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Wednesday, April 22, 2009

FD to My Rescue

Fixed Deposits (FD) has been an dull venue to make your money grow, as far as I am concerned. It is only to be used if you have some spare cash that you don't need to use in the near future. And it is also a tool that helps people in the near-retirement category, where they are not willing to take much risk in equities or other similar kind of investment vehicles.

So, what about me or others in my category, who prefer to take more risk with their money? Can't FD help us at all? Or so I thought, until recently. I found that the FD account can be renewed on a monthly basis. And in case the need arises for me to use the cash for emergency purposes, I still have the flexibility to do so.

You see, the arrangement for my maid's salary is like this: I only have to pay her full 2 year's salary when she completes her contract. Until then, I'm allowed to put her monthly salary in a separate account (not necessarily under her name) in case the authorities request to show proof of me paying her salary.

Until I make the full payment to my maid who is going to be richer than me, I decided to bank in her monthly salary to a special FD account created for this purpose. I'll make some extra cash (even though its a very small amount), which I won't see if I just let the money lying in a savings account.

Monday, April 13, 2009

Stretching your $$$ during bad times

Last month, the government seemed to have reduced the interest rates. This was done in an effort to promote spending and therefore to revive the economy.

I noticed that Fixed Deposit (FD) rates that was at almost 4% is now at 2% per annum only.Since FD is the most simplest & safest method of making your money grow, most people would stash away unused cash in a FD account. But looking at the current situation, it is not as attractive to lock your cash in a FD account somewhere and let it lie there almost doing nothing. So what are the options that you have now? Either take some cash and spend it (main intention of the government) or start investing or pay off some your debts that carries higher interest rates. I opted for the 3rd choice after doing some homework.

The home loan I was servicing had interest rate of 5.99% per annum. After the Base Lending Rate (BLR) was reduced by the central bank, most banks cut theirs. The bank now has offered me an interest rate of 4.6% per annum. With this new rate, if I religiously continue to pay the monthly amount I'm currently paying, the loan would be settled within 12 years, instead of 24 years. What a difference it makes!

But no bank will call you an make their offers. They certainly would not want to reduce their profits that they make from you, would they? You will have to make the call and ask for a reduction. Most often, you will find that they are more than willing to accommodate your request. If you are no more within the lock-in period, then you have a better bargaining power on your side, as you can always do a refinancing with other banks.

Opportunities like this doesn't come very often. So, make good use of this bad economic times to your advantage. I believe I've made mine.

Thursday, April 9, 2009

Best Ways to Utilise Your Credit Card

Though I don't usually promote the usage of credit cards, I would like to share some information on how we can benefit from it and not fall into its trap. Credit card debts can be killer, especially when the interest rates charged can be up to 18% or more!

When you pick a card, try to pick one that has no annual fee.Free for life.It is also common to see that these companies usually wave the fees if you are a good paymaster, but you have to ask! I found it out through my own experience with Citibank.

Just have one credit card at any one time - for any emergency purpose. Maybe one of your family members are admitted in the hospital and their insurance policy/medical card seems to give problems at that particular time. Or it just happened that you forgot to withdraw cash to make a payment for something that says "DEADLINE TODAY!!!".

Since credit cards nowadays come with promotions of free points and most of them are providing electronic service, sign up for the electronic billing system. The companies usually have promotions in terms of free gifts or free points to promote their internet billing facilities.

Talking about free points, what do you usually redeem them for? Some gadget that will be used for about five times maximum and then lie in the closet, collecting dust? Think about the items that you actually need, rather than what attracts you on the redemption catalogue. A simple guideline would be to choose an item that you would actually pay money to get it. Otherwise, just forget it.

You can also churn money using your credit card if you know what to do and have the right contacts. Credit cards usually offer cash advance with some interest charged. If you can spot an investment avenue that brings you a higher interest, why not use this cash for this purpose? When any friends need a short term loan from you, with some interest, of course, you can lend them the money. But be sure you have all this properly documented as you don't want to suffer from bad debts!

Make prompt payments.Do not delay even a single day. And pay in full, always. Don't make it a habit to make the minimum payment only. When you do that, all of a sudden you will find that you are surrounded by huge debts, thanks to the high interest rates charged.
Don't use your card to make purchases at merchants who charge an additional fee. Automatically the price of the goods become more expensive. Why pay extra when you can get it at some other place at a cheaper price? Or purchase with cash to avoid the additional charges?

When you need to make a big purchase such electronic goods, look out for promotions which allows you to make payment over a 12 month period, with 0% interest fee.This would actually free your cash flow a little, but always remember to pay on time.

Tuesday, April 7, 2009

Painless Way to Clear Your Debts

Just a few days back a friend of mine was complaining that his economic situation was bad and that he was under huge amounts of debt. He had his credit card debt and his car loan that he has not paid for a few months now, not forgetting his wife's car that has expired road tax and insurance.

While we were chatting on further, he revealed to me that just last month, both, he and his wife got a pay rise. Well, it is a very good thing to happen, since most other people are either retrenched or afraid of that happening to them soon with the economy showing no sign of major improvement. And yet they still find that they are almost penniless by the end of the month.

How can this happen, I wonder. You are used to live by almost 20% lesser income. Now that you have more, definitely you should be able to save more or pay off your debts.The answer lies in our own attitude. How much self control do we have? Are we disciplined enough to control our finances? Do we make a budget every month? Purchasing expensive items and gifts just to impress others or to show-off shouldn't be in our priority list at all.

If you are serious in clearing off your debts, I would suggest that you continue to live with the salary amount that you have been getting before this. The increment amount that you have now (the balance) should be used to pay your debts. You would not feel the pinch much when you apply this technique because you are not used (yet) to live with more money. So the additional money is channelled straight to whatever financial purpose you may have - clear debts, make investments, have savings, etc.

I am practising this method, and I can say that its really worth it!