What is your Money Personality ?

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Do you know what your money personality is? Now you must be thinking what is the meaning of "Money Personality"? Let me give you a hint! . Ajay earns a lot of money, but his financial life is not that great, the main reason is that he is too conservative with his investments and all his money lies in Fixed Deposits and Cash in the Bank, that's all. This happens due to his internal design of being a "Saver". His life is all about saving and only saving and there comes his money personality. Let's explore more on this. Money Personality We have identified that each one of us have a money personality which we develop during our life and all our actions are driven by our money personality, even our financial life is driven by it and the product we choose, the way we look at each and every aspect is result of what money personality we have. Over the last few years, when we interacted with dozens of clients and thousands of readers like you, we identified that each one of us can be categorized in following money personalities which we will discuss today. Spenders Savers Avoiders Saints 1. Spenders The first money personality is "Spenders". People who fall in this category have an attitude that "Life happens now". They will spend their money all over which makes them feel that they are "living" the life. They will buy expensive gadgets, eat out at expensive places and will make sure that they are not at all compromising on enjoyment. The behavior also affects their financial life; their savings are not as much as it can be because most of the leftover money at the end of the month is saved. The simple rule of Savings = Income – Expenses is applicable for these people. Most of these people don't have much left in their bank account by the end of the month and they wonder "Where does it all go? " . 2. Savers The next personality is that of the "Savers". These people believe that life is all about saving and for being prepared for the future. They are not exactly misers, but they appear like misers to others. Whatever can save money for them looks attractive to them. This behaviour also enters their financial life and they invest in anything which claims to save money to them. You can also attach the word "Safety" with these people. They invest in Fixed Deposits , Recurring deposits , bonds , debentures and other investments which are safe avenues. These people like to buy stuff if it claims to save money to them . 3. Avoiders The third and an interesting category are of "Avoiders". These people are great avoiders, when it comes to taking actions, they will not spend or save, and instead they will just avoid the situation and find all the reasons in life for delaying things and avoiding it. They read, talk and learn about everything, but don't apply it to their life in any way. I personally think that a lot of us are like that. There are even many readers here who are learning things from months/years, but still they have not done anything with their learnings, they just read and feel happy that they know something good, but where is the action? 4. Saints The last category is really a different one and often forgotten, that is of "Saints". A person who belongs to this category feels that money is an unimportant thing in life. His beliefs would be "Money is not important thing in life", "More money is more trouble", "Life is all about being Happy and content" and "You just need bare minimum and satisfaction to lead a happy life". While that all is fine, these people over react and don't give much importance to money in life. Most of the people who talk like this are those who really can't make a lot of money and deep down they themselves are worrying for money, but they make sure they show themselves as not-interested-in-money kind of individuals. Conclusion So which money personality is better than the other and how to make change in your personality? First thing is that there is nothing bad or good about having one of these money personalities. These personalities get into us because of various reasons in life and it's not that easy to change them. What's important is that you need to be aware about your personality and how it's affecting your financial life. Try to find out how your money personality can help in having a financial life which you desire. What do you think about these personalities and which one are you ?

Source: Jago Investor


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Yours

Murali........

Reader comment about ICICI Home Loan

Piyush Modi had a very interesting comment on yesterday's post, and this is relevant for people with home loans from ICICI Bank. It seems that he called them up to get something done, and they offered him a lower rate on an existing home loan, and saved him a lot of money! I've been thinking about it, and can't understand why they did that, and I certainly don't know of any other such cases. I thought I'd publish his comment here to see if anyone else has a similar experience, and to let others know about this as well. It will only cost you a phone call, so there is no harm in trying your luck. Here is his comment verbatim: Though this comment is not particularly relevant to this post, but I wanted to leave it and want you to write about it cause I am sure it will help many many of your readers. My dad has a home loan with ICICI Bank which was once taken at a floating rate of 7.5%, and which now stands at 14.5% rate. I recently called up ICICI Phone banking to ask the procedures for a balance transfer to a different bank & I was told that they are running a scheme where existing customers could move to a lower rate of interest. I was skeptical at first, but then went through with the documentation required and apparently its an amazing scheme. Obviously ICICI wont advertise it or inform you, but it is available. My dad's rate has been reset from 14.5 to 10.5% a huge 4% difference. His tenure, which was originally 180 months, and had now gone up to 315 months despite making the EMI repayments for the last 4-5 years (60 months approx) stood slashed at one go to 160 something. Alternatively, one can choose to reduce one's EMI instead of choosing to reduce the tenure. For those wondering how such a drastic reduction in tenure is possible, it can happen. In this case, the total EMI was approximately equal to the interest charged in a year and only a very small amount (4-5%) of the EMI was being used to repay capital. With the fall in the rate charged by 4%, this shifted up considerably to 25-27% of the EMI, and this means that a lot more of the EMi is being used to repay capital instead of just service debt and this leads to drastic reduction in tenure. What were the documentation/formalities required – 1. Cheque for a charge of 0.5% of balance outstanding on the loan+service tax on the same. This is extremely cheap as I will recoup this charge within 2 months 2. Non-judicial stamp paper of Rs 30 signed by borrower & co borrowers 3. Some sort of an agreement which you will get from the bank itself and has to be signed by borrower & co borrowers 4. All outstanding EMI payments have to be cleared (obviously) Now I am not sure whether the scheme is available for all home loan borrowers or a particular category, as also the amount of reduction in rates will be the same for all borrowers or not. But give a call to ICICI bank and just ask. It will save you a tonne of money.

Source: OneMint


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Yours

Murali........

Don’t confuse yields with interest rates

Last week, a reader pointed me to fixed deposits from Avon Corporation, and my eyes naturally gravitated towards the highest number in the table viz. 14.19% yield  p.a. for a 3 year fixed deposit. On the face of it this looks quite high, but that's because your reference is usually a fixed deposit interest rate, which is different from this yield. It is important to understand this difference because there are a lot of private companies that offer fixed deposits, and they usually do advertise the effective yield. I don't write about company fixed deposits a lot, but when I checked a 2009 article about Tata Motors fixed deposit – I saw that they used the same annual yield as well. Usually companies give you two options: Periodic interest payment Cumulative option The periodic interest option is usually straightforward, as they advertise the rate of interest you will get for your deposit. However, the cumulative plan becomes confusing because they advertise an interest rate and an annual effective yield. Let's use the numbers given in the Avon example. They say that the minimum investment is Rs. 5,000, tenure is 3 years, interest is compounded quarterly, and the yield per annum is 14.19%. So, what does that mean – are you getting 14.19% interest per year which is then re-invested for you? No, absolutely not. Their brochure tells you that  you're getting 12.00% interest rate for the 3 year maturity period, so where does the 14.19% number come from? Since, this is a cumulative option you won't get any interest payments, and get a lump – sum payment at the end of three years. Use the Compound Interest calculator to calculate how much you will get at the end of 3 years. This gives us Rs. 7,128.80 at the end of 3 years. So, for Rs. 5,000, you get interest of Rs. 2128.80 for 3 years. Divide that by 3 to get the annual interest – Rs. 709.43. And (709.43 /5000) x 100 = 14.19%. This is your annual effective yield. Conclusion You can't compare this 14.19% with the interest rate that banks normally show because that's like comparing apples and oranges. This number is high only because it has been compounded for 3 years, then divided equally by three years, and you use the initial principal of Rs. 5,000 as base. If you were to get a fixed deposit with a bank at 12% for a year, and re-invest that money again for two more years you will get the same effect. I think this post is important for people who are interested in depositing money with companies, so please keep the distinction between yields and interest rates always in your mind, and don't confuse one with the other.

Source: OneMint

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Yours

Murali........