Basic idea on financial, savings, investment, debt of Individual and small business men!!!
What is income?
Money earned from various sources like salary, wages, earnings from farming or business etc. is our income.
What is expenditure?
Money spent by us on various items is our expenditure. It includes spending money on essential as well as non-essential items.
What is investment?
Deployment of money, say out of savings, with the expectation of earning higher returns overtime is investment. e.g. purchase of land, fixed deposit in banks etc.
What is saving?
When income is more than expenses, then we have surplus money known as savings.
What is debt?
When expenses are more than the income and we have no savings with us, then there is shortage of money which is covered through borrowing, creating debt.
How can we manage our money?
What are different types of deposit accounts?
Banks offer three types of deposit accounts- Savings deposit, Term deposit & Recurring deposit as explained below:
1.Savings deposit account is for depositing our day to day surplus. We can withdraw our money whenever we need it. We can also get an overdraft (Loan for emergency needs) in our saving account.
2.Term deposit account is for depositing our money for a fixed period suitable to our needs. This may earn interest at higher rate than saving account, as we deposit money for a pre decided fixed period. We can also withdraw before the due date but in that case we will get less interest.
3.Recurring deposit account is for depositing an amount periodically say every day or every week or every month for a certain period. This can be used for depositing regular savings.
A mutual fund is a common pool of money into which investors place their contributions that are to be invested in different types of securities in accordance with the stated objective. Mutual Funds are the best solution for people who want to manage risks and get good returns.
Advantages of Mutual Funds-
Portfolio diversification: It enables him to hold a diversified investment portfolio even with a small amount of investment like Rs. 2000/-.
Professional management: The investment management skills, along with the needed research into available investment options, ensure a much better return as compared to what an investor can manage on his own.
Reduction/Diversification of Risks: The potential losses are also shared with other investors.
Reduction of transaction costs: The investor has the benefit of economies of scale; the funds pay lesser costs because of larger volumes and it is passed on to the investors.
Wide Choice to suit risk-return profile: Investors can chose the fund based on their risk tolerance and expected returns. Advantages of Mutual Funds
Liquidity: Investors may be unable to sell shares directly, easily and quickly. When they invest in mutual funds, they can cash their investment any time by selling the units to the fund if it is open-ended and get the intrinsic value. Investors can sell the units in the market if it is closed ended fund.
Convenience and Flexibility: Investors can easily transfer their holdings from one scheme to other, get updated market information and so on. Funds also offer additional benefits like regular investment and regular withdrawal options.
Transparency: Fund gives regular information to its investors on the value of the investments in addition to disclosure of portfolio held by their scheme, the proportion invested in each class of assets and the fund manager’s investment strategy and outlook.
Bonds refer to debt instruments bearing interest on maturity. In simple terms, organizations may borrow funds by issuing debt securities named bonds, having a fixed maturity period (more than one year) and pay a specified rate of interest (coupon rate) on the principal amount to the holders. Bonds have a maturity period of more than one year which differentiates it from other debt securities like commercial papers, treasury bills and other money market instruments.
Certificate of Deposit (CD)
A certificate of deposit (CD) is a time deposit, a financial product commonly sold by banks, thrift institutions, and credit unions. CDs are similar to savings accounts in that they are insured “money in the bank” and thus virtually risk free
Equity is typically referred to as shareholder equity (also known as shareholders’ equity) which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debt was paid off.
Equity is found on a company’s balance sheet and is one of the most common financial metrics employed by analysts to assess the financial health of a company. Shareholder equity can also represent the book value of a company. Equity can sometimes be offered as payment-in-kind.
Pradhan Mantri Jan Dhan Yojana:-
Pradhan Mantri Jan Dhan Yojana is a National Mission on Financial Inclusion which has an integrated approach to bring about comprehensive financial inclusion and provide banking services to all households in the country. The scheme ensures access to a range of financial
services like availability of basic savings bank account, access to need based credit, remittances facility, insurance and pension.
Prime Minister Jeevan Jyoti Bima Yojana
Pradhan Mantri Jeevan Jyoti Bima Yojana is a government-backed Life insurance scheme in India. Pradhan Mantri Jeevan Jyoti Bima Yojana is available to people between 18 and 50 years of age with bank accounts.
Pradhan Mantri Suraksha Bima Yojana
Pradhan Mantri Suraksha Bima Yojana is a government-backed accident insurance scheme in India. As of May 2016, only 20% of India’s population has any kind of insurance, this scheme aims to increase the number.
Atal Pension Yojana
It is open to all saving bank/post office saving bank account holders in the age group of 18 to 40 years. Subscribers would receive the guaranteed minimum monthly pension of Rs. 1,000 or Rs. 2,000 or Rs. 3,000 or Rs. 4,000 or Rs. 5,000 at the age of 60 years.
Kisan Vikas Patra
Kisan Vikas Patra is a saving certificate scheme which was first launched in 1988 by India Post. KVP certificates are available in the denominations of Rs 1000, Rs 5000, Rs 10000 and Rs 50000. The minimum amount that can be invested is Rs 1000. However, there is no upper limit on the purchase of KVPs
Stand Up India
Stand-Up India Scheme Facilitates bank loans between 10 lakh and 1 Crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch for setting up a greenfield enterprise.
PM Vaya Vandana Yojana
1.To provide social security during old age and to protect elderly persons aged 60 and above
2.The scheme provides an assured return of 8% per annum for 10 years.
3.It is implemented by LIC
Sovereign Gold Bonds
-The Sovereign Gold Bonds will be issued every month from June 2019 to September 2019.
-The tenor of the Bond will be for a period of 8 years with exit option after 5th year to be exercised on the interest payment dates.
-The maximum limit of subscribed shall be 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time.
Aam Admi Bima Yojana
1.It provides Death and Disability cover to persons between the age group of 18 yrs to 59 yrs.
2.It is a group insurance scheme providing insurance cover for a sum of Rs 30,000/- on natural death, Rs. 75,000/- on death or total permanent disability due to accident, Rs. 37,500/- for partial permanent disability due to accident.
3.The total annual premium under the scheme is Rs. 200/- per beneficiary of which 50% is contributed from the Social Security Fund created by the Central Government and maintained by LIC.
Gold Monetization Schemes
The scheme intends to mobilize the idle gold held by households and institutions in the country and to put this gold into productive use and in the long-run, to reduce the current account deficit by reducing the country’s reliance on the imports of gold to meet the domestic demand.
Varishtha Pension Bima Yojana
1.Implemented through Life Insurance Corporation of India
2.It will benefit the vulnerable section of society with limited resources as it will provide monthly pension ranging from Rs 500/ to Rs 5,000/ per month to senior citizens of the country
National Pension Scheme for Traders and Self Employed Persons
To provide an amount Rs 3000 to the beneficiaries after they attain the age of 60 years.
Loans such as credit cards and signature loans are unsecured or not backed by collateral. Unsecured loans typically have higher interest rates than secured loans, as they are riskier for the lender. With a secured loan, the lender can repossess the collateral in the case of default. However, interest rates vary wildly on unsecured loans depending on multiple factors, including the borrower’s credit history.
Credit cards or debit cards are called Plastic cards. Plastic cards are one of the most popular forms of payment. In fact, Plastic cards are an inevitable part of our life. They allow cardholders to pay for goods and services easily and conveniently and provide an alternative to cash and cheques
Credit Information Bureau (India) Limited is India’s first Credit Information Company (CIC) founded in August 2000. CIBIL collects and maintains records of an individual’s payments pertaining to loans and credit cards. These records are submitted to CIBIL by member banks and credit institutions, on a monthly basis. This information is then used to create Credit Information Reports (CIR) and credit scores which are provided to credit institutions in order to help evaluate and approve loan applications. CIBIL was created to play a critical role in India’s financial system, helping loan providers manage their business and helping consumers secure credit quicker and on better terms.
A CIBIL score is a three-digit number between 300-900, 300 being the lowest that represents an individual’s credit worthiness. A higher CIBIL score suggests good credit history and responsible repayment behaviour.
Advantages of a High CIBIL score
1.Cheaper interest rates on loans
2.Cards with better benefits and rewards
3.Avail pre-approved loans
4.Loans with longer tenure
5.Quicker approval on credit applications
7.Discount on loan processing fees and other charges
8.Higher credit card limit