Difference between Savings and Investments

In my previous post i.e.Investment Definition and Explanation, I gave you an idea and constructed a definition of investment in terms of Personal Finance. Now we further discuss the difference of Savings and Investments, and how we can chose between Savings and Investments based on these differences.

Difference Between Savings and Investment

Intent or Purpose: First difference is based on the intent with which money is kept aside for either Savings or Investment. Savings is the money or any other asset set aside with an intention to remove risk of loss, or buy something in the future etc, and NOT without any profit making intentions(except very nominal returns on savings which only cover expected inflation). Whereas Investment is purely with an intention to use money or any other asset with a hope to generate income in the future or a capital gain, and risk is an integral part of every investment.

Where Implied: Savings is mostly done with Banks, Other financial institutions or even at home in the form of Cash. Whereas usage of Investment is varied, i.e. investing in stocks, bonds, real estate etc.

Time: Time is another factor that differentiates between Savings and Investment. Savings are generally for a shorter period of time, with an intent to accumulate a certain amount of money. Whereas Investments are done, generally, for a longer period of time, and by a person who has a longer time horizon in his mind.

Source: Another very interesting difference that I have thought of, is the source of funding for Savings or Investments. Savings are funded, generally, by either reducing your current expenses or doing some extra work to have that extra amount available for Savings. Whereas Investments may have varied sources of funding. You may take a loan to invest, And of course you will never take a loan to Save, or you may use even your extra Savings for investing which normally many people do.

Returns: Value of Investments may fall or rise and you may not get your original investment back. Whereas in Savings you always get your original investment back (though its actual value might have been hampered by increased interest rates or inflation).

People save or invest money based on factors, such as availability of funds, sources the funds are coming from, liquidity and Risk and Return trade. Future forecast is another critical reason that helps in the decision of either Saving or Investing.

Investment Definition and Explanation

In order for the individuals, households and companies to actualy start investing, it is generaly a good idea to understand the concept first.

Investment is one of the fundamental concepts in finance. No financial discussion, website or blog is complete without defining and explaining investment. I intend to write about investment in detail with reference to households and individuals, as a tutorial, starting from defining and explaining investment as a phenomenon and then slowly incorporating complex topics in further posts.

Definition of Investment

"Investment is the concept of putting 'surplus' money to things such as stocks, bonds, real estate, starting a new venture, buying a capital good etc. with a hope/forecast to have capital gains or continuous streams of positive net income from this employment of money."

With reference to individuals, it is generally recommended to use surplus money for investments, as there is a very thin line between investing and speculating, so investment decisions should be made very wisely and with proper research and analysis. Investment always comes with a risk of losing the invested amount, and this loss would not be in the control of the investor then, it is always advisable to measure and research all risks involved.

Investment is a parallel concept to Savings, where savings is done with an intent to cope with increasing inflation, Investment on the other hand is done with and intention to earn revenue streams or have capital gains from money invested, and it also generates employment and increases the production level of a country. Individuals either save or invest their surplus money based on how much risk they are willing to take. More risk taking individuals prefer investing over savings.

Top Three Paid to Click Websites and how to earn on them

This post is to facilitate people who are interested in earning money from home or getting some extra income while surfing or working online.

Top Three Paid to Click Websites

Without wasting your time, I'm providing a list of Top Three, guaranteed Paid to Click websites. All of the below websites are reliable and accept some widely available payment methods, including PayPal and Payza. Payment proofs can be seen in the forums of these websites and also they are self-tested.
Here's the list:

Easyhits4u is a well established website for Traffic Exchange. They are one of the best and very trustable. There are so many ways you can benefit from this website. As a standard member, you get paid 30 cents for surfing 1000 pages and there is no limit on how many you can surf in a day. You receive 10 cents for each referral that has surfed 100 ads. Then you can use the credits earned on this site to advertise your other websites/blogs or even paid to click sites. 

Neobux is the best in the business when it comes to earning from Paid to Click websites. It is the oldest and very reliable paid to click website. Accepts both PayPal and Payza. You get paid for referring people and also when they click on the ads. Just recently they have increased the number of ads on their website and made it even better.

Trafficmonsoon, is a recently added giant to Paid to click business. It is very reliable and pays 1 cent for each click and 100% for referral clicks i.e. 1 cent. I've recently had a cash out from this website to my paypal account.

Let me know if you have any questions and I can help you set up accounts on these websites.

 

Five Critical Financial Mistakes Households Make & Ways to Avoid them

People generally are lazy and do not want to give their finances some healthy thinking. Whether it is a small start up company, household financial analysis and planning or any other aspect that we can relate to money. We only think about start planning our finances and do a bit of budgeting and start analysing our near and far future risks once we are buried deep into a financial crisis(Current financial crisis has proved that even Governments and large Corporation are no exception to this behaviour!!!). Cutting long discussion short, if we force ourselves not to commit below mentioned critical financial mistakes, it would definitely save us a lot of money.

1. NOT CALCULATING, FORECASTING AND MATCHING ONE'S EARNINGS AND EXPENSES --NOT PLANNING

This is a very general trend that people tend not to engage in calculations before when they really have to. Secondly, even if we do spare some time to do calculations of income and expenses for the current month, we do not forecast. We need to remove this behaviour and should start planning.
The process is very simple! Calculate your earnings for the current month and then calculate current month's expenses. Now incorporate the expenses you postponed from previous months, e.g. credit card or utility bills any loans you have taken from friends or bank loans you have not paid recently. You will have a Net Earnings Figure. Repeat the same process for coming 3 months at least so that you know how much you would be left with if you pay portion of these pending payments and your regular expenses.

2. NOT PRIORITIZING TRANSACTIONS

After doing all the necessary good work, people just jump into making decisions about what to pay first and
'very importantly' how much to pay.
Make a small priority list of payments. This hierarchy can be almost universal.
1. Pay/save for your needs first.
2. Pay loans which are interest based as they eat up your income to a great extent.
Now how much of these loans you should pay as an installment may or may not be in your control. If its a fixed monthly installment, you have no choice but to pay. But if you have, let's say, a credit card outstanding and you can opt to pay a minimum payment but you have few bucks extra, clear off the principal amount as much as you can.
3. Pay loans which are not interest based, let's say from friends, family members or any organization, and try to delay their payment further if it is possible by any chance.
4. Pay yourself! Yes, this part is very important that you should save a reasonable portion of your net earnings so that you can tackle any probable future financial crisis.
5. Pay for your luxuries. Although, I would strongly recommend that paying for luxuries when you have loans pending should be avoided. But if you cannot help it, AND you have reasonably paid all items mentioned above, pay last for your luxuries(Still Not Recommended if there are loans outstanding or credit card interesting bearing payments!!!)

3.NOT DECREASING EXPENSES TO INCREASE NET INCOME

People generally do not think on the lines that we can increase our net income ourselves (if our business income is not increased or salaries are staying same) by decreasing our expenses.
If our income is stagnant at one point, we should be more inclined to decrease our un-necessary expenses, like luxuries. We can avoid costly luncheons and dinners. We can be less brand conscious and put extra efforts in shopping and try to get best prices. We may need to shorten our list of 'so-called' necessities. For example, major necessities are grocery, utility, food and car, and children's fees may also be included(if you have children). Now include everything else into the category of a luxury for time being if you are short in cash. Even reduce the amount that you spend on necessities by consuming less electricity, making lesser and only necessary phone calls through your land line and mobile, purchasing a fuel efficient car if you don't have one already etc. So you can surely increase your net income by decreasing your expenses.
Because Net Income = Earnings - Expenses ---Remember!!

4. NOT STAYING UPDATED ON THE CURRENT MARKET TRENDS

We mostly believe that only finance/accounts related people need to have a look at the current market conditions and trends, which is absolutely wrong. These market trends, whether it is the value of our currency in specific or dollar in general, whether it is gold or oil price, whether these are any rules and regulations passed by the government, they affect us directly or indirectly. So we should develop a habit of giving few minutes of our daily routine to the business section of the newspaper or any web portal we read for News.

5. FINALLY, RESIGNING TO FATE ONCE IN A FINANCIAL CRISIS

When we are in a financial trauma, there is a general inclination that we get so messed up that all those plans we had set up, we stop working on them and make stupid decisions. NO! this should be absolutely avoided. If there is a way into a problem, there is always a way out!! We might have to redesign our plans, redo the calculations and revise our expenses, but we can always get out of a financial crisis, sooner if we plan again.
So no matter whatever the situation is, make financial planning, general analysis, and information gathering a part of your routine so that when tough situations may arise, you are ready!!!


Because Money Matters!!!

When Should I Refinance?

Refinancing is a financial term used for changing terms of your current debt, either with the same financer or with a different one, in order to achieve following goals:

To consolidate other debts into one loan. When you are having more than one debts and it is hard to manage them separately, you should refinance them into one loan to help ease the process of tracking your liability payments, and thus your monthly budgets. You may also be inclined to consolidate your debts to avoid fees and penalties on separate debts, and again, achieve the goal of easily managing your debts.

To take advantage of a better interest rate available in the market. If the interest rates have fallen from the time when you engaged into your current debt(s), you should refinance your debt(s). Here your judgement and financial observation would be required for deciding on when to refinance. If you feel that interest rates would go further down, you may opt to hold refinancing. But be very watchful and do no wait long enough and refinance as soon as you get best interest rates offers. To be more aware, always keep yourself updated with news and announcements from the Government and/or Central Banks regarding interest rates and other Monetary Policy actions.

To reduce monthly repayment amount. When you are paying an amount of money from your budget that is becoming un-affordable, you may opt to refinance.

To use cash for investing or more interest paying saving opportunities. If you are planning to use a portion of your budget that is going for extra payments for, either investing in some high interest paying opportunity or a better savings scheme, or even for retirement, you may also chose to refinance your debt and use the freed cash to invest.

To reduce or alter risk. When markets are volatile and interest rate is fluctuating so very often, and you are a risk averse person, you should refinance your variable interest based debt to a fixed interest rate debt to ease yourself of the stress of ever changing interest rates. If you plan to stay in your home for years, and you are currently in an adjustable-rate mortgage, you should strongly consider a refi. ARMs are incredibly dangerous - the financial equivalent of Russian roulette, but with multiple bullets. Refinancing into a 30-year fixed-rate loan may not cut your current monthly payments by much, but it gets rid of the risk that those payments will suddenly skyrocket.

 

Avoid Credit Card Fraud - Tips and Tricks

Our credit card information is very much vulnerable to theft and there should be steps to avoid this. Many people around us,whether online or offline, are always looking for a chance to steal this information and then use it.

1. Use CCs on secure and verified websites online. How you can judge that is not very difficult as most people think. Try to look for a third party verifiying seal. Like, there may be a seal saying 'Verified By Visa' or by any other well known third party certifier.

2. Sign your CCs as soon as you receive them

3. Do not let your CC away from your sight in any transaction you make as scammers may take a picture of your credit card, encrypt the information on in many ways they may be knowing.

4. Prefer merchants which ask you to sign the receipt instead of providing your pin number.

5. Only keep cards with you that you are most likely to use. Do not keep extra.

6. Always keep your pin number and card separately.

7. Shred anything with your card information written on it and dispose it off properly.

8. Review your statement regularly to check for any un-authorized transactions.

9. Set an alert system with the providers whenever a transaction is made.

10. Never share your CC information on un-secured plat forms.

11. Be VERY aware of spam emails---Beware of Financial Help Spams

12. Protect your PC/Mobile or any other device where you may store your CC information or may
use to make transactions through CCs.

13. Keep changing your passwords regularly.

14. Keep a list in a secure place with all of your account numbers and expiration dates, as well as the phone number and address of each bank that has issued you a credit card. Keep this list updated each time you get a new credit card.

15. Report stolen or lost cards immediately. The sooner you report the less likely it is that you'll have to pay for any fraudulent charges made on your credit card. Write down your credit card companies' customer service number now so you'll have it if your credit card is ever missing.

16. If you have just experienced a fraud, report to the provider immediately.

17. Keep all your account, credit cards and other important expiry dates, passwords in a well secure place.

Five Critical Financial Mistakes Households Make & How We Can Avoid Them

People generally are lazy and do not want to give their finances some healthy thinking. Whether it is a small start up company, household financial analysis and planning or any other aspect that we can relate to money. We only think about start planning our finances and do a bit of budgeting and start analysing our near and far future risks once we are buried deep into a financial crisis(Current financial crisis has proved that even Governments and large Corporation are no exception to this behaviour!!!). Cutting long discussion short, if we force ourselves not to commit below mentioned critical financial mistakes, it would definitely save us a lot of money.

1. NOT CALCULATING, FORECASTING AND MATCHING ONE'S EARNINGS AND EXPENSES --NOT PLANNING

This is a very general trend that people tend not to engage in calculations before when they really have to. Secondly, even if we do spare some time to do calculations of income and expenses for the current month, we do not forecast. We need to remove this behaviour and should start planning.

The process is very simple! Calculate your earnings for the current month and then calculate current month's expenses. Now incorporate the expenses you postponed from previous months, e.g. credit card or utility bills any loans you have taken from friends or bank loans you have not paid recently. You will have a Net Earnings Figure. Repeat the same process for coming 3 months at least so that you know how much you would be left with if you pay portion of these pending payments and your regular expenses.

2. NOT PRIORITIZING TRANSACTIONS

After doing all the necessary good work, people just jump into making decisions about what to pay first and 'very importantly' how much to pay.

Make a small priority list of payments. This hierarchy can be almost universal.

1. Pay/save for your needs first.

2. Pay loans which are interest based as they eat up your income to a great extent.

Now how much of these loans you should pay as an installment may or may not be in your control. If its a fixed monthly installment, you have no choice but to pay. But if you have, let's say, a credit card outstanding and you can opt to pay a minimum payment but you have few bucks extra, clear off the principal amount as much as you can.

3. Pay loans which are not interest based, let's say from friends, family members or any organization, and try to delay their payment further if it is possible by any chance.

4. Pay yourself! Yes, this part is very important that you should save a reasonable portion of your net earnings so that you can tackle any probable future financial crisis.

5. Pay for your luxuries. Although, I would strongly recommend that paying for luxuries when you have loans pending should be avoided. But if you cannot help it, AND you have reasonably paid all items mentioned above, pay last for your luxuries(Still Not Recommended if there are loans outstanding or credit card interesting bearing payments!!!)

3.NOT DECREASING EXPENSES TO INCREASE NET INCOME

People generally do not think on the lines that we can increase our net income ourselves (if our business income is not increased or salaries are staying same) by decreasing our expenses.

If our income is stagnant at one point, we should be more inclined to decrease our un-necessary expenses, like luxuries. We can avoid costly luncheons and dinners. We can be less brand conscious and put extra efforts in shopping and try to get best prices. We may need to shorten our list of 'so-called' necessities. For example, major necessities are grocery, utility, food and car, and children's fees may also be included(if you have children). Now include everything else into the category of a luxury for time being if you are short in cash. Even reduce the amount that you spend on necessities by consuming less electricity, making lesser and only necessary phone calls through your land line and mobile, purchasing a fuel efficient car if you don't have one already etc. So you can surely increase your net income by decreasing your expenses.

Because Net Income = Earnings - Expenses ---Remember!!

4. NOT STAYING UPDATED ON THE CURRENT MARKET TRENDS

We mostly believe that only finance/accounts related people need to have a look at the current market conditions and trends, which is absolutely wrong. These market trends, whether it is the value of our currency in specific or dollar in general, whether it is gold or oil price, whether these are any rules and regulations passed by the government, they affect us directly or indirectly. So we should develop a habit of giving few minutes of our daily routine to the business section of the newspaper or any web portal we read for News.

5. FINALLY, RESIGNING TO FATE ONCE IN A FINANCIAL CRISIS

When we are in a financial trauma, there is a general inclination that we get so messed up that all those plans we had set up, we stop working on them and make stupid decisions. NO! this should be absolutely avoided. If there is a way into a problem, there is always a way out!! We might have to redesign our plans, redo the calculations and revise our expenses, but we can always get out of a financial crisis, sooner if we plan again.

So no matter whatever the situation is, make financial planning, general analysis, and information gathering a part of your routine so that when tough situations may arise, you are ready!!!