What is an NAV

Net Asset Value is the value of each unit in the portfolio. For Mutual funds, it is the price at which investors buy shares from mutual fund company and sell them. There is formula for calculating the NAV

NAV = Total Asset Value - Total Liabilities
              Total no. of units

NAV is usually used by the media like newspapers etc to designate the price per share for any particular Mutual fund. Ofcourse one thing should always be kept in mind that low NAV does not
mean that you are getting a good fund cheaper and it is no indication of performance of Mutual funds. The performance of any Mutual fund should be measured in terms of returns they have given over a period of time.

Tips for Cutting Costs

Here i would like to give a few tips for cutting costs on personal expenditures and saving some money. This way you will save more and become financially secure faster.

1. Always pay by Cash or Debit Cards.

Potential saving - Saves interest on credit cards and also helps you budget better since cash will limit your expenditure

2. Always Pay credit card payment in the full at the end of every payment cycle.

Potential Saving - Saves interest on credit cards which can actually go upto 40% anually with some banks.

3. Always save small amounts every month for Diwali/Christmas/other festival shopping.

Potential Saving - This way you can avoid going it to shopping spree with a credit card and unlimited expenditure and end up paying heavy interest.

4. Always use internet / phone banking

Potential Saving - Saves fuel traveling to the bank, saves time, saves bank fees in some cases

5. Always take your own Lunch to Office

Potential Saving -
If you are spending Rs. 50/day on lunch, in a month you can end up saving Rs 1300/month and Rs.15600/year.

6. Always start saving early for your next car and buy a lower model.

Potential Saving -
A larger down payment can result in lower cost and lower interest payments for the loan.

7. Always use pre-paid cards for Children 's mobiles.

Potential Saving - If they talk too much on mobiles and end up finishing there balance early, ask them to top it up with their own pocket money, this way they will know learn the value of money faster.

8. Always stay in a self service hotel when going out on vacation

Potential Saving - Saves a lot on restaurant bill when out of town a lot of money since they are usually cheaper. i recently heard that the TATA group has opened a chain of such hotels.

Well that all i could think of right now, if you have any other items you can think of do let me know.

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Negotiate your Salary

Now why would i be talking about salary negotiation in a personal finance blog, well because salary is one of the primary source of income to over 90% of the people reading this blog and hence if you were to negotiate your salary well and get a good salary, you would have more money to spend and invest. I found this cartoon on one of those job portals that i would really like to share with you, its says a lot..

Well any HR professional will tell you that the first thing on his mind during any interview is the salary and how much he thinks the candidate is worth and how much is he willing to negotiate. While some candidates i know, who are desperate for a stable job in these times of recession are thinking "Lets just get in once no matter what they pay right now, i will get a good raise later". This thinking is not practical, since what ever raise that you get after this point will completely depend on the base salary fixed at this time.

There are some things that should be kept in mind while negotiating a salary...

1. Always be ready - Ready with all the data about your current Cost to Company along with any data like your retirement benefits or retention benefits that your company may have provided to you. Research your net worth and what salaries are your peer groups getting in different companies. Know your worth.

2. Dont push too much - Always remember that you are negotiating with the people you have to work with, dont let your negotaition skill tarnish your image. But then there is a very thin line between too much negotaition and too little. Even for the employer, if they really want you cost will always be taking the back seat but still you need to puch in your point as gently as you can.

3. Do not start a salary discussion - Never intiate a salary discussion, it shows you are desperate. Let the employer intiate even if it means going into next round.

4. Do not be hasty - Do not be hasty in rejecting or accepting any proposal put forward your way. Give it time to settle down and think over it very carefully before replying.

5. Freshers careful - If you are fresh out of college remember most companies have policies they like to stick to and might not like to negotiate but you have every right to ask if the salary is negotiable. So ask and if it is let them know your expectation. Do not under or over estimate your worth.

6. Time for silence - Remaining silent for a few seconds to think over a matter or let the emplyer get some breathing space to be able to evaluate what you might have just said. Silence is considered a very key negotiation skill.

7. No politics - Dont let the discussion get into a political mode, these discussions dont go anywhere and you might be left high and dry. So keep the discussion focussed.

8. Dont use the telephone - Never negotiate the salary over telephone, it may always end by you not getting what you asked for. It is very imporatant to study the body langauge of an individual. Including letting the employer study your body language.

9. Do not lie - Never lie about your past salary or about your packages, you dont know where it could lead you and if you are caught even at a later date your job may always be at risk. Some companies do reference checks of there prospective employee and it may create a bad note between yourself and the company.

10. End on a positive note - Always end the discussion in a positive note, even if you dont get the job at the end. Even when rejecting an offer always be polite and remember that you never know when you might be applying again to the company.

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Ways to Cut Taxes and Save money

With the start of the new Financial year and the last one long gone, most of us just like to forget the taxes and money saving ideas we had last year. Even the resolutions made last year are forgotten, but its always best to start investing in the start of the year itself and save money and also cut taxes. This way we dont have to do last minute purchases of tax saving instruments so lets start doing them right now, although i have talked about them a lot of times but i would really like to point them out right now in the start of this FY...

1. Systematic Investment Plans(SIP) - We should just get out there and buy one of those so many advertised Equity Linked Savings scheme SIP 's. Always buy one which can directly debit your account

2. Equities - Its getting more easier to invest in Equities with the DEMAT accounts. With a lot of banks offering share trading options online, you could just sit on office, do a little research, visit this site very often and just buy equities. Although you dont get tax deductions, there is always a exemption from capital gains tax if you stay invested for over 12 months. (also read - How to invest in a stock market)

3. Public Provident Fund(PPF) - I have given a lot of details about PPF in my previous posts but here i would just like to point out that insted of making one large deposit at the end of the year, maybe we can make small investments of equal amount over a period of one year.

4. Insurance - We dont need to wait for the end of the year to complete the premium payments, just try to pay all of them up by December. This way you dont have to wait for March and them make a dash in March for all those premium recipts and collect them to be sent to the office. (also read - What is Endownment Policy)

5. Home Loan - Well this is a great avenue for building up an asset and also helps cut down on the tax liabitlity as well. Even if you already do have your house try buying out a new one, maybe just as an investment or just to rent out.

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Defining Salary Structure - Last Part

Well to continue the series on defining salary structure, i am making effort to explain to all the newbies about the salaries and how they are structured. This is as you can make out the last part in series, you can always ask me if you can't see something here that you need defined. You can also read the Part 1 and Part 2 on this blog.

Employee Stock Options - These are basically designed for retaining employees in the company and are commonly known as ESOP. The company gives you either free shares or gives you an option to buy shares at a discounted price if the employee decides to stay with the company for a fixed period. And of course if you hold the shares for more than a year, no capital gains tax is applicable to you.

Bonus - It is a part of your CTC, which is usually given once a year in lumpsum based on your and the companies overall performance. It is taxable as a part of the salary. In some companies this amount is also variable depending on your performance and your meeting your Key Result Areas.

Gratuity - It is the Lump sum amount paid by the company, when you either retire or resign from the company. Of course for it to be paid you need to have worked in the company for atleast 4-5 years. Gratuity can be calculated by

Gratuity = Last drawn salary x 15/26 x No. of years of service

Well that's about it, as far as i can think of and of course you are free to write to me about anything else you came across and i will try to define it also.

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What is Money debt?

I found this great video on You tube, talking about Money debt? and how it works. Its a nice animated film which is in many parts. I am posting here the first part and i will try to continue with the videos but its a great video. Its got the past present and future of money debt.