An experience and reflection

A colleague, was interested to train his son in driving a car. It is quite reasonable and understandable. But the only issue is he is not yet a major. The child was 6 months to complete 18 years. His idea was that the child being active, will learn it easily and when he turns 18, he can get a license without delay.

He started training him on a empty road in the early hours of the day when there is no traffic. He taught him how to drive and he was driving on the road with some confidence. He got good control of the vehicle and he was able to maneuver easily on a empty road.

One day, while  driving, a car came and brushed a vehicle when the son was at the wheel.  The person who was in the other car was a gentleman and requested my colleague to repair the minor dent on his vehicle, which my friend obliged. Thus the matter ended.

When he shared this information with me, It set me thinking. Is my friend correct in training his son. Should he have controlled his enthusiasm till the son completed 18 and major legally. Or he could have taken more precaution and continue coaching his son.

I was in a quandary. Many of our rules and regulations are archaic and there are no revisions for the same for years.  Though government is revisiting and revising some laws gradually, the pace is very slow.

I feel that now a days, children are ageing faster and the yardstick for adulthood needs to be brought down at least by 1 year. As the parent or guardian will be guiding a child, a child can get a learning license when he completes 17 and after 18, he can be given a full license.

Thus there is a need to revisit such archaic laws.

How much money do i need for my retirement

This is a recurring question one encounters many times in life.

The answer is not straight forward. To answer this many aspects need to be considered.

1. When one wants to retire and how many more years one needs to survive with the corpus. With increasing life expectancy and increasing living costs, one needs to consider this aspects very carefully. Hence it is better to take higher life expectancy and a reasonable factor of living expenses. If I want to retire at 50, one may be better off considering 35-40 years of remaining life and 6-7% annual inflation. However, this is subjectively.

2. What is the status of living one wants to maintain. The higher the status of living, the higher the expenses and higher the corpus should be.

3. What are the responsibilities one has to take care off. One needs to take care of children to some extent. However, this level may vary. For boys, one has to foot the bill for their studies and bring them up to some level(till 25 years). For girls it may be marriage. But it will be useful if one makes children independent and train them to be on their own from the beginning. This will reduce expectation that my parents will give me this much money etc.

4. External factors like inflation and rates etc. Though one is not directly in control of these aspects, one can understand and prepare for these. This will help them by giving necessary grounding to weather these changes.

After going through the above, it may feel that one can never retire. But with some discipline, one can get enough corpus and optimize one's expenses so that one can retire peacefully at 60 at least.

Control

One day my son came back home from school, very upset. In fact it is the first day for him at the new school. He was upset because he thought he was not treated properly at the school. In the previous school, the students were not controlled in the class and he was enjoying due to familiar environment.

Suddenly this changed. As he did not go for first week, the teachers expect him to complete the backlog in a day (at least he felt so). All these upset him and he came back home in a tense mood. Wife was upset as she tried hard to get him admitted in the new school.

I met him in the swimming pool in the evening after my return from the office. We talked a little. When I came home, I asked him how he felt at the new school. He told me all his woes and expressed the desire to go back to the old school. This he did about 10 times that night.

I said, lets see and asked him what his teacher wanted him to do. We both together worked and completed half of the notes. Then I told him that I will complete the balance work in his rough notes so that he can copy the same the next day, when he has time. Then we discussed some rubiks cube solving(his current fancy) in which he could teach me something. Then he slept off.

The next day, though not enjoying, he prepared and went to the new school. The resistance had gone down. Had to work on it for more days.

Generally we get upset when things are not to our liking. Our liking mostly is based on pre conceived notions and not on rational thinking. It my not be to our good, if we take some decisions in that emotional state. This is because in an emotional state rational brains ceases to work.

It is required to control ourselves at such times. In other words one needs to control oneself from oneself.

For this one needs to understand the phenomenon of emotions and emotional triggers. Once a person gets sensitized to this aspect, one can search for triggers which takes him to such state. The trigger can be a dis agreement, a talk back from subordinate or peer etc. These are to be found by the person who wants to know.

Once the triggers are identified, one can check for ways to avoid those triggers. There are many ways to distance oneself from these triggers. One has to research for what works best for him.

This gives one control over oneself. We can train children in this by rational reasoning over a long period. Though the exercise is time taking, it is worth pursuing.

Training a child.

Now a days, schooling became a hot topic in parents’ discussion. For many, a school with higher tuition fees automatically represents better education. Hence school fees are skyrocketing yearly.
Is the contention that higher fees represents better education, correct?
It is true that due to inflationary pressures and other influences, fees are increasing yearly. Some of the other reasons are the new private schools, equipment like virtual screens etc and exotic options like IB. Thus school fees are ranging from Rs 1000 to Rs 10000 or more per month. In addition there are other fees like infrastructure fees etc.
But is a consumer getting returns equal to the investment. Let see.

What does a child needs to understand and grow up as a responsible citizen. School provides a platform to mix with kids of similar age and help them understand the interactions. Thus some sort of school experience is desirable. More than this, what can one expect from a school platform, other than the peer interaction. 

This is a tricky question. Given a chance, I expect everything under the sun. Good coaching, good subject knowledge, tricks to clear competitive exams and the list goes on. Is this realistic?
Normal class has 30-40 students with 0-100% understanding / learning ability. As a matter of fact, teacher can target a group of middle 30-40% for instruction. This is reasonable. What will happen if one’s ward falls outside this band?

Also, school offers many additional items in which a child can participate. What should a parent do.
Ideal solution can be first understand the child. What are its strengths and weaknesses to get an approximate idea of what are the areas where a child can shine and where one needs polishing. This can be a starting point from where a parent can start one’s expectations/demands from school. 

 However, the exercise should be rational. To keep it rational, one can take the help of a close friend or a psychologist.

A child can be analysed on multiple intelligence framework. What types of intelligence a child displays. Check which traits you want to improve. Then make a plan for stressing those traits unobtrusively.

For example, if a child is a loner and a parent feels that he be introduced to group activities, a parent can gradually work on this aspect by encouraging him to participate in group activities in school, residential colony etc.

Thus it will be useful, to let the children experience and understand various skill sets. This will also help one to zero down on one;s liking and may be work on it in future.

Understand that this is a long exercise and patience is the most important thing in the process.

I tried this with my kids and results are satisfactory.

Is frugalism only way to wealth creation

I recently came up on a discussion group where the above point was being debated. Is frugalism only way to build wealth or if one builds wealth for the first 30 years or so of one’s working life, whether one will have enough time to enjoy life?

These are pertinent questions.

It is true that one has to enjoy one’s wealth. There are no two thoughts about it. But in this world of uncertainty, one needs to plan from the beginning to generate enough corpus to sustain one throughout life. Now, how much does one needs for this. Lets take a rough estimate.

In this calculation, there are few important items. Current expenses, time and estimated inflation. Inflation as all are aware, is the rate of increase of prices and is normally expressed on a yearly basis. That means purchasing power of money will reduce at that rate for an year.  Now if  monthly expenses of normal household is Rs 30000 per month and inflation is 7% on an average, the expenses after say 25 years will be about 19.5 lakhs. That means, one needs to have a corpus, which can generate a sum of about 20 lakhs per year after 25 years. That means one need a corpus of about 2 crores @10% interest rate to meet his expenses requirement.

Yes, it is a big corpus. Also, expenses may decrease after children grow old and start earning for themselves. Considering these aspects, the corpus may be brought down somewhat. However, the future is unknown. There can be unexpected expenses like medical costs or some amount required by a child.

Now accumulating this money is a daunting task. But the time will come to our rescue. If one plans religiously from an early age, it is not so big  corpus. But if one delays, the effort required will be much higher.

There is one more aspect here. It may be possible that one stops a regular paying job and pursue an activity of one’s choice. It may or may not pay at the level of current regular job. But to pursue, one needs to have a corpus to fall back on in case of any necessity.  

Another aspect which can be thought of can be family responsibility, in case something happens to the bread earner. Normally many do not people consider this as a requirement. There is a psychological phenomenon called ”Survival ship bias”. One tends to think that as I didn’t meet with an accident till date, I will never meet an accident. This is illogical and one should plan for eventualities.

Thus, frugality is required to take care of one’s future responsibilities and aspirations. Hence it is advisable to start early and create a corpus.

Once a person understands the need for it, it may be easier to embrace the concept and succeed.

Less known ways to manage Income tax India

I was searching for some ways to manage my taxes and I found some  ways to manage my taxes.

These are not routine ones that’s why I wanted to list them so that others can benefit. All these come with points to be kept in mind, before using.

HUF

(Hindu Undivided Family) This is specific to Hindus. A married person can create a HUF and can receive Rs 50000 max as gifts per year into it in the form of gifts.

The process to open a HUF is as follows

Get a PAN card. For this one can apply online with relevant proofs. Card will be sent directly by post by NSDL.

Karta should get a Stamp made stating that he is the Karta of the HUF. He has to use this any time he transacts in the name of HUF.

Then open an account in the name of HUF in any bank. Then route the gifts into that account. The money can be invested similar to any other person.

Karta Can also take loan for any purpose with valid proof and manage such funds.  Also any ancestral property can be kept under HUF and the income can be accounted under HUF.
Advantage with HUF is additional PAN card which helps in reducing tax out go.

Gifts from Relatives

Gifts from blood relatives are tax free in the hands of receiver. Thus, if one takes gifts from parent brothers etc, if one maintains proof, the gift money can be shown to be tax free.

Adult children

Adult children can be used as a good tax saving tool. In fact, with proper management, an adult son/daughter can act as an earning member even if she/he is not earning. Gift some money to them and get it invested in their name. Thus one can get tax advantage and also one can initiate adult son into the wonderful world of finance.

There is one more issue here. Adult in Indian context is one who completed 18 years. For income tax purpose, even if one is becoming adult, he will be treated as adult for that whole year. Thus if one is completing 18 by say Feb 28, he can get money and act as an adult from April 1^st onwards. This can be used by a parent for managing tax.

Parents

If parents are not in taxable limit, this also can be taken advantage by gifting them and investing on their behalf. Online banking facility will further ease the process.

Will update this list in a future post.

Bonds in the family

Now a days, it seems that family members are becoming more and more separated mentally.

When two persons marry and start living together, a bond develops between them. Initially, it may be for some needs. And as the (live together) time increases, the relation ship ideally should improve and transcend the need requirement to something better.  Then children come. This phase initially can create testing times for the parents. But if handled well, it soon converts to a better time. It even improves the bond between parents and get them closer. This may not always happen this way.

Thus, for wife and husband, the reasons for relation will be needs converted to support converted to (rather sublimed to) something better. But what about children. The relation ship starts with needs, specially children needs. Most of the time, it will not move forward. Father remains a banker and mother remains a feeder. But if the relation moves beyond this, the results will be great.

But how can one( a parent) take this forward. For any relation to grow, the first investment should be time. One has to spend enough time with the partner to grow the relation. Now a days, the leisure time available to one is decreasing and what ever is leftover, is being eaten into by TV and other gadgets. Can one reclaim part of it and channel the same into relationship one wants to build.

This needs introspection and some discipline. With children, time is never in excess. Specially when they are young, one needs a parent. But by intelligently managing their time, one can divert this need into activities enjoyed by a child. Here I am not hinting at engaging child with an activity and escape.

Parent needs to be present when a child needs. However, this needs if handled properly will start reducing and they slowly become independent. Rather a parent has to make the children independent gradually. For this one has to encourage children to do things on their own, starting with easier ones. For children, doing things like adults will be fun and one can leverage this to teach children how to do an activity. This in turn will teach them how to be independent.

But this initial care has a bigger ramification, further into children lives. They feel wanted and they feel independent. These two will propel them to be open with parents. This is a big requirement to handle teens, as they turn into teens.

Thus, quality time help develop relations. One(parent) has to introspect and provide quality time to the children so that they develop as responsible adults.

As with other posts, this stem post stems from my personal experience and I am enjoying the fruits of my time invested in building relationship with my children.

You may also try to work on this  aspect of life, if relevant.

Experience with Children

Are children asset or liability.

Once can argue both ways on this topic. My personal belief is that we can make the children what we want them to be, to most extent.

In dealing with children, the theory about situational leadership helps. In that theory the point is that on needs to act as per the level of one’s subordinate to lead him/her. That means one style of leadership will not work in all cases.

Similarly, one has to behave with children differently at different times. But the behavior should be consistent. Let me explain. One can point out issues in a child’ behavior. But few precautions will help deliver the message firmly but in a friendly tone. criticize the act and not the actor. Also don't use corporal punishment. This type of behavior help developing bond between parents and children.

Now a days children are getting exposed to life experiences from an early age. A parent can help them further if he/she creates more and more opportunities in that direction.  For example, letting them take (minor) decisions. Let them go out and purchase things on their own. This will teach them the way world works. A parent needs to be ready for some loss in the bargain.

Children can be used as good learning tool. If one discusses various topics with children above  15, one gets good inputs, which a parent can use.

Thus it all depends on how one reacts and how one uses children to mutual advantage, that determines relationship with children.

Lastly one has to respect a child’s privacy. This is important because, every one has his own secrets and others need to respect that space. This will not be a major problem as long as healthier bond exists between child and a parent.

Many of these methods, I used in my life and the response or result is very satisfactory.

Frugality - In day to day life.

One route to wealth is frugality. Frugality, as I understand is reducing personal requirements to the extent possible. Don’t get me wrong. I am not hinting at renouncing all worldly pleasures etc.

All requirements, I feel, can be splits into wants and needs. Needs are essentials which can not be foregone. For example, food, clothing etc. Then wants are things which are good to have, but not essential. For example, one can have a decent clothing which is a need. But designer wear is want.

I think, many of us confuse one to the other. A car can be requirement(this itself can be a point of contention). But car may be required, to meet certain social status norms. For that one can spend a reasonable to unreasonable amount. For a newbie, an entry model car may be sufficient. But if one opts for a sedan which can be 2-3 times the base mode, one has to finance it from one’s resources. Thus, one needs to differentiate between wants and needs. Another aspect which skews our judgment in this connection is societal pressure. When a colleague at a similar level purchases a bigger car, one things(falsely) that he too show off his wealth.

When one takes a purchase decision, one can think if one can get the same service with a lower price else where. This search takes time. Thus, one needs to control one’s urge to buy something on today basis. Generally, one gets a better deal, if one studies the purchase and takes an informed decision. However this is not required for all purchases. If I want a pen for Rs 10, spending an hour  researching  may not be worth it. Thus one has to optimise and use this technique only where substantial gains are possible. Routines help in this situation. Zero down on some brand of pen, paste, rice etc and purchase same brands for purchase till one gets some issue with those products. This will help save lot of time in regular purchases. One can counter this, by saying one misses variety in this process. But I believe, that will be a minor price to be paid for the time saved.

Then comes high value purchases. These are the situations where one can save substantially by proper research. It is quite possible that we go to a supermarket and like a fridge or AC. One way to go ahead with purchase is to book it immediately. I follow a different way. Once I want to by some object, I research about various brands comparing them on factors like cost, maintenance and service levels. There are many websites which provide this type of services. One can make full use of them. Once service level and maintenance issues were understood, one can check the lowest price of the piece on net. There are many sites which provide same object for different prices and one can chose the lowest one. When a standard object is purchase(LG 1.5 Ton AC), the item will be same across distributors and some could give discounts based on their logistical efficiency. Currently, the online stores are providing lower prices compared to brick and mortar stores.

This process cannot guarantee purchase of a good which lasts for a very long time with zero maintenance. Same is true for immediate purchase mentioned at the beginning. However, this process can  reduce occurrence of such incident. However, this process needs some effort from individual.

Also, continuous check of one’s purchases should be done, at least till some control is achieved. For example, I reduced non essential purchases reasonably and now my month end surplus(salary – expenses) is generally constant. I will route this amount to investing for the future. This worked for me quite well.

Please comment if you have some different views on the topic or the process.

Air Conditioner

Would like to share my experience in purchasing an AC.

Two years back, I thought of purchasing an AC. As always, I started researching for good brand and service factors etc. Then I stumbled upon the BEE rating.

This is the energy efficiency rating of the machine. The agency(BEE, in India) compares similar objects in a category and rates them based on their energy efficiency. The categories include AC, Refrigerator etc. The rating is in the form of stars from 1 to 5. The higher star rating the better, meaning it will be able to do the same work with less energy. Of course, the higher the star rating, costlier will be the object.

I started comparing various brands on the BEE scale and price. There were many suitable ACs which came up in the analysis. I was tempted to go for the one with highest rating, though the price is more. This is with a view that I will be able to save energy and money on a monthly bill.

Then I looked at the BEE efficiency calculation and their saving numbers. They take 8 hour of operation per day and 365 days a year. This may not be the case for many. With the current auto switch off models, one can program the machine to switch off in 3-4 hours in the night and can comfortably sleep the whole night. Also many may not use it for 365 days a year.

After this analysis and understanding, I settled for a 3 star AC of a brand. Now after two years, I am happy that my understanding is correct. We use the machine for about 6-7 months in a year and about 4 hours in the night.

This input on usage was not available anywhere, while I was researching for factors to be considered.  Hence I wanted to write so that this is known to all.

Health

Health is becoming an important concern for each individual now a days. Untimely deaths in close circles and articles on net/papers are increasing this anxiety.

But there is no use worrying about one’s health. What is needed is positive action. How can one start?

First one needs to take stock of his/her situation. On good starting point for this will be a periodical medical exam. If one did not get this done till now, this may be a good time to start. PME and subsequent consultation with a doctor, which is currently being offered by many medical centers, can help put one’s health in perspective.

There are few key parameters viz  blood analysis(sugar, Lipid profile), heart functioning etc.

Normally, in medical consultation, doctors tend to give a brief overview of the problem and more about the precautions/steps to be taken to alleviate the condition. One needs to question the doctor to understand one’s condition better and what various test results signify. This will slowly make the person able to understand the test results.

Next, one can make a plan, to prevent one’s health from deteriorating or maintain good health. “Prevention is better than cure”. One can anticipate the age related issues and take precautions in advance. Life style changes form an important part of this action plan.

Starting from early thirties, (if one had not already started), one can make exercise a daily routine. Initially, regularity will be a problem, but over a period it improves. One can add various exercises for various body parts and rotate the exercises so that one does not feel bored.

Then comes healthy food. One needs to temper food, as one ages. It will be better to reduce carbo hydrates and compensate with likes of sprouts etc. One should take care to take sufficient quantities in regular intake lest one tends to snack on un healthy items between meals.

Good exercise regimen supported by healthy food will see one through in middle age. But making these a habit takes time. One needs to be patient and has to keep working on these aspects to gradually improve the plan.

Once a reasonable level is achieved in this, one can work on his spiritual side. Controlling extreme emotions to the extent possible, cultivating love for all etc improves one’s outlook and makes world a better place.

Thus one can gradually work on  oneself, keeping in view long term goal of a healthy life.