Exploiting Financial Ignorance

Exploiting Financial Ignorance

Out here in India, we're reasonably familiar with the notorious moneylenders exploiting ignorant, impoverished, illiterate people quite liberally. We're also familiar with the kind of usurious rates of interest charged by them.

Apparently, we're not the only ones who have such moneylenders. Out there in the US, the entire process has been institutionalised.

Take a look at:

• Banks Pushing Into Small Loans Compete With Payday Shops

A key difference that I noticed was that in our case, the moneylenders' loans are comparatively risky. In contrast, the so-called "Payday loans" offered by the US banks appear to be completely secure, linked as they are, to the weekly / monthly salary that's likely to be credited into the very same accounts, with a provision for directly debiting the amount due to the banks from the customers' savings accounts!

Obviously, a Heads-I-win-Tails-you-lose situation for the banks.

I'm sure that a class-action suit is not too far off out there.

But then, I wonder if our banks and NBFCs are having any such interesting products and whether our regulators are keeping a watch to prevent customers from being fleeced???

The only obvious thing that I can think of is the "revolving credit" facility offered by credit card providers to their customers.

I'd welcome feedback on your experiences in this connection. 

Regards,

N

Jaspal Bhatti Dies in Road Accident

Jaspal Bhatti Dies in Road Accident

Just heard the news earlier today about:

• Jaspal Bhatti Dies in Road Accident

Certainly, shocking news indeed. And sad. He was such a delightful provider of endless bouts of laughter to an entire generation of people.

And he was just 57 years of age.

All that is fine, but what is this news item doing in a "financial blog"?

Simple - some basic questions that need to be asked will become relevant when they are asked at the right time (due to the "shock and awe" value):

Did Jaspal Bhatti, while he was still alive, 

1. Have the faintest clue that he will be no more in a few hours / days / weeks? 
2. Take an insurance policy for his life? Was the sum assured adequate, considering the kind of income that he was earning?
3. Nominate different people for all his financial assets like bank accounts, mutual funds, etc.?
4. Keep all his financial papers, documents, etc. in a well-organised manner and in an easily accessible location?
5. Write a will clearly mentioning a sufficiently exhaustive list of all his assets (including intangible assets like royalty on his works, for instance) and indicating who should be receiving each of those assets and in what proportion?

And most importantly, has Jaspal Bhatti actually intimated at least two of his near and dear ones about the answers to each of the above questions?

For the sake of his family members, I do hope that the answers are indeed available. A few days / weeks / months later, when they have overcome their grief, they will certainly be seeking answers to all the above questions, and Jaspal Bhatti's soul will rest in peace if and only if his near and dear ones have satisfactory answers for these questions.

Now the critical question for each one of the readers of this blog post is:

• Do YOUR near and dear ones have satisfactory answers if you disappear from this planet all of a sudden to the very same questions asked above?

For obvious reasons, I would like each of you to live for several decades more, and remain healthy, happy and prosperous. But then, it will be prudent for each of you AND me to ponder, introspect and provide answers for the above crucial questions.

Give it a thought!

Regards,

N

Kingfisher Employee's Wife Commits Suicide

Kingfisher Employee's Wife Commits Suicide

The news has been flashing all over TV channels. In case you've missed it, you can see the link here:

• Kingfisher Employee's Wife Commits Suicide

She is supposed to have taken this drastic step on account of the "acute" Financial Strain caused by non-payment of salaries for around six months.

Very sad, indeed. For the limited purpose of this blog post, I'm assuming that the news reports are accurate and she did commit suicide due to Financial Strain.

However, some questions arise from the point of view of Financial Planning.

The lady who committed suicide was around 45 years of age. Her husband apparently retired from the Indian Air Force before joining Kingfisher Airlines.

Quite obviously, they must have enjoyed the "benefit" of a regular, steady salary (though perhaps not flashy) for at least a couple of decades. With ENORMOUS savings potential by normal Indian middle class standards.

Further, the pay scale at Kingfisher must have been quite decent (though the salaries apparently have not been paid for the past six months).

The questions that come right off to my mind are:

1. Did the family never hear about terms such as "regular savings", "Financial Planning", "Investment for Retirement", etc.? If not, why not?
2. Considering the fact that her husband is an engineer and that her 18-year old son is also an engineering student, chances are bright that their family can be considered to be a "reasonably progressive, educated family". If people belonging to such a background are not aware of the need for fiscal prudence and financial planning, where are we, as a nation, going? What's likely to be the plight of the vast majority of Indians whose financial situation will, in fact, be far worse?
3. The typical TV debates have been pouncing on the Kingfisher Management and the Government. Why is nobody raising those uncomfortable, politically incorrect questions which lay the blame squarely on the family of the deceased. It may sound cruel and heartless, but it a person who has been enjoying the benefits of a very decent professional life for over two decades has lived the life of a Grasshopper, when winter comes, he should be ready to pay the price. He should not expect the benefits which are presently being enjoyed by the Ant.

If at all we ought to be blaming the Government, it should be to the limited extent of not providing meaningful financial literacy (and hence Financial Independence) to all its citizens after over half a century after obtaining Independence.

Give it a thought!

Regards,

N

Wonderful blog that I came across - SafalNiveshak.com

Wonderful blog that I came across - SafalNiveshak.com

Hi folks!

Coming from a financial blog, you must be wondering why I'm doing a post introducing you to another one!

Reason is simple - when high quality knowledge is available somewhere, and I've been prompted to take a look at it by someone, obviously, it becomes my duty to share the same with you. Obviously, I would further expect you to do likewise by sharing similar knowledge with as many others as you can!

A sample post that I liked:

http://www.safalniveshak.com/an-open-letter-to-my-daughter/

Enjoy reading!

Regards,

N

Myth of US Stocks being cheap

Myth of US Stocks being cheap

There have been a number of folks on TV who have been screaming from the roof tops that the US stocks are presently undervalued.

Just came across a nice article which busts this myth.

Read on:

• Myth of US Stocks being cheap

Certainly worth reading.

Regards,

N