Retirement Planning

The buzz word in the IT industry is early retirement. Most of the friends I know either want to move from IT to some other field or retire early. Do they have any plan? Is it possible to retire early? There is no way to retire early without planning early.  With proper planning you can either achieve the goal or quit your early retirement ideas and plan for a proper retirement. Remember retirement can be saddest or happiest day of your life depending upon the on of cash in hand.

I will walk through a common scenario where one wants to retire at an usual age with proper cushion in place to maintain his life style post retirement. 

Determine Retirement Age

The most important factor in retirement planning is to determine when one wants to quit. The basic rules are

• After you pay all your debts. It make sense not to think about retirement when you are paying EMI right?
• After all your long term goals are met (Children's Education/Marriage). You should not think about using your retirement corpus to finance your kids marriage/education. Even giving interest free loan out of your corpus will have a huge impact at later stage.

Determining Post retirement years

This one is tricky. You need to determine your post retirement years. Because post retirement, your corpus will not be linear it is actually a bell curve : meaning: your corpus post retirement will increase gradually initially and starts decreasing till it reaches zero. So if you outlive your expected date then you are left with no money.

This make us understand that like every financial goals you should always revisit and review your retirement plan once in a year throughout your life. We can say this retirement planning has two parts

• Corpus accumulation (While earning) and
• Corpus management (After retiring)

Corpus Accumulation

You need to calculate your monthly expense post retirement. You can take your current annual expense and remove all your EMIs, Children related expense and come up with a number which is comfortable for you to live, but don't plan to be too luxurious post retirement. 

Now arrive at the expense, post retirement, indexing the inflation using this calculator


Illustration:
Current Age : 30
Retirment Age: 60
Current Monthly Expense: 30,000
Inflation: 8%

This gives us R.s.3,01,879 per month post retirement which translates into R.s. 36,22,548 per year.

Now determine how long you will live, your post retirement Inflation and post retirement returns.


Post Retirement Years: 25
Expected Returns : 9% (Be conservative post retirement)
Expected Inflation: 8%

Step 1:

Use this calculator and enter the values.

This shows that Rs.80,818,339 is needed as a corpus while retiring. Does it sound impossible? Let us see

Step 2:

Use this calculator  and enter the values

1. Current savings balance is 80818339 that we get from the above calculator
2. Proposed monthly withdrawal amount is  301879 which we calculated in illustration
3. Annual withdrawal increase is the inflation

this calculator will also gives you the yearly split up of your beginning balance, withdrawals and ending balance.

How much do we need to save?

After arriving at a value of Rs.80,818,339 as a corpus we can use this calculator to determine how much money do we need to invest now to achieve that corpus

This shows that we need to save Rs.1,15,358 annualy or 10000 per month (easy man) and increase it by 10% every year to achieve the corpus. which is very much possible


Note: Like every goals there are variety of assumptions we took while doing the calculation like interest rate and inflation. So it is essential to review it once in a year and adjust your investments. Health cost is a different issue post retirement so consider it while calculating future expense.

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Health Insurance

Now a days  no doubt that medical insurance are burning a deep hole in our pocket. Given our lifestyle changes and food habits we get sick quite often and it becomes essential to take a health insurance. There are certain myths in taking Health insurance like

I am healthy now, so it is not necessary to take a health insurance now : How about getting a chest pain all of a sudden and you come to know that the waiting period for pre existing coverage is about 3 years? 

I have a health insurance policy with my company so i don't need to take one: oh ya this one is tricky let us see what will we do if   

• The company do away with its insurance policy as per the latest revamp in their financial policy?
• How about a sudden increase in premium because your colleagues claims have increased dramatically?
• How about leaving your job and becoming an entrepreneur at age of 40? what happens to your history of no claim and your per-existing disease? how about the premium at the age of 40?
• Disease comes uninformed, how about you quitting your company on Friday and getting a chest pain on Sunday?
• Already we are dependent on our company for our salary, how about being dependent on the company for your health?

Being said that, there are few things you should understand while you take your medical insurance

Cashless treatment: Check whether the insurance provider is offering a cashless treatment. It is extremely important since most of us cant afford couple of lakhs out of the pocket immediately.

Network Hospitals: Check the list of supported hospitals. There may be hundreds but think whether it is nearer to your place of working/living (Don't want your attender to spend a fortune on lodging right?) , whether you are comfortable with the hospital (5 star hospitals which charges much beyond your cover?), etc.

Co Pay: Some insurance have a concept of co-pay. It is like this assuming that they are having copay of 10% it means if your hospital bill is 1,00,000, with all those capping the eligible amount may be 85,000 then you may need to bear 8500 (10% of 85000 co-Pay) + 15,000. Get an insurance without co pay.

Loading: Similar to Co Pay some insurance company charges loading. If the loading is 10% and in one year you have claimed insurance the next year premium will go up by 10%. Get an insurance without loading.

No Claim Bonus: Get an insurance with no claim bonus, it means if you have claim free period either your premium will come down or your cover will get increased without any increase in premium. 

Pre Existing Disease: See how long is the waiting period for pre existing disease coverage, choose one which is lower.

Renewal: Opt for one which provides life long renewal option.

Room Expense: some insurance provider will give you room expense only if you are sharing the room or there might be a cap on room expense. 

All said, I believe education and health care should be states responsibility. Because a life threatening disease will erode your wealth accumulated over 2 generations.

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How much insurance cover we need?

After we saw how to set and track our financial goals, it is important to know whether we are sufficiently covered for life.

There are many methods available to calculate the insurance cover like as simple as multiply the yearly expense by 10 to more complicated one  like real life value. I have learned a more practical approach where the insurance value (I.V) is calculated  based on three factors

1. Real Expense
2. Goals and
3. Liability

Let us take an example:

Personal Profile:

	Name	Age	Income
Self	Arun	30	10,00,000
Spouse	Lavanya	27	-
Kid	Ajay	1	-

Financial Profile:

Annual Expense		7,50,000
Savings		5,00,000
Liablity	Home Loan	25,00,000
Goals	Ajay Education	10,00,000
	Ajay Marriage	6,00,000

Real Expense Calculation:
For every insurance calculation we need to calculate the actual annual expense. Arun has mentioned that he is spending R.s. 7,50,000 annually. In that he is investing around Rs.1,00,000 and paying EMI of Rs.3,00,000 so we need to subtract these values from his annual expense

7,50,000 - 4,00,000 = 3,50,000

assuming that his expense alone out of this total expense is 10%

350000 - 35000 = 3,15,000

Rs.3,15,000 is required by the family every year to meet the personal expense should something happen to Arun.

Expense Corpus calculation to generate Rs.3,15,000 annually  :
Expected Inflation: 6%
Expected Returns: 9% (Should be safe enough in absence of bread winner)

Effective Returns: 9-6 =  4%

Tax Slab : 20%
Pre Tax Annual Requirement : Rs. 3,93,750

Expense Corpus Required = 393750 * 100/4(Effective Return) = Rs. 98,43,750


Life Insurance Calculation:
I.V = Expense Corpus + Goal Value (Today's Value) + Liablity - Net Worth
I.V = 98,43,750 + 16,00,000 +25,00,000 - 5,00,000 = Rs. 1,34,43,750


Which Insurance to Choose?
There are many types of insurance policy available in the market like plain vanilla Term plan, Monthly income plan, Endowment plan and ULIP. As you might know that for the coverage of around 1.3 crores Arun cant afford premium in any of the plan except the term insurance.

The important thing to note is insurance is not investment, it helps your family in case of any eventuality so you should not fall into prey of getting returns from the insurance premium you pay.

I have taken an example to show you how much premium Arun will need to pay in case if he choose a term insurance.

Plan : Aviva i-Life
S.A : 1.3 Crores
Age : 30
Policy Term: 35
Non Smoker

Premium : R.s 10,612 Annually

Some thoughts:

I feel that this method gives me more accurate value of my insurance requirement. However there are some variable components involved in this calculation like

• Expense which may go up or down ( Not based on inflation which we already factored in, but based on the need like kids expense may go up considerably once he joins the school etc). 
• Goal: It may go up once you have another kid or when you have more goals

so it is very much important to do the calculation once in 2 years at-least and  add/reduce your insurance coverage accordingly. To start with I suggest taking 3 term insurance plan for Expense,Goal and Liability respectively and once the goal is achieved are you have no liability stop the insurance of those two. 

Summary:

• Always take term insurance (Online preferable).
• Review the requirements once in 2 years and add/remove covers.
• Never lie while filling the insurance application. In case if you missed or lied anything call them and correct the mistake now itself. Even if they cancel the policy, it is ok rather than living in false belief that your dependents will get the S.A in future. 
• Fill the application by yourself.
• Never let the insurance agent talk.

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Goal-Plan-Action for Finance planning

This is the follow-up post for my previous post "The importance of goal setting in financial planning". I will take the  theme of my previous post and discuss how to achieve it using some of the tools available.

Goal->Plan->Action

Goal Setting:

Let us take an illustrative example of one Mr.T.R aged 28 want to save money for his kids education. His kid Simbu is now 2 years old. He needs to address these following things to come up with the goal

• Name of the Goal  :  Simbu's Education Fund
• How much money he need now:  10,00,000 (He should answer how of much money he needs now if Simbu is joining college today)
• Years till Simbu joins college: 16 years

Plan:

Now Mr.T.R clearly defined all the key parameters of the goal, we need to plan how much money is needed after 16 years.  If we assume that the education expense grow 8% every year,

this calculator clearly shows that Mr.T.R needs Rs.34,259,42 after 16 years to meet the education expense of Mr.Simbu.

(Calculator used: Future Value Calculator)

Now we need to calculate how much money Mr.T.R needs to invest every month for the next 16 years to reach his goal.

I use the "How much should I Save to Reach My Goal? calculator from yahoo finance" assuming 12% returns from the investment which is modest. 

this calculator shows me that Mr.T.R needs to invest Rs.71547 annually (Rs.5962 monthly) to achieve his goal. If he has any savings currently he can also put that in current savings balance.

If we cant invest 71547 now, we can opt for a lesser amount now and increase the investment every year, you can play around with the field annual increase on recommended savings to determine such value.

Action:

Next thing Mr.T.R needs to do is to pickup a 5 star rated equity mutual funds from www.valueresearch.com and start investing Rs.6000 through SIP (Systematic investment plan) for the next 16 years. Mr.T.R should not worry about ups and downs in the market and keep investing in equity. The only advice is that he should review the plan once in every year and switch to other plan if it under performs the category average.

To track the growth I created a spread sheet which looks like this (The funds mentioned are just for illustration and not for recommendation)

Similarly Mr.T.R needs to set goals for Simbu's marriage, Kural's education etc. We will talk about retirement planning sometime later.


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Importance of Goal setting in financial planning

When we talk about personal finance planning, we need to understand the clear difference between the terms "Savings" and "Investment". Even though these two terms are used interchangeably in financial discussions there are certain difference with which we can distinguish these two.

When you say "I am Investing" it means that you are expecting the capital to grow and you are taking a risk but when you say that "I am Saving" it means that you are more conservative and you are looking for your capital protection.  

So what should we do? Save or Invest? What I say is forget about these jargon's and get yourself into reality. It gives us a false prestige when we say that we are investing in stocks rather than PPF, it gives you a geeky image. 

Even if we don't understand the risks, even if we don't understand the stock market we will put our money into it and expect a 200% returns in a year. When we question their motive the simple answer is I want to be rich. Well everyone's ambition is to be rich but how rich is rich? XYZ invest in stocks and wants to be rich so as Warren Buffet invest in stocks and wants to be rich. The only difference is Warren Buffet has goals.

Is Finanical Goal important, yes definitely.

Goal->Plan->Action-> Excitement->Achievement ->Satisfaction

Without goal we are clueless, goal will lead us to plan for it. Some one might keep investing in some assets without any goal and become super rich but i don't travel that way. I need a goal to get motivated to get excited. Otherwise it is like watching Sachin playing in Australia without 100th century in mind. That milestone motivates Sachin, excites him and when he achieve it gives enormous satisfaction.

Investing is not about putting your money continuously in some asset and watch it grow, it is all about booking profit at right time and reaping the benefits. To achieve it you should know when to stop, to know when to stop you need to set goal.

You can set a goal by answering these questions

• Why do you want to save money?
• How much money you need?
• When you need that money?

Some of the goals you can set are

• Children's education - Need 10,000,00 in 2021
• Marriage of your Son/Daughter  - Need 15,000,00 in 2030
• Retirement planning
• Down payment for buying house
• Down payment for buying car
• Foreign trip

Next post we will see how should we plan and track for achieving the goal.

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Investing Early

I was talking to my friends brother who recently joined a software company, after a while we where discussing about investing. Then I asked him how much of savings he has, I hear him saying that it is too early for him to think about savings. The problem is that he fails to remember that age is proportional to the commitment and the commitment is inversely proportional to the savings power.

Some people in mid 30's say that "hey I got a home for 35Lakhs and I am paying an EMI of 35000 per month, thats a lot of savings so why should I invest extra". My question is why you consider your EMI as an investment? home loan has two components in it Principal and Interest. Buying an house is a good investment but did we really sell it in crisis situation? Real estate is a tough bet, you cant guarentee its appreciation, a slum clearence board or garbage dumping yard project near your plot may be a severe blow to its value, moreover it has poor liquidity.

Investing  is not only about preserving your capital, it is about earning modest interest with moderate risk. It is not neccessary that you need atleast 1 Lakh to begin investing. Starting early with waterver money even with Rs.2000 per month will also have a great impact on your savings on later part of your life. I will present a small illustration which will show some power of investing early

Let's compare two friends – Ondipuli and Kaipulai. Ondipuli starts saving Rs 50000 per year from the time he is 25. After 10 years he decides to stop investing. By that time the investment grows to Rs. 8.77  Lakhs assuming 10% intrest. 

Ondipuli lets the Rs 8.77 Lakh grow and assuming that it continues to earn a reurn of 10% every year he would have been able to accumulate around Rs. 95 Lakhs by the time he turns 60. So the Rs 5 Lakhs (50000 * 10) he had invested in first 10 years has grown to Rs 95 Lakhs.

On the other hand, Kaipullai starts investing Rs 50000 per year when he is 35 and continues investing this amount every year till he is 60. i.e for 25 years. Assuming he also earns a return of 10% every year, he would have been able to save only Rs. 54 Lakhs.

Even after investing Rs 50000 regularly for 25 years, Kaipullai has managed to accumulate Rs 54 Lakhs, which is around Rs 41 Lakh less that Ondipulli.

As the corpus grows the impact of compounding is greater. Ondipuli as we know managed to accumulate Rs 8.7 lakh after 10 years and then stopped investing after that and left the corpus grow for another 25 years. Let us say he had allowed the corpus to grow only for 20 years then he would have accumulated a corpus of Rs 59 lakh, by letting it grow for another 5 years he managed to get Rs 36 Lakh more.

What are you waiting for? Start investing right away!!!


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Dennis Gartman’s Trading Rules List

1. Never, under any circumstance add to a losing position…. ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!
2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is “low.” Nor can we know what price is “high.” Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed “cheap” many times along the way.
5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
6. “Markets can remain illogical longer than you or I can remain solvent,” according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.
7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds… they shall carry us higher than shall lesser ones.
8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect “gaps” in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In “good times,” even errors are profitable; in “bad times” even the most well researched trades go awry. This is the nature of trading; accept it.
10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade.
11. Respect “outside reversals” after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more “weekly” and “monthly,” reversals.
12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.
13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen… just as we are about to give up hope that they shall not.
14. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.
15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first “addition” should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.
16. Bear markets are more violent than are bull markets and so also are their retracements.
17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are “right” only 30% of the time, as long as our losses are small and our profits are large.
18. The market is the sum total of the wisdom … and the ignorance…of all of those who deal in it; and we dare not argue with the market’s wisdom. If we learn nothing more than this we’ve learned much indeed.
19.  Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.
20. The hard trade is the right trade: If it is easy to sell, don’t; and if it is easy to buy, don’t. Do the trade that is hard to do and that which the crowd finds objectionable. Peter Steidlmayer taught us this twenty five years ago and it holds truer now than then.
21. There is never one cockroach! This is the “winning” new rule submitted by our friend, Tom Powell.
22. All rules are meant to be broken: The trick is knowing when… and how infrequently this rule may be invoked.

[Source: http://www.tischendorf.com]

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Hazards of lending money to close friends and relatives

We used to bailout our friends or relatives whenever they are in financial trouble. The loans may vary from Rs 100 to even Rs 100000 depending on the situation, need and the lenders lending ability ( I would call it as a soft corner). I used to get calls from my friends like

“Machi, my home loan is due today and I don’t have sufficient fund in my account could you transfer it? I will give it back in two days”

 “Wow I like this shirt da, could you use your credit card to buy it and I will transfer you after reaching home” 

Sometimes the request will itself be like a demand like “You were asking me to introduce my girlfriend’s roommate right? I am taking my girl friend and her roommate to a nice hotel for my birthday, so lend me 5000, you can also join us” This is a tough one to turn down.

I used to be the first person to lend money to my dear ones, when I started earning until I had two bitter experiences.  I was not fortunate to get a job in campus, I tried hard for around 8 months and got placed so when I got placed some of my friends where still searching for job. One day I got a call from my close friend who was in Bangalore asking me to transfer Rs.5000 to pay house rent that too not for him but for his close friends. He promised me that he will send it back that month end. My salary itself was Rs. 7000 and also I was paying EMI for my bike, but he was my best friend and we know each other for almost 8 years so I transferred it from my meager savings.  I expected him to pay me back next month but he didn’t, I expected him to call me back but he didn’t when I called him he apologized and told me that he will transfer it next month. Next month when I called him he neither attends my call nor called me back.  Few months later when I was in dire need for that money I asked one of my friends to call him and check with him, the reply I got was shocking “He is earning right? Then why is he pestering me like this for just 5000 Rs? Tell him that I will settle his money soon and ask him not to call me often“

In another occasion I loaned my colleague Rs 20000 who needed it for his surgery, he promised me to pay me back in installments.  He gave me 8000, 2000, 2000 and 5000 in the span of 8 months. Then after a year I found that there is no sign of him paying back the rest. When I asked him, he said he paid the entire amount. I checked my entire account but I found 3k short, I asked him again, he said he paid it in cash. I used to note down all my transactions using one of these tools, so there is no way that I can miss it but still I couldn’t argue with him.

Some of the attributes I observed on people taking loan from friends/relatives are:

• They just want us to help them in all the occasions. They don’t care about our financial positions or commitments.
• Even though they have option to avail soft loan with minor interest like loan from office or even taking salary advance, they don’t do it they just want an interest free loan with no commitments.
• Most of them with my experience will never payback in time or pay it as a whole. They split it into small pieces where it loses its value.

Lessons learnt:

• Make sure that if the person is not paying back to you on promised time it won’t affect you financial goals.
• Don’t be too generous to put a salary advance and loan it to someone.
• Never lend someone huge money for the first time. If you have already lent some money to him and he sticks to the deadline or at least have courtesy to call you back and inform you about the delay then you can go ahead.
• Avoid accepting part payments if you can’t then at least ask him to send an email whenever he transfers the money quoting the amount he has transferred. Make sure to save the mail.

Whenever I need some money I will take this approach

• See whether I can avoid/defer a buying decision to avoid loan.
• See whether I can borrow from my friend and pay it back within 10 working days.
• See whether I can use credit card or sell some of my shares/mutual funds and finally
• Ask my dad.

So I suggest you people to go slow on lending.  If you decide to lend make sure that your relationship won’t turn worse. Whats your take on Lending money?

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Investing in Mutual Funds - Part 1

I got exposed to mutual funds in 2003, I don't have any idea about MF at that time and still managed to invest and make profit. I treated MF just like stock, after it gained 20% I just sold it and bought another MF. I didn't care about the track record of the fund, I didn't know the asset allocation. After an year of investing in MF I started taking it seriously and analyzed everything before investing.

I will share my experience on investing in Mutual funds in a series of article.

1.What is a Mutual fund?
Mutual fund is a scheme where many people pool their savings together to invest.

2.Who pools the fund? Are they safe?
AMC's (Asset Management Company) manages the fund and it sets an objective like

• Hey guys with this fund we are going to invest in Large Cap(Blue chip) companies and most of our investments will be in Energy Sector.
• Our benchmark is Sensex ( We are competing against Sensex, if you invest Rs 10000 equally in all the stocks which makes Sensex and the same amount in our MF then we will make sure that we will give you more returns than Sensex)

Yes, your investment is safe. All the AMC's come under the regulations of SEBI (Securities and  Exchange  Board of India)

3.What investing in stocks? then why cant I do it myself?

Yes, of course you can do it but there are certain reasons and benefits associated with investing in MF

• You can invest in MF even with a small amount, say Rs 1000.
• You can diversify your investment across many stocks in MF. Your 1000 Rs might be invested in 20 different stocks.
• You get a fund manager to overlook the investments made, track the performance and take corrective action if it doesn't perform well.

4. Should I pay anything to the AMC?

• If you invest through  your financial advisor, LIC agent,  your lovers brother then you will be charged with transaction charges(Since abolished entry load)
• Certain funds charge you Exit Load if you sell your funds within a year. 
• There is a fund management fee . You can check the Expense ratio of a fund to determine how much you pay a fund in percentage term every year to manage your money.

5. Is there any way to avoid all the costs associated with MF?

I started liking you, now you are looking for a free lunch.  You can't avoid all the costs but certainly you can avoid transaction charges by investing directly with the AMC. 

6. How should I do it?

Go to the AMC's web site directly and invest it online (For Ex: http://www.hdfcfund.com/). However for the very first time you need to visit the Investor service center of the AMC and invest.

7. What is NAV?

Net Asset Value is the value of your single unit of fund.  For Eg: If you have Rs. 10000 and if you want to invest in XYZ fund whose current NAV is 10, you will get 1000 units.

The rule is every AMC should declare NAV once in a week however most of the MF declare it every day.

8. Hey my friend invested in Unitech shares and got 100% returns in 6 months, will I get similar returns here?

No,  sicne MF is diversified it wont give you astonishing returns like investing in shares however MF will not go down heavily like stocks.

9.No man there is no thrill in MF's, its boring?

If you seek thrill then go Bungee Jumping or propose to Dawood's daughter. 

In next series we will see what are the different types of Mutual funds and on how to choose a fund.

    




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Expense tracking and Budgeting tips

Every time when I go for a trip and return home my mom use to calculate the expense and note it in diary. I used to make fun of her but now I started realizing the importance of it and started following it. The most common  problem is we often we forget to remember whom we have lent and how much. I will try to explain here on what are the various ways/tools I followed to keep track of my expenses.

Excel template:


My friend shared me an excel template called KharchaPani(Download), thanks for the unknown creator of this template, its a life saver. I started entering daily expenses and loans I took/gave. It is very simple and gives a basic chart for  your income vs expenses. The problem I faced with this is you have to always track the latest version and the merge issues if you have two copies one at home and one at office. This tool can be an alternate for online tools available for those who are afraid of privacy.

Buxfer:


I then moved on to an online expense tracking tool Buxfer. I used it for almost 5 years, its free and it has lot of features that reduces your manual work. It allows you synchronize with your bank account (For Indian users it allows only ICICI and HDFC).

You can create Wallet as an account and store the amount in you wallet and add manual transactions daily. For the transactions that you made with your debit/credit card it will sync automatically with your bank account and create an entry here, only thing you need to take care is tagging the transaction.

There is feature to create automatic transaction which I use it for recurring expense like Loan, Rent etc. It creates an entry with predefined tag and also generate alert as sms or mail.

Buxfer is a really cool tool, it gives you a lot of analysis of how we spend and also gives you projections on whether you will overshoot your budget.


Intuit


Currently I started using free trial of Intuit for my expense tracking(Intuit Trial). The paid version comes at 402.80 per year. Intuit is known for their famous softwares like Quicken and Turbo tax. Intuit acquired Mint in 2009 and gained lots of expertise in online personal finance tracking tools.

Man I love this tool. You can synchronize almost all the major bank accounts in india. It also helps me to synchronize my portfolio from money control and form ICICI direct which is a major plus. I can view my entire financial status at one point. It has alerts and remainder too!!

Initially I was worried about the data security but my friend who is working for Intuit explained me about the level of security which somehow eased my initial jitters.

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The major advantage I gained after tracking my expenses are

• It induced my interest for learning other areas of personal finance.
• I can easily track the money I loaned.
• I stopped taking loans from my friends, since I budget every expense an year ahead.
• I always know how much cash I will have at any particular point of time for that year.
• I never missed my Insurance payments and bills.
• I started advising my Dad  :) 

Disclaimer: I suggest you to please analyze the security features of whatever tools you want to use and make an informed decisions.