Skip to main content

Cash Flows: Maintain your own balance sheet

Plan your big expenses. Otherwise, finances can go haywire

Cash flow management sounds a very boring financial term, unrelated to a person's income and expenses. Yet, it does form a part of the foundation on which a sound financial plan is built.

Cash flow management is essentially taking stock of your income and expenses and arriving at your net financial position. It includes smoothening of the expenses over the entire year, to avoid the pain of big payouts in a short period of time.

The two main components are income and expenditure. The income head will take into account all your sources of income. That could be salary or business income, rental income, interest, dividends, annuities, royalties, and so on. Certain incomes are received once or twice a year like bonus, variable pay or the unclaimed (taxable) portion of a leave travel concession, and medical allowances. Accounting for all incomes is fairly simple; the difficult part is consolidating data pertaining to expenses, especially if you do not maintain a written record

EXPENSE ACCOUNTING

To make things simpler, you can divide the expenses into fixed and variable components. Fixed components are those that will not change month-on-month; variable expenses will change speriodically.

Fixed expenses could include your rent, monthly instalments, insurance premiums, savings, salaries paid out and domestic help. Variable expenses could include your routine living expenses like grocery, milk, vegetables, fuel, electricity, telephone and mobile bills.

Most of these will be monthly. But there could be some with a quarterly or annual frequency like school fee payment or vehicle maintenance.

There could be other expenses which are irregular in nature. These would include payments for gifts, outings, and other miscellaneous ones like home renovation.

Once the data on these two heads is complete, you can arrive at a fairly accurate picture of how much you are capable of saving every month. During this process, you need to keep a sufficient buffer to absorb any expenses you might have missed out in the whole exercise. This will also cushion the impact of any impulsive spending.

THE SMART WAY TO PLAN

Certain expenses in the fixed category could be large, like a school fee payment or insurance premium payout. The payment dates for these are already known to you. So, you can plan these in a systematic manner. Say, you have

a ` 1lakh payout every February. You can start a recurring deposit of`8,200 per month. If you get 7.25 per cent for this RD, you will get about `1.01 lakh on maturity. Keep the RD in such a manner that the maturity coincides with your payout dates. Then you will not feel the pinch of a large payment in any particular month.

Similarly, if your bonus payout is in December, and you have a fair idea of the amount you might receive, you can invest it in short-term fixed maturity plans, coinciding with your insurance premium payout in, say, April. This kind of income can also form a part of the contingency fund that will aid you in unforeseen circumstances like a medical emergency or loss of job and so on.


Popular posts from this blog

Axis Mutual Fund NFO - Axis Fixed Term Plan Series 18

Axis MF has announced that the NFO period of Axis Fixed Term Plan Series 18 (15 Months) under Axis Fixed Term Plan Series 17 19 has been preponded from February 27 to February 24.        --------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.   Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)   Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications   These Application Forms can be used for buying regular mutual funds also   Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds ) HDFC TaxSaver ICICI Prudential Tax Plan DSP BlackRock Tax Saver Fund Birla Sun Life Tax Relief '96 Reliance Tax Saver (ELSS) Fund IDFC Tax Advantage (ELSS) Fund SBI Magnum Tax Gain Schem...

Budget 2014 Highlights for Saving

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   The new finance minister Arun Jaitley has just presented his first budget. What measures does the budget contain that will specifically impact savers and investors? Here they are: 1. Housing loans exemption for self-occupied properties increased to Rs2 lakh: Earlier this amount was Rs1.5 lakhs. This move barely keeps pace with the inflation in asset values.   2. Investment limit under 80 (C) increased to Rs1.5 lakh: This is a good move again and offers some relief to taxpayers.   3. IT exemption increased to Rs2.5 lakh, Rs3 lakh for senior citizens. This comes as a minor relief for taxpayers.   4. Annual PPF ceiling to be enhanced to Rs1.5 lakh, from Rs1 lakh: This is in tune with the change in 80C.   5. Long term capital gains tax for debt funds has been rai...

Franklin India Taxshield

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   This fund maintains a quality portfolio of large-cap orientation. The fund manager adheres to a bottom-up investment approach and looks for companies whose current market price does not reflect future growth prospects. Investments are in companies that can drive future earnings growth. Stocks are selected based on the company's financial strength, management's expertise, growth potential within the industry, and the industry's growth potential.   The portfolio is well-diversified across sectors and market capitalisation and follows a blend of value and growth style of investing. The fund follows a predominantly large-cap allocation of over 70 per cent, with small-cap allocation never exceeding 10 per cent since inception.   Performance The fund doesn't dev...

ELSS Funds for different Risk Profile

Match your Goals Risk Profile With ELSS Investment   DIFFERENT TRACKS Unlike funds with a clearly defined investment universe -- large-cap, mid-cap or multi-cap - Tax Saving Schemes do not specify investment focus If you are looking for an equity Linked Savings Scheme (ELSS) to pare your tax burden, the plethora of options may confuse you. Many investors simply opt for ELSS funds , also called tax saving schemes with the best return over a certain time period. However, this may not yield the best results. There are several types of ELSS funds and it requires a nuanced approach to pick the right one. DIFFERENT RISK PROFILES Unlike funds with a clearly defined investment universe -- large-cap, midcap or even multi-cap schemes in the ELSS category do not specify their investment focus. While these schemes have the flexibility to invest anywhere, most tend to follow a defined template. For instance, some funds take a distinct large-cap tilt with a limited exposure to mid or small-cap st...

Reliance Tax Saver Fund Online

Invest in Reliance Tax Saver Fund Online   ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saving Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) Fund 9. Religare Tax Plan 10. Birla Sun Life Tax Plan Invest in Best Performing 2016 Tax Saver Mutual Funds Online Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a mis...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now