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Recurring Deposits

April 24, 2011 3 Comments

wealthymatters.com A Recurring Deposit(RD) is a type of term deposit account opened by a person/persons with a bank or a post office wherein the investor or investors deposit a fixed amount of money every month for a fixed tenure . This scheme is meant for investors who want to deposit a fixed amount every month, in order to get a lump sum at the end of the tenure. The interest on RDs normally offered by banks is one percent below Fixed Deposit(FD) rates compounded quarterly.Often there is nothing extra by way of interest offered for senior citizens.Otherwise the rules for operating a RD account are the same as that for a FD account.The PO offers a fixed 7.5% interest compounded quarterly for a 5 year term.

RDs are great for people to develop the savings habit.It is especially useful to teach kids to save especially the Post Office Recurring Deposit (PORD) which has a minimum deposit of 10 rupees per month.Often banks package RDs as schemes to become or to make your child a lakhpati,millionaire etc or as schemes to build the down-payment on a house or vehicle. Read more of this post

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Human Life Value Calculator

March 23, 2011 1 Comment

Wealthymatters.com In case of our demise we would all love to have provided well for our near and dear ones. A Human Life Value Calculator is a nice place to begin planning how to do so.A very enthusiastic insurance agent might tell you that various insurance products are the best way to provide for all these needs.This is strictly not so.Think if you want to provide for a child’s college education you do not need to buy an expensive children’s education plan but can for example use a plain term deposits.Here is a link to a fairly comprehensive Human Life Value Calculator: http://www.personalfn.com/tools-and-resources/financial-calculators/hlv-calculator.aspx .Remember to put in future values of the goals of your dependents.

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Learn Wealth Building From The Millionaire Next Door

February 14, 2011 35 Comments

Do you want to be a millionaire? Then perhaps you should start by studying the habits of millionaires….. And this book is just the right place to start.

If you check lists of the best financial books of all time, you’re bound to find several that include The Millionaire Next Door: Surprising Secrets of America’s Wealthy. Written in 1996 by professors William Danko and Thomas Stanley, its main premise is that people who look rich may not be wealthy; they overspend — often on symbols of wealth — but actually have modest portfolios and, sometimes, big debts. On the other hand, many actual millionaires tend to live in middle-income neighbourhoods, drive economical cars, wear inexpensive watches, and buy suits off the rack.

Following are some of the gems of wisdom found in the book that the authors Danko and Stanley have gleaned from their thousands of surveys of millionaires.

#1: Income Does Not Equal Wealth
Yes, higher-income households tend to have more wealth than lower- and middle-income households. But the size of a paycheck explains only approximately 30% of the variation of wealth among households. What really matters is how much of the income is invested. On average, millionaires invest nearly 20% of their income.

Danko and Stanley even offer a “simple rule of thumb” formula for determining whether you have a net worth that is commensurate with your income:

Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by 10. This, less any inherited wealth, is what your net worth should be.

Those in the top quartile of wealth accumulation are prodigious accumulators of wealth (PAWs), according to Danko and Stanley. Those in the bottom quartile are under accumulators of wealth (UAWs).This formula also helps in sorting out the millionaires/millionaires-to-be(PAWs) and the millionaire-lookalikes(UAWs).Here is a calculator to do this calculation easily:https://wealthymatters.com/2011/01/17/am-i-wealthy-calculator/

#2: Work That Budget Read more of this post

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Recurring Deposit Calculator

January 31, 2011 4 Comments

There is a saying in hindi ‘boondh boondh se sagar banta hai’ ie ‘Little drops of water make the mighty ocean.’
A life-time is but a sum total of seconds and our accomplishments are just a sum total of a lot of little actions.

Small sums of money saved in a recurring deposit account,tend to grow into nice lump-sums.Here is a calculator that graphically demonstrates this:http://www.religaremf.com/financial-goals.aspx .This calculator however does not allow you to input amounts less than 500 hundred rupees.Nor can you choose the frequency of compounding.Here is a calculator that allows for both:https://www.corpbanknet.com/Recurr_deposit_Calc.html.And in case you’re wondering just how small an amount will be accepted by anybody.The lowest I know of is India Post where the least monthly instalment is 10 rupees.The PORD offers 7.5% interest and is compounded quarterly.Here is a link to the PORD calculator:http://www.indiapost.gov.in/netscape/5YearsRD.html .This scheme is great for getting children to learn about saving and investment.

For any given term,banks generally offer an interest rate of one percent below fixed deposit rates for recurring deposits. Companies,such as Dewan Housing Finance ,too sometimes offer fixed deposits,though they are rarer.To find the best interest rates on offer for a given term please refer to my previous post : https://wealthymatters.com/2011/01/19/interest-rate/

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Target Crorepati — Goal Setter

January 26, 2011 3 Comments

To be a dollar millionaire we need about 4.6 crores in assets, excluding the value of our primary residence.If the goal seems so far away why not aim for one crore first ? Here is a calculator to help set your goals. http://www.religaremf.com/crorepati.aspx .