In today’s world, “Leave It to Beaver” stereotypes for men and women in partnerships should only exist in Nick at Nite reruns. Yet many women still don’t understand their household’s finances and aren’t actively involved in managing money matters.
To achieve true equality in a partnership, both individuals must have knowledge of and involvement in their partnership’s assets and debts. If you’re one of those women who isn’t participating in the financial side of your marriage, here are some tips to get you on the right track:
If your partner has always handled most financial matters, it may seem difficult to bring up that you want to be more involved. The first step is to initiate a conversation with your spouse about your desire to learn more about your household’s assets and debts and to be more actively involved in making decisions.
Choose a time and place without high levels of stress or too many distractions to have this discussion. Bring it up in a positive way, rather than in a tone that might sound complaining or accusing.
It’s never fun to think about something bad happening to the people you love. Yet you must be responsible and realize that if your partner should no longer be able to carry out the role of primary financial decision-maker, the tasks would fall to you.
Make sure you’re familiar with and have access to all financial records and documentation. Know how to quickly access everything from account numbers to mortgage documents to investment information.
Look for ways to become more integrated in your marriage’s finances. Whether it be creating and maintaining the filing system for your financial paperwork or paying the bills, sharing responsibility can be rewarding and make your partnership more balanced and fulfilling.
There can’t be a strong “we” without a strong “me.” While marriage is a partnership, you should still maintain your own financial standing. We recommend that each partner have a checking account and credit cards in his or her own name so that both can build good credit.
There are many programs available today that are focused on helping women handle financial matters. Many companies today provide financial services to help women achieve financial empowerment, security and independence.
Equality in marriage exists on many different levels and requires working together as a team – a team where both members are informed and involved.
I suppose you could live your entire life without going into debt, though modern middle-class society in the United States seems to be designed to require at least some debt. Even if young adults can complete their education without taking on student loan debt, just about all new homeowners need a mortgage in order to afford a house. In some cases, debt is just a cost of middle-class living.
Some debt products should just be avoided, however.
1. Payday loans.
To qualify for a payday loan, you would need to prove a history of income. This will provide you a short-term loan, with the balance and fee due within weeks. Those fees could be $15 to $30 for every $100 borrowed, which on a two-week loan could be considered a 390% interest rate. If you aren’t able to pay off the loan when it is due, you can renew it for an additional fee.
Most people who take out payday loans fall into a cycle of debt, renewing their loans or going back to the lender often. It’s rare that someone in a short-term financial fix borrows money at a high rate for a few weeks and pays the loan off in full.
2. Refund anticipation loans.
These were marketed heavily a few years ago, and now that we’re heading into tax season it’s likely we’ll see more ads. Refund anticipation loans are often offered by the same company you might use to help file your taxes. If your income tax return forms show that the government owes you money, for a fee, these companies will be willing to offer you your anticipated cash now.
You can adjust your tax withholding at your job to make sure you’re not due a large refund when you file your taxes. There are few good reasons to keep paying the government more than you need to every week or two when you receive your paycheck. The “forced savings” rationalization is not a good reason.
For the sake of your kneecaps, you don’t want to find yourself in debt to a bookie. Movie drama aside, gambling is always a losing endeavor in the long run. It can be an addiction, so seek help if gambling is controlling your life. One problem is sunk costs. Once you start losing, you want to make up for your losses, taking larger risks.
If you’re a stock trader relying on the margin for making purchases, you might as well be gambling.
4. Rent to own.
If you have young children in school beginning to learn to play a musical instrument, you are likely encouraged to rent the instrument from the store. The rental programs are generally designed to either buy the instrument after some time or return the instrument to the store when the student loses interest. This is the best rent-to-own scenario.
Once you start renting electronics and furniture, you will generally get a bad deal. It’s likely you’ll pay much more than the cost of the product by renting, and you will likely be charged a high rate of interest.
5. Debt used to finance a depreciating asset.
One rule of thumb dictates that debt should only be used to pay for an asset that increases in price. For that to make sense, the price of the asset should increase at a rate higher than the rate of interest on the debt. The only problem is that you can’t consistently predict whether the price of an asset will increase.
Cars, unless they are collectible items, would not qualify under this rule. I would argue that if you need a car to earn money, the benefits of its use might outweigh the cost of the loan. And even a reliable used car could cost more than someone on the first day of his first job might be able to afford.
A few years ago, I knew many people who thought that real estate prices could never go down, conveniently excusing the fact they had no equity in their house. Banks were eager to let them buy their houses with hardly any down payment. If they were forced to sell after their house values dropped 20%, they would be in financial distress. And worse, if they were no longer able to afford their mortgage, they might have to foreclose.
Do you know your credit score but are wondering what it means? We’re here to help you understand it. The data pulled from all of your financial histories is placed into five primary categories that make up your FICO score. These five factors are as follows: payment history, amounts owed, length of credit history, new credit, and types of credit used. Represented by the pie chart below, each factor is weighed differently – some are weighed more and some are weighed less. To find out which areas of your personal finances should be given more attention, review the easy-to-use chart below, and then read out tips for raising your score through these five factors.
What Makes Up a Credit Score?
As the most weighed factor of your credit score, your payment history is a very important factor in determining your chances of qualifying for loans and mortgages. We all know that there is no way of going back and changing your past, but there are indeed ways of erasing your past mistakes. With 35% of your credit score is calculated from your payment history, it is important to make sure that you avoid missed payments and late payments. Contact our credit team to find out how you can get your bad items removed from your payment history.
The next largest factor that determines your credit score is the amount that you owe to your creditors. This is calculated by the amount that you owe on all of your accounts, and how much credit is available to you on your revolving accounts. To easily determine where you stand in regard to the amount owed, you can calculate your credit-to-debt ratio. In this, you simply must divide the amount of debt on your credit card by the limit amount on your card, and then multiply by 100. For example, if you have $2,000 in debt on the card and the limit is $10,000, then your credit-to-debt ratio is 20%. Anything below 50% is an acceptable ratio.
Length of Credit History
The third factor of your credit score is particularly pertinent to young people. This number is calculated by how long your cards have been open. Basically, the longer your accounts are open, the better. In calculating your length of credit history, FICO takes the following factors into account: how long your collective credit accounts have been established, how long each credit account has been established, and how long it has been since you used each card. The best advice regarding your length of credit history is to keep all of your cards open for as long as possible.
Making up 10% of the weight of your credit score, having new credit is an easy way to boost your score. If you have a steady source of income, then consider opening one or two new cards for charging small items. The credit reporting agencies will, however, penalize you for overdoing it and opening too many cards in a short period of time. In order to effectively build your credit by opening new credit cards, it is important to do so in moderation.
Types of Credit Used
Finally, the last factor of your credit score is the types of credit that you use. The types of credit considered in your FICO score are as follows: credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. It is important to have a good mix of all of these different types of credit in order to boost your credit score. Diversity in your credit cards and accounts is essential to building a good credit score.
Recently, the Government has announced a life certificate facility via post office at your doorstep, and it can be availed at Rs 70.
However, if you want to avail of the facility via an app, then the process is still more straightforward, and even a person who is not tech-savvy can do it.
You need to buy a biometric device listed on their website as the app works with only a few compatible devices like Mantra. It will cost you around 1500 to 1800 Rs. (Note: Many senior citizens are facing a problem with a fingerprint scanner. In that case, it would be advisable to buy an iris scanner which costs around Rs.5000.)
Download the client service for your biometric device from the app store.
Connect your device to the phone or laptop via USB.
Test the scanner to check if it works properly or not.
Now once you are done with step 4, visit jeevanpramaan.gov.in and download their app. This app is available on their site only. I couldn’t find it in the playstore.
Open the app with your biometric device connected to the phone or laptop. If you don’t connect your device, then the app will show errors and will not work.
Now register as an operator by providing Aadhaar, mobile, and email. Enter the OTP and submit.
Authenticate yourself on the biometric device.
You will have to provide the Aadhaar, mobile, and email of the pensioner and enter OTP authentication.
If you had already submitted a digital certificate earlier then you will see a prepopulated form. If not, then enter pensioner’s details like pension type, department, disbursing authority, bank name, etc. and then submit it.
Now the pensioner will have to authenticate via the biometric device.
Once the biometric is successful, you will see his or her photo with Jeevan Pramaan id. This is the digital copy of the life certificate. You can download it anytime from their website as well.
The bank or disbursing authority will verify your certificate and send you an acknowledgment in 3 to 5 days.
You will receive an SMS after successful verification is done. You have to be patient as sometimes the fingerprint isn’t captured due to old age or other reasons.
Conservative estimates place it around 70%… while others believe it is closer to 95%… the number of investors who “fail.” I suppose it shouldn’t shock us… after all, whenever you talk with a Mutual Fund representative, if they’re doing well, they will point you to the fact that they are in the 1st or 2nd Quartile – meaning, the fund they manage has returned more than 75% or 50% of the other fund managers’ portfolios. Obviously, there must be several then who are in the 3rd or 4th Quartiles (the bottom).
There are several reasons why investors fail and today I thought I’d share a few more.
It’s perplexing… the number of investors who continually lose money trading, but for some inexplicable reasons, continue to trade. I suppose a variety of reasons exist, including poor money management (high commissions on small positions eat away at any profits), the delusion they have the skills and knowledge to trade (after all, isn’t everyone else getting it?), or addiction to trading (like gambling, just “sanctified.”).
Some, in sheer frustration, choose to pay hundreds and even thousands of dollars for trading software that promises every success… so they get split screens, subscribe to live news feeds, etc. and still struggle to make money trading. Then they flood their email inboxes with a plethora of free newsletters… worth every penny!
I’m not slamming these individuals… after all, most of us have had experiences like these somewhere along the line. But I am concerned for you if this is your current experience… and I’d like to help.
I think one of the most fundamental reasons why investors fail and why people are losing money in the stock market is because they are trading rather than investing. Perhaps this is so subtle you think I’m trying to create something out of nothing… but hear me out for just a moment. When you think of the term “trading”, what comes to mind? A transaction, a swap, buying and selling, dealing, etc.
Now, when you consider the term “investing” what comes to mind? Yes, some of the same elements of purchasing and transaction but with an added component of you having to “put something into” the transaction. Investing seems to require more than to merely trade. And you’d be right…
If making money in the markets was as easy as trading this stock for that one, and then exchanging it again for another one, we’d all be successful… but very few do this well. Instead, the average Weekend Investor needs to do less “trading” and more “investing.” You’re going to have to put something extra into the transaction… considering the fundamentals of a stock, watching the technical indicators, and keeping track of your “investments” because these investments of time, work, thought, consideration, management, etc. will all determine how successful you’ll be as a financial investor.
I realize most of you don’t have the time to do this on your own… hence, you should stop trading and simply buy the index when you have the money you can spare.
Doctor Stock has experienced some excellent trading success so far. Much of that success is due to his disciplined use of market risk management techniques. In his quest to help you make money on the markets every morning, he has often emphasized the need to balance risk vs. reward.
There are many ways that traders and investors can manage market risk in their portfolios. Here’s a sampling of 5 of the most common ones:
The trend is your friend until it ends. This is a crucial component of Doctor Stock’s strategy, and he tracks it for you at the top right corner of this site. It’s tough to make money by anticipating a change in trend. It’s better to wait for the turn and buy once it’s confirmed. “The market can stay irrational longer than you can stay solvent.” That trading axiom, coined by economist John Maynard Keynes, has become a cliché for a good reason. Many a trader has gone bankrupt fighting the tape.
I know that Doctor Stock makes fair use of these as well. Before you enter a position, it’s essential to know when you will exit. You can set one or more profit targets, but it’s even more important to limit your losses. A stop-loss order or trailing stop can help you do just that. There are tons of ways to choose a stop loss level, from percentages, trend lines, and moving averages to the true average range or simple dollar amounts. You need to find the method that works for you and your trading psychology. It’s less important how you use them. It’s more important that you use them. Set a stop loss level before you trade and stick to it.
One way to limit the amount of market risk you take is to limit the amount of money you invest. If you are placing a highly speculative trade, or one in which you have less confidence, you may want to limit your risk by taking a smaller than normal position. Similarly, if you are uncertain about market momentum, it may be wise to trade smaller until a more well-defined trend emerges. Always set rules for yourself on the maximum amount of money you are willing to risk on each trade as a percentage of your total investable capital.
You’ve heard about this one before. It’s essential to diversify your capital by investing it in asset classes that aren’t correlated with one another. Unfortunately, there are times (like the recent market crash) where most asset classes move in unison. That’s why it’s important to keep at least some liquid cash on hand. There are many different ways to diversify your holdings: geographically, by asset class, sector, market capitalization, and many others. The key is to put your eggs in a few different baskets so that if one company, region, or asset class gets destroyed, your losses will be limited.
This strategy pertains more to market risk management for investors as opposed to traders. Many traders only actively trade a portion of their capital. They invest the rest of it (often their retirement funds) more conservatively, with a longer time horizon in mind. One risk management strategy for investors is to set an asset allocation (50% stocks, 30% bonds, and 20% cash, for example) and rebalance it periodically. If the equity portion of your portfolio has performed very well and it now constitutes 60% of your holdings, you would sell some of those holdings to bring your allocation back to 50%.
If your bond holdings have performed poorly and now makeup only 25% of your portfolio, you might consider buying more to rebalance your bond allocation. This is one way to buy low and sell high automatically.
Disciplined market risk management, in whichever form(s) you choose to implement, is the key to successful investing and trading. What kinds of strategies do you use to manage risk?
In this book, Mr. Bernstein starts off with an overview of financial theory illustrated with relevant bits of financial history, then takes readers on a tour of the behavioral traps they might stumble into and concludes with the mechanics of building a portfolio. If this synopsis sounds familiar, it is because Four Pillars dealt with similar themes: the theory, history, psychology, and business of investing.
As you might expect of a brilliant writer like Mr. Bernstein, his writing is so quotable. Here are some examples:
“Investors cannot earn high returns without occasionally bearing great loss. If the investor desires safety, then he or she is doomed to receive low returns”.
“… the rewards of equity ownership are paid for in the universal currencies of financial risk: stomach acid and sleepless nights.”
“Much has been made lately of “black swans”: rare and supposedly unexpected events that roil society and the financial markets. In the world of finance, the only black swans are the history that investors have not read.”
“You are not as good looking, as charming, or as good a driver as you think you are. The same goes for your investing abilities. In an environment filled with incredibly smart, hard-working, and well-informed participants, the smartest trading strategy is not to trade at all.”
Mr. Bernstein is a wise investor and talented writer and while The Investor’s Manifesto is a very good book, I feel that it doesn’t quite achieve the brilliance that The Four Pillars did. If you’ve read the previous book, you can re-read it and safely skip this one. If you haven’t read Four Pillars, perhaps that’s the Bernstein book you should be reading. The Investor’s Manifesto is published by John Wiley.
William Bernstein, a practicing physician, has written an excellent guide to invest (affiliate link) that contains important (as the sub-title says) “lessons for building a winning portfolio”. The Four Pillars of Investing that the title refers to are theory, history, psychology, and business of investing.
Often, books on investing are dry, and reading them is a bit like working through a dense textbook, but fortunately, this scholarly book is not one of them. Even the driest theoretical concepts are illustrated with historical examples.
In the section on history, Dr. Bernstein tells the tales of bubbles and busts past and present and points out that lack of historical knowledge hurts investors the most. I realized that this is an area I need to learn more about and helpfully, the author provides a list of useful books in Chapter 11 (no pun intended). The book concludes with practical ideas for assembling your portfolio.
I can’t hope to do a better job of summing up the contents of this book than the author himself:
The overarching message of this book is at once powerful and simple: With relatively little effort, you can design and assemble an investment portfolio that, because of its wide diversification and minimal expense, will prove superior to most professionally managed accounts. Great intelligence and good luck are not required. The essential characteristics of the successful investor are the discipline and stamina to, in the words of John Bogle, “stay the course”.
I think “The Four Pillars of Investing” is worth reading and would also make a nice addition to your bookshelf (I am adding it to my list of recommended books).
Over the past few years, I have realized that many people have misconceptions about credit cards, credit scores, and creditworthiness. Credit cards are considered as liabilities and looked at as if it’s a loan. However, in reality, a credit card is nothing but just another mode of making payments and much more rewarding as compared to other methods of making payments in terms of credit period, reward points, offers, discounts, and cashback, etc. among other things.
It only gets messier when people behave in an indisciplined manner while using credit cards for spending beyond their means just because people have huge credit limits on their cards—defaulting on payment of credit card bills by not paying the full amount due on time, using credit cards for withdrawing cash in times of emergency, etc. People behave casually while falling into these financial wrongdoings without bothering/realizing that all of this indiscipline comes at a substantial financial cost in terms of massive interest, fines & penalties, and severe damage to their creditworthiness.
If one can use the credit cards efficiently by exploiting their features and benefits without getting into overspending beyond their means and without indulging in any financial wrongdoings, credit cards can be one of the most significant assets. Therefore, a person who follows below discipline while using credit cards can have a very healthy personal finance and creditworthiness:
Utilizes his credit cards for making his regular payments, which he would otherwise do irrespective of whether he has a credit card or not;
Does not get into overspending just because he has a credit card and a significant limit on it;
Pays all his credit card bills in full on or before due dates without any exception;
Does not use any of his credit cards for emergency cash in times of crisis;
Never takes any loan or spends with costly EMIs on credit cards etc.
Often, a person not having any credit history (i.e., no record of loan or credit cards) is denied loans by banks / financial institutions despite having adequate income levels.
Credit Score / Creditworthiness:
Another big misconception is one or more of the following factors adversely affect the credit score/creditworthiness of a person:
Having one or more credit cards
Having a considerable credit limit on credit cards
Upgrading the credit limit every time there is an offer to do so
The truth is none of the above factors impact a person’s credit score unless there is a default or high credit utilization ratio on his credit card. Apart from theoretical knowledge about these aspects, I have my own practical experiences to back my above observations. I have been using seven different credit cards for the last many years. All of them issued by various banks / financial institutions having different credit limits, and every time I get limit enhancement, I opt for it.
Apart from these credit cards, I also have two home loans and one car loan in my name. Still, my credit score never went below 750 since I took my 1st credit card eight years ago and my latest score, checked yesterday, stands at 800.
How you can effectively use credit limits on your cards to improve your credit score
One of the crucial factors which affect your credit score is the credit utilization ratio. It means how much percentage of credit limit you utilize on an average, e.g., if you spend Rs 10,000 on your credit card, which has a limit of Rs. 1,00,000, you have used just 10% of your credit. Likewise, if you spend Rs. 50,000 on the same card, your credit utilization ratio is 50%. The lower the credit utilization ratio, the better for your credit score/creditworthiness. You can manage your credit utilization ration in two ways, either by keeping your spending on credit cards as low as possible or enhancing your credit limits on your credit cards as high as possible. I preferred to choose the latter.
Over the years, I built a portfolio of 6 credit cards, setting different billing cycles for each one of them so that I get to use all the cards every month for a few days. See the table below for easy understanding:
4th – 8th
14th – 16th
You can see in the above table how one could build a portfolio of credit cards to make the best use of the credit period by setting different billing cycles and also keep your utilization low by spreading it over several cards in a month.
I have been practicing this for several years now, and it has neither affected my creditworthiness nor the health of my personal finance negatively. Instead, effective utilization has strengthened my personal finance and boosted my credit profile. I hope you find this note insightful.
This is CA Anand Kankariya’s indigenous note on credit cards as part of financial awareness. Please share your feedback/suggestion below.
A Multibagger in stock market parlance is a stock that can return multifold returns when invested in it. The holy grail of investing is to identify such multibaggers and hold them in your investment portfolio.
To spot a multibagger needs a thorough study of multiple fundamental parameters, a few of which are listed in this article. Please note. However, we cannot be rigid on any of these parameters. We need to be flexible to interpret things from a bigger picture point of view.
So what are these parameters of a multibagger stock that we should look for?
No doubt about business survival.
Identifying a multibagger begins with identifying a business that can weather the test of time. Whether there be a health crisis, economic crisis, or political crisis, these businesses should not have any difficulty in surviving. When I was young, my father told me that to survive, humanity will always need food and consistently invest in promising companies that cater to the hunger of the masses.
There are many other businesses, apart from those in the food industry that can survive and thrive in adverse circumstances. The health sector is one; the information and technology sector is another. There may be sectors that will come up in the future; you may be aware of them due to your line of work. Look into those businesses.
Visible & sustainable growth potential
Most businesses are not built because the management wanted them to remain stationary. Entrepreneurs and management want a steady and sustainably growing business. Look for companies that are growing at a fair clip with good management.
A management team that continuously innovates and optimizes its core business should provide profitable growth for investments in the company. A management team that is not focused is a poor innovator, and does not optimize resources, may give spectacular returns in the short term, but may not be able to sustain in the long run. Such businesses usually do not provide multibagger returns.
Management has a vision of growth.
Identifying potential in future markets is a must for any good management. The company should not bask in the past and should be forward-looking to identify the ideal growth opportunities. The management should be ethical and provide adequate consideration for every stakeholder.
Reasonable Promoter stake
There should be fair skin in the game from the promoter. Many successful investors avoid companies that have a very low promoter stake. Ideally, the promoter should have at least a 50% holding in the company, and the higher this number, the better it is, and the likelier it is to end up as a multibagger. If in case there is a low promoter stake, then promoters should increase stake at every possible opportunity. Also, pledging should either be zero or minimal.
Debt zero or going towards zero
Debt is becoming a dirtier word at the individual as well as at the corporate level. A Debt to equity ratio of less than 0.5 should be an ideal investment; however, do remember that smaller companies that are growing fast may not always be debt light—most of the time, the lower the debt, the better the valuations.
Increasing cash flow
At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow (FCF). If the cash flow of a company is increasing, it means that the company is growing well and can use the amount to grow itself further.
Rare equity dilution
The lesser the equity dilution, the better will be the valuations. Stock dilution, also known as equity dilution, is the decrease in existing shareholders’ ownership percentage of a company due to the company issuing new equity. New equity increases the total shares outstanding, which have a dilutive effect on the ownership percentage of existing shareholders. Management should avoid equity dilution at all times. To improve the liquidity, equity dilution is suitable sometimes; however, it should be only when the proportionate growth is visible.
If the company is showing earnings of 100 & giving dividend equivalent of just ten or less, it raises more doubts on such companies before building conviction. There should be an acceptable dividend policy; however, if the profits are being used to improve the business quality further or for capacity expansion, fewer dividends may be sufficient.
Lower the price-earnings multiple, better multiple returns potential in the future. With the growth in earnings & with every new milestone achievement, PE gets re-rated, and then there is usually a multiplier effect on the stock price.
Association with a brand
If the company has its growing reputation or is associated with some client who itself is a brand, that’s a big positive.
In conclusion, do remember that these are just a few aspects to spot a multibagger. Many stocks may not fit into any or all of these parameters. An example is Bajaj Finance, which has proven to be a massive compounder despite not checking many of the boxes like Debt, Environment risk, or having Low PE. It is essential to be flexible when looking at the fundamentals of the stock before investing in it. If you are a retail investor, keep some basic things in mind as follows:
1. Why you are investing – invest with a goal and plan.
2. Time frame – you may be better off in debt instruments or bonds for a short time frame.
3. Knowledge of the company/industries – stick to your circle of competence.
4. Risk and Reward ratio – Never invest without learning the risk associated with the particular investment.
5. Stock price is affected by market condition/Govt policy, so keep updated – especially true of highly regulated sectors.
6. Keep part profit booking/average – you can do this downwards or upwards.