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Showing posts with label Marketing. Show all posts
Showing posts with label Marketing. Show all posts

Economic Meltdown Impacts IT Industry

Tuesday, August 09, 2011 at 10:39 PM Article by Unknown 0 Comments

The economy has seen better days. Many IT departments started 2011 with cautious optimism and grand plans to modernize and expand, but amid the turmoil of the past month or so those plans have been whittled away.

Uncertainty. Even before the current economic crises caused by the political extortion over the debt ceiling, and the subsequent historic downgrading of the credit rating of the United States, the economy was on a shaky recovery at best. In a survey of 563 IT professionals conducted by nCircle in March, 48 percent of respondents claimed the economic downturn had impacted security initiatives in their organization--up 11 percent from 2010.

Money changing hands 

As the economy slides, getting money for IT projects is harder and harder.Businesses don't like a climate of financial uncertainty. Capitalism is all about taking risks--but good business is about taking calculated risks with some measure of predictability. When there is economic chaos, companies tend to hunker down and hoard what they've got. When the dust starts to settle, and they can see who is left standing, and get some idea of which way is up, the flow of money is restored.

Raising the Bar. No, not in a good way. As the economy slides, the bar is raised for acceptable return on investment (ROI). In a good economy, when revenue and profit are flowing more freely, IT projects are approved based on less tangible returns, but when the economy tanks businesses are quick to cut those projects and focus only on IT investments with a concrete impact on the bottom line.
What does that mean? That means that projects like virtualizing servers in a data center, or migrating servers and data to the cloud--projects with a clear cost benefit--will most likely proceed, but that other projects like PC hardware refreshes get delayed or canceled. New PC hardware may perform faster and improve productivity, but not enough to justify upgrading or replacing equipment the company already has that appears to be working fine.

Resources. When budgets are cut and money is tight, IT workers are asked to do more with less. Not only do businesses not hire additional IT workers to lighten the load and help IT operate more efficiently--many businesses may even cut the IT staff to save a buck and expect the remaining IT department to pick up the slack.
When the economy is going well, and organizations aren't operating from a mode of simple financial self-preservation, IT departments can get the tools and services they need to make their jobs easier. With a smaller IT budget, managing and maintaining the IT infrastructure can be a much more tedious prospect.
Has your IT budget been impacted by the economic meltdown? How has the current economic crisis affected your IT plans for the remainder of 2011?

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Get Richer by avoiding this Money Mistake

Monday, August 01, 2011 at 8:43 PM Article by Unknown 0 Comments

Mental Accounting is one such money mistake even smart people are committing.  Understanding this mistake and avoiding this could make us richer.
Behavioral Finance experts say that mental accounting works this way: Let us say you have bought a Rs.200 ticket to a movie. When you show up at the entrance of the theatre and realize you have lost your ticket, do you buy another ticket?
If you are like most people, you would probably think twice. You may still drop down the money, but you will now feel that you paid Rs.400 for a Rs.200 movie.
But let's construct the scenario differently. Let’s say you hadn’t bought the ticket yet, and you show up at the entrance to buy your ticket. Unfortunately, you realized you’ve lost Rs200 in cash since you walked from the parking place. But fortunately, you still have enough in your wallet to cover the cost of the ticket. Do you buy the ticket? Again, if you are like most people, you may feel upset about the lost money, but it probably won't affect your decision to buy the ticket. Why?

Behavioural Finance experts conducted similar experiments. They found that 46% of those who lost the ticket were willing to buy a replacement ticket. On the other side 88% of those who lost an equivalent amount of cash were willing to buy a ticket.

Both scenarios are a loss of Rs.200. However, in the second scenario you separate the loss of the Rs. 200 from the purchasing of the ticket. In the first you consider the cost of the movie as a total of Rs.400 and suffer at the high cost.

It is because of the psychological phenomenon known as mental accounting. One of the fundamental concepts in Economics says that wealth in general and money in particular, should be fungible. Fungibility, in a nutshell, means that Rs.100 in lottery winning, Rs.100 in salary and Rs.100 tax refund should have the same significance and value to you since each Rs.100 has the same purchasing power at the market. But do you treat them in a similar way?

Mental accounting has enormous consequences in your daily life. It affects how you spend money and how you save. It influences how you deal with losses and windfall gains.

How Does Mental Accounting Affect You?

1)  The source of the money affects how it is spent.
v  You tend to dine lavishly with the “gift meal vouchers” given by your company. But you will be dining consciously if you are paying out of your salary.
v  You are most likely to spend more with credit cards than with cash.
v  You may consider Tax refund as“free money”. In actual terms it is your own money. You will not spend tax refunds, birthday gift money or lottery winnings on essential things like utility bills, school fees, paying off your credit card debt. But you will be more than happy to spend the same money on discretionary items such as vacations or a trendy mobile phone.
2)  Don’t be a victim of ‘Relative cost’.
Assume you are going to a super market to buy a laptop. The price is Rs.40000. But you get to know that there is another branch of the supermarket, a ten minutes walk away, in which the same laptop is sold for Rs.39950. Will you walk down to the other branch?
Let us say instead of buying a laptop you have planned to buy a memory card. The price at the supermarket is Rs.100 and at the other branch is Rs.50. Where will you buy the card?
Most of us will make a trip to the other branch for the memory card but not for the laptop. Because we think that the Rs.50 saved on a Rs.100 item is better than the same amount saved on a Rs.40000 item.
But both the situation is same. You save Rs.50 by making 10 minutes walk to the other branch.
Remember that money is money. Rs.50 saved on Rs.40000 laptop is not less money than Rs. 50 saved on Rs.100 memory card.

How to face Mental Accounting and spend consciously?

  • You can use mental accounting to your advantage by spending money out of your salary. Immediately invest the “free money” like Tax refunds, gifted money or any other windfall gains.
  • Imagine that all income is earned income.
  • Use the free meal vouchers and other gift vouchers to buy essential items.
  • Pretend you don’t have a credit card. I am not telling you not to use credit cards. I am saying you should stop and think: would I buy this if I was using cash?
A Successful Practical Strategy:
You can have two bank accounts. One for the purpose of savings and the other one for spending.
Every month you need to set aside some amount for expenses as per your budget or previous experience. That amount you need to transfer to your spending account. Balance amount you need to keep it in savings account. 
You need to meet all your expenses including your credit card payment from the spending account. You should not spend from your savings account.
In between, if you receive any cash gifts or windfall gains, deposit them in your savings account. If you receive gift vouchers, then transfer the money equivalent of that voucher from your spending account to your saving account. That is your spending limit will not go up by just receiving the gift voucher. So that you will not use it lavishly and use it only on pre-planned things.
When it comes to money your mind unconsciously plays this trick of mental accounting. You have understood that today. So hereafter, you can avoid this mistake and you become richer day by day.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

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5 Steps That Help Selecting The Best Financial Advisor

Saturday, July 23, 2011 at 9:30 PM Article by Unknown 0 Comments

Preparing to start the choice:

Satish grew concerned about how to manage his personal finance investments and asked his uncle, who is a very successful investor, if he knew a good financial advisor. His uncle knows a few each specializing in a particular type of financial consultation, and asked him about the type of consultation he required.

Then his uncle went to tell him that his first task lay in identifying his financial objective, whether he needed financial advice for goals like long-term financial portfolio, or tax planning, or providing for the higher education and marriage of his children. Uncle went on to tell him there were more than 50 type of specialists specializing in aspects like stocks, insurance, mutual funds, postal savings, financial planning, taxation and real estate and told him the five steps to select the best financial advisor.


1) Meeting and reviewing different financial advisors:
Once your financial objective and goals are set, your choice of a specialist would depend on whether you want one for your savings plans, tax advice and preparation, stock and equity portfolios, investment strategies, personal budgeting and debt management, retirement planning, estate planning, or insurance advice.
A search on the internet and referrals from friends, colleagues and relatives could help you find some appropriate financial advisors to look into your concern. Make sure that when the financial advisor suggests suitable financial plans, he also assures you to look into its maintenance, updating and implementation with periodic reviews of reports and correspondence.


2) Details about the financial advisor’s educational qualifications, certifications, and experience:

As all other dealings financial dealings too require the qualifications, certification and experience. So it is best to know and verify the advisor’s educational qualifications, certifications and experience. It pays to verify required certifications, like being licensed by IRDA to do insurance business and by by AMFI to deal in mutual funds in India. The extra qualifications like CFP add more value.

 In addition, the professional’s experience in the nature of business, and with sizable experience dealing with recession times plays a vital role in the choice of a financial advisor. The investment advisor’s past professional positions and his reasons for change will be able to tell how efficient he is, with a positive switch of revealing his good expertise.

3) Information of clients he has dealt with along with references:
I would say it is in your interest to not rely just on the positive talk of a financial advisor, and beware of his trying to belittle your ideas. Asking for a reference helps verifying his authenticity, honesty, integrity, and empathy and whether he specializes in the similar nature of business you expect of him. I would say if you are young, you would not benefit from a financial advisor dealing mainly in retirement and senior citizen plans.

Interviewing a number of clients would give you the best idea if the financial advisor can be relied upon confidently to meet your financial goals and objectives. In addition to this you may verify the testimonials given to him by his clients.

4. Verify his past records to judge his present and future behavior:
I would rather rely on written words like past documents than what he professes, and would say that a financial advisor’s past performance indicated well his present and future actions. I would also make sure that any disciplinary action for professional and ethic violation has been taken. I would also avoid financial advisors claiming very high performance, as they would highly risk my money.

5) The rate and method of compensation for services:
Now comes, the final stage of discussing and knowing your financial advisor’s compensation. Financial advisors have varied compensation methods for their services, charges could be hourly, a flat monthly fee, a percentage on the assets managed, and a commission on the financial products managed or could be based on the number of transactions.  Others could be a combination of 2 or more methods.
A word of caution in dealing with financial advisors charging on number of trades, or getting commission from the investment company, these fees or commissions can be profit motivated with no empathy to client needs.
You could always suggest changes in the fee structure, if not accepted you could always find a reasonable financial advisor to sign a compensation agreement with him.


The final note:
My best wishes for good financial dealings with financial advisors, but a word of caution, are ‘be selective, diligent and patient to understand well the philosophy of your investment and never be shy to ask questions and clarify doubts’.

(Ramalingam K, an MBA (Finance) and Certified Financial Planner, is founder & director of Holistic Investment Planners (P) Ltd (www.holisticinvestment.in))

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Eight Simple Ways to Plan your Taxes

Saturday, July 16, 2011 at 1:24 PM Article by Unknown 0 Comments

Eight Simple Ways to Plan your Taxes.

You have got only a few more months to complete this financial year. Very soon you will get a call from your company to submit the proofs for tax saving investments. So why don’t you spend some time on organising your tax plan?

1)     Proper Allocation of Annual compensation
Restructuring your salary with some additional components can reduce your tax liability. This restructuring doesn’t require any additional cash outflow. The following components can be efficiently used to reduce your income tax liability.

v  Transport allowance to the extend of Rs.800 is exempt
v  Medical expenses which are reimbursed by the employer are exempt to the tune of Rs.15000
v  Food coupons like sodexo or ticket restaurant are exempt from tax up to Rs.60000
v  Individuals who are all living in a rented accommodation can include House Rent Allowance ( HRA ) as a part of their salary
v  Leave Travel Allowance (LTA) can be part of your salary as this can be claimed twice in a block of 4 years.

2)     Effective Utilization of Tax Exemption
As far as possible utilize the maximum exemptions available under section 80 C, 80 CCF and 80 D. The maximum exemption available under section 80 C is Rs. 100000.

Under this section Rs.100000 investment or contribution can be made in PPF, NSC, Life insurance premium, 5 year FD with banks and Post offices, Mutual Fund ELSS, Principal Repayment of housing loan, and the tuition fees paid for children’s education.

Under Section 80 CCF, you can invest up to Rs.20000 in infrastructure bonds.

Under Sec 80 D, the premium paid towards the mediclaim policies are exempt. The maximum limit of exemption is Rs.15000 and for senior citizens the limit is Rs.20000 and for covering senior citizen parents there is an additional exemption to the extend of Rs.15000.


3)     Properly Structure your Housing Loan
The Principal repayment of a housing loan is eligible for a deduction up to Rs.100000. The interest paid on a housing loan is eligible for a deduction up to Rs.150000. If the housing loan is for a sizeable amount, then it is possible that the principal repayment and interest may exceed the specified tax exemption limit. To utilise the maximum tax benefit, an individual can consider going for a joint home loan with his/her spouse or parent or sibling. This will make sure that both the co-owners can claim tax deductions in the proportion of their holding in the loan.

4)     Tax Plan in Sync with Overall Financial Plan

You should not do your tax plan in isolation. You need to do it in sync with your overall financial plan. So a tax plan is not only to just save taxes and also it should assist you in achieving your other financial goals like children’s higher education, buying a home or retirement.


5)     Avoid Last Minute Rush

In fact the right time to do the tax plan is the beginning of the financial year. If you postpone your tax planning even now and do it in the last minute, then you will not be able to choose the right investment. In the last minute rush, you will be forced to choose a scheme which gives the proof immediately. Is the investment sound and profitable? Is there any other better options? You will not be able to choose the best scheme and you may settle with a mediocre one.

6)     Invest Some Quality Time
Before investing your money, you need to invest your time. You need to take some quality time to understand the various tax saving options and compare their benefits and limitations.


7)     Check for Future Commitments
Some tax saving options like NSC or ELSS need only onetime investment. Some other tax saving options like PPF, Ulips need periodical investments year after year. You need to be careful in choosing a tax saving scheme where you need to commit for periodical future payments. You need to check on a few things like; do you need such a future commitment? Will you be able to meet the future commitments at ease? The law may change and you may not get any tax exemption for your future payments. Would you consider the scheme irrespective of tax benefit for the future payments?

8)     Changed Your Job; Redo your Tax Plan
Did you switch your job in the middle of the financial year? Then you need to redo your tax plan with consolidating the income from both the companies. It is advisable to inform the new company about the income during the particular financial year from the old company. So that your new company will deduct the right amount of TDS. Otherwise you may need to pay extra tax at the end of the financial year.

Whenever you change your job, you need to have a sitting with your financial planner or tax advisor. So that the required changes in your tax plan can be done proactively.


With proper tax planning you can reduce your tax liability; save more; invest better and become wealthier.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.


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