Navigating the maze that is personal finance

Friday, 30 September 2016

You can actually earn using credit cards - here's how

 
We Indians love our credit cards. According to one report India had 24.5M credit cards in March 2016.  Credit cards have made life easier but carry high interest rates, anywhere between 12-18% per annum depending on the card you have. However, if used judiciously, credit cards can actually help you save money.

Let me show you how.


Earn interest

When you are paying for your expenses through your card you are not settling the transaction. That happens only when you are paying the bill on your card at the end of the month. The money which you would have otherwise spent earns that extra interest for those few days. Though the amount could be small but it should not be forgotten that every drop contributes to the ocean.

Let's say you bought grocery for Rs.5000 on 1st of the month in cash. If you use credit card this would earn you Rs.25 @6% as interest (just by keeping it in your bank account) by end of the month which would be 300 rupees for the whole year. Sounds less, doesn’t it. For an expenditure of Rs. 50,000 per month you would be saving close to Rs.3000 in a year. It's the small amounts we save that matter in the long run.

 

Points earned

So not only do you earn extra interest you can actually turn your expenditure into earning. Different banks offer different perks for using their cards. Points are earned for money spent through the card, which can then be redeemed for a discount on your air fare or for free fuel or as simply as in a restaurant on a night out or getting cash back.

Let’s say that your bank rewards you with 1% cash back on every purchase. Again considering an expenditure of Rs. 50,000 per month, you would save Rs. 500 or Rs. 6000 per year.

If your expenditure is substantial you could actually sign up for 2-3 cards and use each at place where you get more reward points for doing so. Like use one at a petrol pump where it gives you more points and other which has partnered with an airline, so every time you book tickets you earn more miles. This way you can maximize the points earned which then translates into more savings.

However, all this would make sense only if you are paying you dues on time i.e. paying your credit card bill at the end of each billing cycle. Otherwise the interest that you have to pay on you unsettled amount offsets the advantage of points earned.

In conclusion

I have just shown you how by using your card judiciously, buying only what you want and clearing your credit card bills in toto when they land in your mailbox at the end of the month, you can actually save money (to the tune of Rs. 9000 per annum considering an expenditure of Rs. 50,000 per month which you would spend anyway). This might seem less, but remember you will have to invest Rs.  100,000 for a period of one year in a fixed deposit to get that kind of return.


P.S. given below are some examples of what rewards are offered by banks on their credit cards.

https://www.online.citibank.co.in/portal/newgen/cards/rewards/citi-rewards-card.htm

https://www.icicibank.com/Personal-Banking/rewards/index.page

https://www.sbicard.com/en/personal/rewards.page

https://www.sc.com/in/credit-cards/platinum-rewards.html

http://www.hsbc.co.in/1/2/personal/credit-cards/rewards-programme

What do you think? Let me know.
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Tuesday, 27 September 2016

Why should you track your expenses and 5 free expense tracker apps



It is of paramount importance to know your expenses. Yes, you must be wondering why expenditure first and not earnings? The thing is that in today's era with expenditures more so than earnings we need to know how much minimum amount we need to spend to maintain our lifestyle. This would include:

·         Regular bills such as phone, electricity, water
·         Commuting expenditure like petrol
·         Rent
·         School Fee of your children
·         Salary of maids
·         Your liabilities such as EMIs, insurance and credit card bills
·         Miscellaneous such as laundry.
·         Others which are occasional but substantial could be spent on entertainment, traveling, etc.

Once this is done it would be prudent to divide your expenses in fixed and variable ones. The last would belong to the variable category while the others would be in fixed category.

I recommend writing down your expenditure to the rupee. This helps you understand your spending habit n in the long run will help you identify areas where you can prevent your hard earned money going down the drain.

You also need to ensure that expenditure done by all family members is noted and not just by you. Because a 1000 rupee unaccounted for expenditure per month would amount to Rs.12, 000 per year, which you could be spending on something as innocuous as a samosa and a cup of tea in your office every day.


List of ways to maintain down expenses

The point is not in not spending it on your pleasure but being aware while doing so. Once you know where you are spending it is easier to save.

The following apps would be helpful in doing so.


Mint


Available on Android, iOS and Windows. It does an excellent job of giving you insight to how much money you have, how much you owe, and where you've spent it.  A detailed review of the app can be found here.


Andromoney



AndroMoney is an expense tracker for Android phones. AndroMoney is extremely configurable, you enter an expense and find that none of the existing categories or subcategories fit your need, you can add a new one immediately. A detailed review of the app can be found here


Expense Manager



Expense Manager is simple, intuitive, stable and feature-rich app to manage the expenditures and budgets. A flexible, feature-filled app, it has an excellent range of reporting abilities. More details about the app and how it works can be found here.

Money Manager Expense & Budget



Money Manager is an expense tracking and personal asset management app for Android. It helps record your personal and business financial transactions, generate spending reports, review your daily, weekly and monthly financial data and manage your assets. The free version comes with most of the features, you need to manage your expenses including a pass code to keep things secure, stats about your spending among others.  

Money Lover 



Money Lover is a great tool to track your personal finance: incomes, expenses, debts, and savings. Even though Money Lover is not very flexible, it allows you to add notes, contacts, a picture, location, and reminders.


In conclusion


Personally I use the Expense Manager app to track and maintain my expenses. If however you are not comfortable with this, use excel to track your expenses. What do you think? What tool do you use to manage your personal expenses?
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