Do you talk about money ?

It is a good idea to have an open discussion about money in a family-between husband and wife and importantly between parents and children.

We keenly watch the governments’s budget exercise for what it might have for us. On the same lines there should be a family budget and a person with clearly defined responsibility of creating and managing the household finances.

Though roles and responsibilities can be delegated and divided, the important point is clear communication and developing an understanding.  If no one from the family is confident/competitive of handling this, outsourcing to a financial adviser/planner would be a good idea.

Having a conversation around these aspects would be helpful:

Assessing the family net worth 

Savings and investment target 

Money inflow v/s outflow 

Who pays bills/routine expenses and are these automated

Major purchase decisions 

Affordability versus usage 

Saving for kid’s education

Retirement planning

Family’s attitude towards money 

Personal finance is an almost ignored aspect and it is not even taught as a subject at school or college level. Thus the role of the person/s in the family managing finances becomes all the more important.













‘Personal’ Finance guidelines

As it is about an individual or a family and is also dependent on certain variables , hence the term ” ‘Personal’ finance”.

We cannot just read about personal finance from books, blogs, newspapers and put it into practice. It has to be customized and ‘tested’ to see what works best for us.

The spending, savings and investment pattern has changed in last few decades. Our parents belong to a generation which used to save and spend.

Our generation spends and then if something is left, tries to save. Ours is an age of instant gratification-it here and now or never.

Thus the savings and investment behavior also has seen a paradigm shift. The total credit card penetration in India as of June 2018 was 39.7 million. That figure is trivial in comparison to our population. However, people mostly have a conflicting relationship with their credit cards!

“Understanding” and Investing in Mutual Funds

While we all are smart at earning and saving but it seems like we are quite bad at ‘learning’ and investing.

Most of us think that there are people who specialize in this area and we would do well to outsource the investing part to them. However how many of us can really afford to have a Relationship Manager or a paid adviser for managing all our money and investments, when in the first place most of us have a grouse that we do not have much left at the end of each month, to “invest”?

“Investing” has to be stressed upon here because we as a society, believe in ‘savings’ only and like to park most of our money in banks-either in the form of Savings account, Fixed Deposits or in the form of Recurring Deposits.

While ‘saving’ is a very good habit and some people I know, do manage to save 30% of what they earn on a monthly basis, investing and multiplying wealth is a different ball game. Very few people actually invest in the best option available to individual investors- Mutual Funds.

Now much has been written about and a plethora of information is available about why and how investing in MFs is a very good option for retail investors. What few focus on,however, is making people “understand” the product.

While many fund houses, stock exchanges, business news channels, AMFI and even the regulators have been working on educating and creating awareness about the benefits of investing in MFs, there is still a long way to go. For a population of the size of India, there are only 42,778,001 accounts (account refers to a folio and an investor may have multiple accounts in a fund or across funds-AMFI).

In fact it would not make much of a difference unless we make an effort to understand the product. I will share a very simple example about how we have an eye for detail when we are buying a tangible product but when it comes to displaying financial prudence, we seem to lose our magical touch.

While purchasing a mobile, my cousin spent a few days in researching, sent a few mails to technology forums, consulted friends, colleagues and finally bought a phone of a known brand for INR 12999. What I liked about this was that at least he was trying to get the most out of his hard earned money. This for me was a step in the right direction and impressed upon me the fact that he managed his finances well  .

However there was a surprise in store and came a few days later. He informed me that he had visited a financial adviser seeking advice for investing in Mutual Funds. The adviser suggested a few funds and explained to him what a MF was and gave him various options. He also made him read through the portfolios of a few MFs so that as a first timer he was satisfied with where his money was getting invested. I was under the impression that he will take this seriously and read more about MFs before taking the final investment call.

A month later he called me and informed that he had invested in a particular small and mid-cap fund which his colleague had invested in. The NAV was down by INR 2.30 from his purchase price and thus he was liquidating his entire investment of INR 25000. I was not happy with his choice, as I have been investing in MFs for over eight years now. So I called him over for having a discussion on his choice of fund and how it would impact his objective of wealth creation in the long term. This is when he had spent a few weeks for spending INR 12999 for the mobile and not even a few hours before spending INR 25000. So much for wealth creation!

Individual investors need to understand that MFs are investment vehicles and before investing they should make an effort to understand the product.

A Mutual Fund at a very basic level is like nutritious, well balanced diet which comprises of  a variety of ingredients and nutrients. In contrast, a Savings Bank account or Fixed Deposit would be more like a staple diet – rice, roti and daal kind of stuff, enough for sustenance but not enough for long, healthy life as inflation constantly eats into our bank savings year on year. I am not going to write about inflation, FDs and absolute rate of returns etc.

Even if you do not understand equities, consider this- your Mutual Fund is buying you a PORTION or PART of –

Your local private/public bank

Your automobile company

Your car’s fuel company

Your TV/ fridge/AC manufacturing company

Your rice/oats/sauce/noodles or any other eatable brand’s company

Your telecom provider company

Your health supplement provider company and many more

Chances are that it might be buying a portion of the company you or your spouse is employed with!

(PORTION or PART here means stake in  the listed company/ies)

In addition there would be some cash lying in the safe deposit of a bank earning fixed returns for your MF (all this is just for illustration purpose and would differ across MF categories)

Ninety percent of us invest in MFs only in the form of SIPs because it is easy and almost akin to a RD for us. We rarely make an effort to check the status every six months or even a year.

Now imagine how, as intelligent and well informed investors we can considerably enhance our wealth creation potential. For the past few days, our markets have tumbled quite drastically. Most of us, who do not understand the market cycles, stop our SIP in MFs and instead, opt for safer options like bank deposits.

However, those of us, who understand the dynamics of markets actually wait for such opportunities and invest small or large amounts (taking into account the risk appetite and availability of investible surplus)  during such falls in the market. As a thumb rule, I always invest some amount whenever the NIFTY is down by 50 points in a single day. Thus your responsibility does not end merely by initiating SIP in MFs. Why is this important? Let us illustrate this with an example-

We eagerly wait for “End of season sale” towards the end of winters, for purchasing those jackets, pullovers and sweat shirts at mouth watering discounts of 40-50 % knowing that we would be able to wear them only in the next season. We know it quite well that the brown leather jacket or the fur coat would never go out of fashion and thus buying these at a discount of 40- 50% would be a very good deal.

Similarly, we wait for festive offers for purchasing consumer durables or weekly bargains for local grocery shopping .When we are so particular about  bargains and buying at the right price or getting maximum out of our money, then what happens when it comes to investing? Once we have educated ourselves, we would start spotting bargains and would wait for specific timelines as well. The inherent issue is that of understanding- we would definitely buy more during lean periods in the market  if we are aware, confident and well informed.

The most common statement that one gets to hear is “there is bloodbath in the markets, I have stopped all SIPs and will park my money only in FDs now. Will never look for opportunities in the market”

What is quite thought provoking and unfortunate is that when it is the best time for investing, people get scared and miss the chance of getting wonderful returns.

The regulators need to ensure that more than advertising and carrying out features in news papers/magazines on the virtues of investing in Mutual Funds and the inherent risks involved, there is focus on teaching the concept of equities at all levels, starting from the elementary level .We need to build a culture where the focus is on inculcating the practical aspects. I am sure our bright students can easily understand the concepts of markets from an early age.

Simplification of documentation and the jargon involved would be another great step. Imagine a customer going through a multi  page SID, SAI, Offer Document, KIM (don’t even know how many of the readers understand these) – it would not make much sense and in fact would add to the mystery. An important step in this direction would be to create a one or maximum 2 page document which would enable the customer to understand the objective and risk associated with the investment in MFs.

In rural areas, people started visiting banks and post offices for getting accounts opened because they saw offices being set up and real people working there. In fact literate rural people are more cautious and make an extra effort in safe guarding and multiplying wealth. The need is to teach and create awareness-they keep their pass books or cheque books in the safest corner of the house and would definitely make a lot of effort in understanding and investing in Indian equity markets- a reflection of the growth story of the nation. Creating visibility at the grass root level in these areas will make a difference.

The scenario is different in urban areas- if a person is operating a bank account online, he or she will get numerous options for investing online and getting maximum returns. With so much information and free advice available, the income class often makes uninformed and unintelligent choices, only to get low, or at times, negative returns.

As intelligent men and women, we need to take charge of our financial decisions. Just sit back and think about it-we take on so many responsibilities at both a personal and professional level. Our daily short term and long term decisions are backed by sound logic-whether emotional or financial.

I was drawn into the world of MFs  a few years back when the markets were doing well and MFs were posting high double digit returns. The huge pile of pages that came along, (they still do) made it difficult to understand the product. But over time and with changing market cycles I have evolved as an investor.

As a start, read about  the basics of financial markets-chances are that if you  spend a few hours focusing on the  end objective, you would develop a good understanding of  MFs and other financial products.

If this is difficult, gift yourself  an online or classroom  course – some financial entities offer it for free while others would charge a fee- but it would be worth the effort.

You would like to check these websites for greater insight:!    and

Individual websites of Mutual Funds in India

The reason for focusing on “Understanding” and then investing is to give control of your investments to you.

Investing in MFs is no rocket science-Just the basic framework needs to be understood, no friend or adviser would be able to make you understand the concept till you take charge and read and learn about it yourself.

So this Sunday (if you are occupied for the rest of the week), set aside two hours and subsequently, one hour each, Monday on wards to read about Indian equity markets and specifically Mutual Funds.

I understand, in the first instance you would not understand the concepts and most of the terms used would not make sense. However search the internet for certain terms and it would look  easy- this would be time well spent.

As per AMFI, the value of assets held by individual investors in MFs at the end of July 2015 stood at INR 5.93 lakh crores-and the total assets managed by the Mutual Fund industry in India stood at INR  13.19 trillion- this is a  huge amount by any standards and we should be a part of this wealth creation process.

As an individual investor, investing in a Mutual Fund is the closest you can get at multiplying your wealth – making some really serious money without actually making an effort in the process itself !

Are you a smart, educated and informed Investor?

As per AMFI (Association of Mutual Funds in India),

 “Assets managed by the Indian mutual fund industry has grown from Rs. 11.19 trillion in November 2014 to Rs. 13.43 trillion in November 2015. That represents a 20% growth in assets over November 2014. The value of assets held by individual investors in mutual funds increased from Rs. 5.07 lakh cr in November 2014 to Rs. 6.14 lakh cr in November 2015, an absolute increase of 21.24% Individual investors held Rs 6.14 lakh crore in mutual funds as of November 2015, an increase of 21.24% over November 2014. Investments of individual investors in equity schemes increased by 28.25% over November 2014.”

 Now that is huge money and if so much of money is going into this all important wealth creating instrument (Mutual Funds), then why is retail participation still so low? There are less than 4.5 crore retail investor accounts for a population of 1.25 billion.

It is that time of the year when we receive e-mails from the finance department for submitting investment proofs for tax savings.

There are many sites which are encouraging investments in ELSSs (Equity Linked Savings Schemes) and while there are positives and negatives, many of us stay away from this product. The problem lies with our natural inclination towards avoiding ‘Risk’-we are so besotted with fixed returns that any investment which has the word ‘risk’ mentioned in it, becomes a taboo.

This obsession of having the ‘Principal’ intact and earning over and above it is the greatest fear that keeps us away from earning higher than inflation returns. We also have to live with a loss by missing out on the all important ‘Opportunity Cost”

Opportunity Cost is the price we pay by staying invested in a lower yielding asset class when the same investment in another asset class would have earned us better returns.

For ease of understanding, if MFs for a particular year returned 15 % and you stayed invested in Bank FDs @ 8%, then the difference of 7% (15%-8%) is your opportunity cost.

We have a tendency to ignore anything related to investing where we need to read, learn, understand and then take a decision. Our preferred investment vehicles have traditionally been instruments which are easy to understand and require little or no follow up or review thereafter.

Most of us bought our first Insurance policy just because a relative or a neighborhood uncle or aunt coaxed us into buying it – we never made an effort to inquire about the product features. We keep on paying premiums only to realize later that it is a dud instrument and not an investment.

There is another reason for our lackadaisical behavior with money- staying un-aware, both at school and home. There are many things which remain only ‘Formula’ for us, with little or no practical application.

Remember the school days when calculating Simple Interest was so simple, however when it came to Compound Interest, the problem always seemed to be compounding as the formula was a little complicated! Money affairs, we believe, are to be kept simple!

Compounding is of great significance and the sooner we understand it, the greater are the chances of benefiting from it. (We can discuss this in detail, later)

What would you do if tomorrow banks start paying you 2% on FD, or if the banks stop paying any interest on your money? Now that is a distant possibility in India in the current environment. However, think about it seriously- what would be your backup plan in that scenario-it would definitely call for studying other options available.

You would go in for real estate, equities, gold, bonds or government securities.

However remember, that from a liquidity & ROI perspective, there would be a lot of variation. Thus start reading and making informed choices. Most studies prove that a person, who keeps himself updated, stays engaged and well aware would be able to multiply wealth manifold.

Understanding a product BEFORE you put your money is of utmost importance. Non Tangible products require greater research, assessment and review.

There are a few people who still choose to neglect equities saying it is risky and akin to gambling – this is as far from reality as it can get.

If you consider Gold and Real estate as investment products, how many times have you sold gold for a profit to invest or for returns? How many of you have really thought about selling your home from purely enjoying the ROI?

Do we look at daily, weekly or monthly price of these two instruments to assess the returns? We DO NOT, then why do we start tracking our equity investments from day 1?

Some important factors before investing in Mutual Funds:

Why to invest                        there are many reasons, but here I would say that invest purely from a diversification point of view. Once you start understanding the magical world of MFs, make a plan and stick with it.

When to invest          for a retail investor, this is a dilemma- whether SIP or when the market goes down. If you are an informed investor, try a rule based approach- say when Nifty is 25-50 points down. If that does not happen, let it be 30th of the month. Have your own logical approach and go with it.

How to invest            this is not that difficult-either get a Demat account or speak with your bank representative. Direct investing with the MF is another option and has its own advantages. There are sites with automated and algorithm based tools, identifying best MFs for you, basis your needs and profile.

How much to invest  the beauty of equities lies in the fact that when you look back, you always tend to think that why did I not invest more! So, for arriving at this amount, you need to take care of your monthly expenses, have an emergency fund ready and then take the plunge. Try to start with at least 5 % of your monthly salary.

Review            this is an important aspect of investing. You might not look at your FDs or RDs during the tenure as you are assured of the returns. However with MFs, there are chances that due to certain market factors, there might be an impact on your portfolio returns. Thus re balancing or re aligning with your long term goals is a necessary step.

While I do not believe in New Year resolutions, I thought of today as a good day to share this as I know there are many who believe in and stick with their resolutions.

Let 2016 be that year-become an informed, educated and smart investor – start investing in Mutual Funds.

Best wishes.

“10 commandments for retiring at 39, or doing your own thing”

I happened to meet my senior from school when I was in my hometown a few days back. He had not changed much and in fact looked as fit as he was 9 years ago!

We agreed for lunch the next day as I thought he was on vacation. I was surprised when he said he was there for good.

I first thought he was the latest to enter the entrepreneurial world- there have been so many stories now of people quitting well paying jobs and picking up farming or some environment related venture in the hills. I was wrong.

The next day we caught up over lunch and our conversation resulted in some vital financial lessons, the only difference being that these came from a person I knew quite well and not from a newspaper article. He said that he was late by three years as he had contemplated becoming his own boss by the time he turned 36!

Just to share a brief background- he was heading a critical department  around 9 years back in a leading financial services giant and was considered to be one of the most prolific managers in the organization. He was ambitious and I remember him saying that one day he would like to lead the organization!

Change of heart? He had clarity of thought, vision, focus and a razor sharp mind. He started investing in different avenues at the age of 23. He is 39 now, having seen his fixed investment in PPF account mature.

The journey has been easy, he said- PPF, bank FD/RD and Mutual Funds/Stocks. Unlike others, he never bothered about real estate. (Which is strange for people his age and a topic for discussion in itself!)

How did he achieve financial independence at such an early age- focus and discipline are the keywords from what I could make out of our two hours long conversation.

1 Starting early                 He implemented his plan for building a corpus at the age of 23. Initially he used to save almost 75% of his take home salary! It helped that his father had insisted on RD/FDs initially.

2 Do it yourself                 Very early in his professional life, he made an effort towards financial self sufficiency and literacy. He practiced the principle of “Outsource only when you understand and if you must”. If you outsource everything, your advisor or bank might start helping themselves rather than creating wealth for you!

3 Goal oriented approach            the end objective gives wings to your goal and brings focus in whatever you do.  All assets were reviewed for returns every year-non performing ones would be substituted, where ever applicable.

4 Mix of asset classes                    Mutual Funds, stocks, fixed return instruments- the mix for him was different as it would be for any investor. Experience taught him that each asset class grows at a different pace and the returns over a period of time are also different. The average return over the years for him has been 18%. (This is substantial, by any standard!)

5 Use your Credit card and automate expenses  a very interesting aspect and something which I always insist on. All expenses should be on credit card and regular ones should be automated. In fact he told me that he even used to track the savings from his credit card and has saved a reasonable amount by way of cash back and discount offerings in the last 12 years. Also, he has never missed on a payment!

6 Patience is the key                     Quick money is akin to gambling, not investing! Wealth creation is a long drawn process. Warren Buffett has created most of his billions by staying invested “forever”. If you have the force of conviction, stay put for the long haul.

7 Build a corpus to take care of all your expenses for one year    the journey becomes easier then. You would not have sleepless nights. This also enables you to take a few calculated risks, as you would not need to worry about expenses on a monthly basis.

8 A second source of income definitely helps    when he started working, his parents were working. This enabled him to invest at a faster pace with a good amount. His wife continued working till the time he quit his job. He ensured that one salary was being invested judiciously, as per the goal. (# 3)

He strongly believes that having a second source of income has helped in multiplying money and also acted as a catalyst for arriving at the ultimate decision.

9 Earning is different from ‘Creating or multiplying wealth”       Earning takes care of your monthly expenses, wealth ensures your life goals are met. You cannot really decide how much you earn, however creating wealth is a step by step process, which if followed religiously and given time to compound, yields amazing results.

10 Buy only what you need         there will always be things which you would be forced to buy due to peer or societal pressure. While we are part of a consumer focused world with lucrative deals across, we need to decide what is good for us financially. As the famous Buffett quote goes: ‘Buy things you like or you will have to sell things you like’

Today he has the equivalent of next six years of salary as corpus, considering a 12% average annual increment, baked in! This amount will take care of next few years as well, even if it grows at a decent 10-12% return. Meanwhile he has taken up teaching, mountaineering and writing, in the cool climes, apart from training his daughter in badminton for two hours daily at the local club.

Last thing, though he mentioned it in the beginning- Invest in your physical well being – any plan would be meaningless otherwise.

Sounds simple? It is, indeed!

Just follow the golden rules.

2017-How about a ‘Life Continuity Plan’​?

I spent almost the entire month of December, 2016 in hospital. There was a medical situation which required me to be with the close family member as he was in ICU for more than three weeks.

This time spent there was an exercise in itself and apart from the agony, anxiety and insecurity associated, it was also time for some introspection.

It made me realize the importance of continuity-like BCP in our organizations, it is essential to have continuity in life, in case of an emergency.

The trigger – While filling up the Insurance claim form at the TPA counter, I came across a lady who was not aware about even the name of the organization her husband worked with, leave aside other details. She had two school going children and the husband, the only earning member, had suffered a paralytic stroke.

The Dictionary defines ‘Emergency’ as “a serious, unexpected, and often dangerous situation requiring immediate action”. This ‘immediate action’can be better controlled, to an extent, by some planning and the sooner we act, the better it is.

These are certain aspects which might help us in initiating an action:

1 TheWhy’ – No one ever thinks about anything going wrong with him/her or a family member and thus plans for future with respect to long/short term investments which would yield good returns and help in achieving life goals.

·         Life goals would mean kid’s education, house, car, celebrations etc. However, in absence of an effective plan, a medical emergency can derail all your long term goals by eating into the investment corpus.

·         Medical costs are quite exorbitant – (our first week’s expense was close to five lakhs) your employer’s medical cover takes care of only the hospital expenses (full or partial). Think about other aligned expenses – medicines, travel related cost, post hospitalization check up, multiple visits to the doctor etc. These would be totally from your pocket.

·         What if the medical situation/illness is prolonged and you have to go on an unpaid leave for a month? Loss of job due to the illness is a scary, but realistic possibility as well.

·         Creating a life continuity corpus would enable us or our family members to carry on with a normal life from a monetary standpoint in case of a medical emergency.

2 Creating a corpus – there cannot be a formula for calculating a particular amount for everyone. As a general rule, three to six months of house hold expenses is suggested as a corpus. In case of a family where there is a single earning person, factors to be considered will be different from a family where both are working.

·         The amount thus arrived at can be accumulated and put in either a joint account or an account in the name of the spouse (the way it works for you).

·         We generally live from salary to salary and thus most of the EMIs and other payments are taken care of through the salary account. Link this (corpus) account to the salary account, so that in case of any disruption, funds can be immediately transferred to the salary account.

·         Creating this corpus would need effort and can take time as it would require you to tweak certain expenses and change your lifestyle, at least in the short term. Be disciplined.

3 Inform and teach– there is a lot of focus in the modern workplace on open culture, information dissemination and communication. Though in our personal life we ignore this important aspect.


·         Create a list of expenses and categorize them with respect to the frequency (monthly, quarterly, or semi-/annual).This list should have items like house rent, home/auto/personal loan EMIs, utility bills, in case of school going kids, their fees, day care or private tuition fee etc. It should have details like date, account/s or cards from which the payments are being made.

·         In households with double income, mostly, one person saves and the other one takes care of all the expenses – in such an arrangement, the other one should know all the details regarding the regular transactions. It would be better if monthly expenses for essentials/utilities can be automated.


·         It is imperative that the spouse is aware about how to operate bank accounts and conduct other financial transactions (online and mobile banking is easy & user friendly) Ignorance is no longer bliss.

4 Invest in relationships  In case of a long illness or hospital stay, family and office support would go a long way in taking off at least some pain.

·         In times of need, your subordinates and bosses are all equally important. It helps if you share a good rapport with your colleagues and if you are a good people’s person.

·         For those who consider relatives and neighbors as always intruding and are of the view that staying independent is the way of life, it is time to rethink. In tough times, you realize the importance of support from family, relatives and friends.

5 Take stock of your finances regularly-Take some time out to review your finances (at least annually) and align with your current life situation.

·         Make the pending (if at all) payments,basis above assessment and discontinue others which are not yielding any benefits (your Life Insurance policy for 3-5 lakhs for which you are shelling out INR 25-35,000 per year today would be worth nothing in 10-15 years from now)

·         If not a Term Plan, buy a health cover for the entire family. This would be a step in the right direction and will definitely make you stress free to some extent. (some of my friends cite a selfish reason for not buying a Term Plan-‘if we will not be there, what’s the point in taking a hefty cover’, they ask. However that’s  beyond the scope of this article)

6 Go for a health checkup today. Even if you are in early 30s, do not ignore- spending between INR 5 – 8,000 today for a checkup is obviously better than landing in an uncertain situation where spending a few lakhs would become a necessity.

Life is uncertain and full of challenges – a few controls can ensure peace of mind and provide the much required continuity.

For some of us, 2017 has just started. For others, we are through with the first month and left with only eleven months now.

Plan well, but execute !


Credit Card for Financial Planning- an intelligent option

What prompted me to come up with this post was a series of phone calls from friends and then finally a function in the family. The phone calls were routine and rather innocuous but got me into some serious thinking. My friends keep calling me, mostly asking for my credit card details for making their travel bookings or paying mobile bills when the due date is approaching or when visiting the store is a hassle! Two of them have stopped using ‘plastics’ as they were unable to control their spending habits and the ever increasing offers were too alluring, finally resulting in a never ending debt trap.

One of my friends called me two weeks back and asked if he could order a water filter through a leading e-commerce site using my credit card as he was getting a very good deal and there was a cash back offer of up to 5%, on this particular bank’s card.

The ultimate trigger for this article was the wedding in the family last week. You must be wondering as to how did it bother me- it did, for an important reason- the mode of payment. Indian weddings are a lavish affair and however hard we might try; even the ‘necessary’ expenses are way beyond imagination and are always exceeding the allocated budget.

This is what I want to stress upon- approximately INR 7,50,000 was spent towards jewelry,dresses and gifts-I have included only these three categories as these are the ones where payment could have been made using a credit card. These are approximate costs and the final cost was slightly higher.Why am I rooting for using a Credit Card?

A little planning would have worked wonders in terms of savings and ‘earning on spending’. Let us see how- I have 3 cards from different banks or providers, on one I get one point for every INR 40 spent and on the other two, one reward point for every INR 50 spent. In this case, the transaction would have accumulated 18750 or 15000 points respectively (given the credit limit is available,obviously). In addition, had there been a shopping festival or some other promotional offer, the points would have multiplied manifold.

The entire payment was made in cash- this amount lying in savings account would have fetched interest for a good 50 days (credit period offered by most providers). Add to this cash back offers-even a 1% cash back offer (or whatever the maximum amount it is capped at) would have been beneficial. I calculated this keeping in mind my credit cards and with maximum cash back capped at INR 5000, the total cash savings would have amounted to approximately INR 12000 (including interest earned at 7% for 50 days).The points earned in the bargain could have been utilized later as per requirement and options available.

We might want to strike this off as a onetime purchase and the amount is also huge.However, if you really plan your finances well and start using your credit card intelligently, you would be able to earn reward points for the amount of money that you would spend on your monthly bills or purchases- mobile, electricity, internet, magazine subscriptions, dining out, etc.I did a quick calculation and was startled at the fact that the total annual spend was well above INR 2,00,000, with groceries, electricity bills and dining out contributing the maximum amount. I have become a proponent of using credit card for ALL my purchases since then.

Now coming to the reward points-if you have a credit card that offers you decent reward points on your purchases, then this should be the clincher- the next time you go for shopping, you would not want to carry your credit card. Most of the times you would be allowed to order gift cards of major shopping outlets, including apparel brands, grocery chains, gift shops etc, enabling your shopping using these ‘gift cards’. This is the reason you should look at the rewards catalogue and then decide what is it that you want to order using the points earned.

Some of the card issuers also give you an option of ordering a gift card similar to a charge card which can be used as a normal debit card for making POS or online purchases. I normally order this one as it gives me the freedom to ‘choose’


You should have two or maximum three cards from different providers. Understand the individual billing cycles and then spend as per these cycles for maximizing benefits.

DO NOT make the payment towards your card the very next day of a purchase, just because you do not want to keep a payment outstanding or revolve credit- the benefits of a card are not for you then, as you do not understand the features.

Check the annual fees and other charges. An important point to note here is that most of us refrain from using cards that have an annual fee component, where as these are the cards that pack the maximum punch. If you use the card annually for a particular amount, the charges could be waived off, depending on the kind of usage and your payment history. The provider would not like to lose a good customer. Most of these high end cards with annual fees come with the best rates, customized offers and value added services.

Pay the credit card dues in full, preferably online, to make use of the maximum credit period, 2-3 days before the due date (or the last day, if the card issuer is your bank)

In terms of priority, keep the credit card payment on top, even before you pay your rent. Once you get into this habit, you would never think of revolving the balance on your credit card

Use your card on necessities every month and keep a track of offers- you would be amazed at how easy it is to earn points and cash back credits, of which sometimes you might not even be aware of.

The other benefits like free  insurance, frequent flyer miles, safety etc have been around for quite some time now, but the easiest and most visible benefits remain un explained mainly because we tend to ignore the positives of ‘plastic money’. A little understanding of the product, planning of finances and a strategy will go a long way in maximizing returns by using a product as simple as a credit card.