KyePot Blog

7 Basic Tips for Effective Wealth Management

We all love the exciting feeling of getting our paychecks every month. With our accounts flushed with money, we can buy whatever we need, splurge on things we want, and life seems… comfortable.

But what about the end of the month or after an unforeseen emergency when the accounts start running dry? Such dicey situations can leave even the most intelligent and rich in an unpleasant ditch.

Here we cover 7 basic tips that you can follow to manage your money better.

1. Set up a monthly budget and STICK TO IT

A well planned budget is not exactly a limitation on what you can or can’t spend. In fact, it is the liberty to spend your budgeted money without feeling guilty or worrying about tomorrow.

Setting a budget is a life skill that is underrated by most people in this day and age. Unlike the common notion, budgeting isn’t only for those who are bad with money or spend without putting a second thought to their accounts.

When setting your budget, it is important to keep it in sync with the day you receive your paycheck or the beginning of the month. Yes, it can be a hassle to work out daily expenses and big spends for the month, but the one time effort to plan your budget and small efforts on a regular basis go a long way. And soon you’ll realize it does reap benefits in the end if you successfully stick to your plan.

2. Track your finances monthly

Once you’ve set your budget, it’s important to stick to it. But it’s also important to keep a track of where you are spending your money and to check if it matches with your planning. Unfortunately not many people follow this as they think keeping a track of records can be a tedious task. We are always busy with work to even consider doing this and it falls back in the list of our priorities. However, with all the money management apps easily available to you now, keeping a track of your expenses and savings is easy. It can even help you create a better management system and motivate you to keep your budget in check.

3. Create an emergency fund

The first lesson when managing finance is that you are the only one you should rely on for financial safety. Imagine not having a safety net to fall back on when you are in the middle of an emergency. Building a rainy day fund is one of the most crucial things you need to do if you yearn for financial security. If you haven’t done it already, start by setting aside some part of your monthly income as an emergency fund.

4. Create a savings and growth plan

Anyone you turn to for money management advice will tell you the importance of savings. It is the extra income that you keep for yourself in case you want to make a big purchase or as emergency funds.

However, money doesn’t grow itself; it needs the help of several financial tools. If you have money that you can set aside every month, consider investing in tools like fixed deposits, chit funds, mutual funds, etc.

5. Merge your finances as a family

If you live with your family then common financial logic dictates that you pool your money so that it brings in more resources at hand. In a family, the chief wage earner is the one who brings in the money and manages the expense. But it is unfair to leave the entire responsibility to one person. Moreover, most families today have multiple earners. Therefore, it is essential to merge your finances so that it brings in more stability to the house and after the expenses are deducted, you have a larger pot to put to use.

6. Avoid taking extra credit cards from the banks

One of the most common financial pitfalls is that people take credit cards, not realizing that they are spending money that they’ll have to pay back. Of course the banks are to blame here for the aggressive selling of credit cards. Just because you’re getting a ‘good deal’ on a credit card, doesn’t mean you have to get extra ones.

7. Seek expert advice whenever possible

There is absolutely no shame in asking experts for financial advice. Just as you don’t hesitate to go to the mechanic to repair your car or a doctor for health issues, you should seek the help of a financial expert.

Alan Lakein once said, “Failing to plan is planning to fail”. The quote speaks for itself! Let’s consider these wise words and create an effective money management plan to keep you safe, secure and happy.

By Team KyePot

17, April 2018

Top 5 myths about Chit Funds you probably believe

Once indigenous to India, Chit Funds grew to become a global financial tool, known by different names around the world. In India, Chit Funds are among the favorite investment tools used by millions for building wealth through sensible savings and achieving short- and mid-term goals.

Despite this, there are many prevalent myths and misconceptions about Chit Funds, many of which you might believe as well. On closer inspection, however, you’ll find the truth often seeps through the cracks of these superficial falsities. Here are the top 5 myths about chit funds and the actual truths behind them.

Myth 1: Chit Funds don’t offer any significant advantage as a financial tool

Truth: Chit funds are great because of the low cost of borrowing and they offer great monthly returns. The higher the value of chit and longer the duration, the better the advantages for the investor. Especially when compared to other financial tools, in the short- and mid-term, chit funds compare favorably to other asset classes and tools like bank savings, FDs, RDs. etc.

The biggest advantage of chit groups (as each group in a chit fund is called) is that they allow you to borrow a lump sum at any time so that you can actually plan your short-term financial goals with ease. Moreover, the overall interest rate when you borrow turns out to be far lower than a loan product. It is especially a great alternative to personal loans. Because along with your monthly contribution (EMIs), you also earn dividends every month.

Moreover, chit funds are not subject to market risks, unlike mutual funds or stocks as they are dependent only on the group’s performance.

Myth 2: Chit funds are not government recognized and are unregulated and unsecured

Truth: The chit fund industry is a safe and regulated industry, governed by the Chit Funds Act, 1982, which is enforced by state laws across India. There are various rights in place to protect both the end users and the financial institution.

Read more about investor safeguards and legalities in Chit Funds.

Myth 3: Chit fund returns are taxable

Truth: Chit funds returns (called ‘dividends’) are tax-free and are not subject to TDS deductions, because dividends are not classified as interest under Section 194A. Yes, you read it right. Any dividends or prize money won during a chit cycle is not subject to tax deductions. You can also offset the total gain or loss at the end of the chit group against a business profit or loss, if the chit is taken as a business investment.

But it should be clearly understood that if any of the gains from a chit group remain in your bank account and earn interest or are further invested in any other asset class, you become prone to tax deductions as per the normal taxation rules.

Myth 4: Chit funds are just a local, informal tool

Truth: The digital revolution has brought about salient changes in the finance industry and chit funds are keeping pace too. Today, we are witnessing the dawn of digital chits.

In order to regain transparency and trust, KyePot has partnered with India’s most reputed chit funds to offer India’s No. 1 digital chits platform. It is simple, convenient, and easily accessible with an internet connection. You can easily find and join chit groups, make online payments, bid for auctions, track your money, and much more with the KyePot App.

Myth 5: Chit funds are only used by lower income people from small towns and villages

Truth: Probably the biggest myth so far. If you go to any respectable chit fund, you’ll easily find more than a handful of examples of people who have built their wealth using chit funds as their primary financial tool. Chit funds are the most versatile financial tool available on the market. Apart from housewives, students, and young professionals, chit funds are also used by well-to-do individuals from all strata of society to accomplish their goals. Because of the secure savings and flexible borrowing options, high net worth individuals like businessmen, IT professionals and even banking professionals often participate in chit funds.

To sum it up, chit fund is actually an underrated financial tool whose true potential is immense. If you are dedicated to your plan of securing your financial future, participating in a chit fund can help you achieve your goals.

By Team KyePot

10, April 2018