (which also accounts for any emergency expense too). When we have a fair idea about what is needed and valued the foremost (which could not have been possible without keeping a track of actual figures of income & expenditure), we are able to allocate the money in the most productive way.

Money Hack 2. Tracking Spending on Spreadsheet:

We have literally created a spreadsheet which has two sheets on it: one recording all the income and the other recording all the expenditure. Sometimes when we do a trackback in the month end and see that we ended up spending thousands over online shopping buying a pair of jeans or shoes (while so many unused pairs of them are still waving at us from our wardrobe), we bang our head for why did we even buy them at the first place.

We never understood why someone would pay thousands of rupees extra to sit in a wide seat with better legroom for a couple of hours when they could buy a fancy recliner of worth half of those thousands spent on first-class airline tickets and enjoy it for decades. Certainly, our body will appreciate those hours spend comfortably during the travel, but the wallet shall definitely be pissed off at it.

Money Hack 3. Wise Use of Credit Cards:

We know we’re entering a controversial and disputed territory here, but here is our take on the usage of credit cards. Use them maturely and they do wonderful things to you. Use them carelessly and: BOOM!

People usually think they have to make sacrifices when it comes to saving for financial independence. We’ll say, it’s not. Let us tell you a small story, we have enjoyed the best 6-7 days of our lives in Sri Lanka at a very reasonable travel rate. We got our air tickets, hotels at much cheaper rates because of the cashback we got on our credit cards (we have a lot of them actually…wink). When we were planning the Sri Lanka trip, we received a shopping voucher along with one of the credit card’s welcome gift that helped us in all our fashion needs on the vacation. We bought our iPhones and iPads INR 10,000 lesser than the usual price as a last minute discount on the credit card was ON and we leveraged it. We can go for the movies at BOGO offers (every Wednesday & Saturday), just because of the credit cards.

At times, we have even paid the outstanding of credit card via converting the same credit card’s points into cash rewards. Isn’t it clever?

But hang on, before you consider any of these you must bear in mind that you have to keep your hands tight when it comes to the shopping spree via credit cards. Use the credit cards responsibly and never hold a balance!

Read: The Reality of Being Self-Employed

Money Hack 4. Personal Capital Record:

Our financial records get complicated sometimes, and we’re sure you won’t be remembering your fund allocation to each and every place made. Since one puts their money at about thousands of different places, if not literally at least it feels this way!

The remedy to this problem for our sake is Moneycontrol. This platform aggregates all our accounts in one place. We’re sharing a screen capture of the same for all of you to have a look at:

We have just masked our recordings with the black boxes, finances are a secret right? Well, you have seen how beautifully it keeps a record of everything ranging from equity investments to your loan accounts and property details as well.

The best part of this platform is that it’s free, and who doesn’t like anything free?

Money Hack 5. Shopping for Long Term:

We think for the long term when it comes to making a purchase of something big. We’ve heard/seen people making impulsive purchase many a time in the market and saying, “it’ll come handy someday, let’s buy now or where to find at the time of need”. Do you know the money invested in the equity gets doubled typically in less than 10 years, obviously when invested wisely? Big purchases at an early age may cost you big time in the long term.

What’s Your Money Hack?

So, this was our side of the story when it comes to the money hacks and we know we have hardly touched the surface of the matter here. We would love to hear your money hacks now. What are your hacks to hold down the slipping of hand inside the pocket for wallet and cut down spending? What tools do you use to stop spending rather investing?

Knock us in the comment section below and let’s all of us learn more.

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