Month: February 2018

How to sell your car for the best price? Comparision of Exchange offer, Dealer, CARS24, OLX

Posted on by Jagoinvestor

Are you looking for selling your old used car? Are you wondering how to get the best deal for your 2nd hand car?

Today I will share with you 4 different ways you can sell your second-hand car and also share the pros and cons of each option.

How to sell your second hand car in India for the best price. Here are various options

But before we move ahead, it’s important to point out that when you sell an old car, there are few things which matter and should be taken into consideration. It’s not always the money you get by selling the old car which is to be maximized. It’s not the top priority of all the people.

Yes, price matters. But then a few more things matter.

  • Sale Price
  • Convenience
  • Documentation and RC transfer
  • Safety and Security
  • How fast you can get money in your account
  • Speed of Transaction

So these are 6 things which you look at when you sell your old car. Sometimes you need money fast, sometimes your preference is the convenience it takes to sell the car.

Sometimes you are not in hurry and can run around and you want to maximize your sale price and for some people, it matters that the whole transaction should be safe and they should not get into any trouble.

There is no “best way to sell your old car”

One important point to note is that there is no single best way to sell your car. In some situations, you can get a great deal when you sell your car directly to the end-user. But in situation, it can be the dealer who can offer you the best price. Sometimes, it can be online and some times it can be in the exchange offer.

If you want to watch a video on this topic, below is a detailed step by step process I have created.

Let’s start our discussion.

Option # 1: Selling a car in Exchange Offer

When you buy a new car, you can sell your old car in an exchange offer. They buy your old car for a price and deduct that amount from your new car price. You have to just pay the balance.

However, this is not so simple. Let’s dive deeper into this

There is something called “Exchange Bonus” which most of the showrooms give you which makes the whole thing very interesting.

So apart from the old car price, you also get an exchange bonus which increases your net price of the old car. However, the exchange is not always available and depends on the new car which you are buying.

So to sum it up,

Total discount you get = Old Car Valuation + Exchange Bonus

Here is how it works

When you want to buy a new car, the car showroom will do your old car valuation first. They will screen it various parameters and then tell you how much they can offer you for your used car.

On top of this, they may have an exchange bonus also in offer. It’s mostly available for cars which are already established as brands or towards the year-end when its time to clear the old stock (the old year model) or when some new version of the existing car is going to be launched (like New Swift)

But there is a problem, the thing is that the valuation you get in exchange is generally the lowest you can get. You can get much better pricing generally if you try to sell an old car in the open market. But let’s talk about it later.

Also, know that a discount is usually available most of the time, so even if you do not sell your old car, some discount you can get just by negotiating, hence the “Exchange bonus” is not something extra you get. It’s more of a marketing gimmick or a trick to give you a special feeling.

Here is a snapshot of a car seller confirming this point on Team-BHP thread (one of the best places to discuss and learn about cars)

Car Exchange is a marketing trick from showroom owners and sales people

When you sell your car in n exchange, you get high convenience and it saves you a lot of time, and that’s the reason you get lower valuation almost all the time. But if there is a good exchange bonus available, then the final deal might be ok (if not the best)

However when an exchange bonus is not available, its almost the worst pricing you get in exchange.

For example, suppose you want to buy a new car which is worth Rs 7 lacs and you want to exchange your old car. The showroom person tells you that your used car will fetch Rs 2 lacs and there is also a Rs 20,000 exchange bonus. So your total discount is Rs 2.2 lacs and you need to pay just Rs 4.8 lacs (7 – 2.2)

Pros of selling car in Exchange offer

  • It’s an extremely convenient way to get rid of your used car. All the formalities are taken care of by the showroom
  • You need less money to buy a new car. The amount you get in exchange is automatically deducted from your final price
  • It’s a safe way to sell your car, no worries of getting it misused or RC transfer
  • You get discard old car as soon as you get the delivery of your new car
  • It’s a good choice if your car is very old and not very famous
  • If good exchange bonus is available, then it can give you a very good deal overall

Cons of selling car in Exchange Offer

  • You get the lowest price for your second-hand car when you sell it in the exchange offer, especially when there is no exchange bonus
  • Not a great option if your car is not very old and is quite popular (swift, i10, Alto)
  • You can get manipulated in buying a bad option (some car which is going to get discontinued soon) by offering you a good exchange bonus which might look great.

Things to Remember

  • If your car is not very old (below 5 yrs) and it’s a popular brand, then do not sell it in the exchange offer, because you will not get a very good deal
  • You will not get any exchange bonus for newly launched cars or some car which has heavy waiting list. Do not try much
  • Do visit more than one showrooms of the same car brand to check what is the price they are offering for your old car along with the exchange bonus.
  • Do also visit a few other brands showroom just to check what valuation they are providing for your car.
  • While using this option, always make sure you are clear about the new car which you want to buy. Do not get influenced by the salesman talks about other cars and awesome deals you can get on them

Option # 2: Selling used car to local Dealers

The next option is to sell your old car to local dealers in your city. Dealer is someone who buys your old car, makes all the minor repairs, cleans it properly and sells it to another potential buyer who is looking to buy a second-hand car.

So instead of selling your car to the end person, you sell it to an intermediary who makes some money out of the whole process. Its a business and the intention is to maximize the cut from the deal.

There are two kinds of dealerships. First is the organized dealers which are quite big brands like Maruti True value and Mahindra First Choice and second is the unorganized dealers which are small local setups.

Just watch carefully and you will be able to see tons of cars lined up in a ground with a board which might say .. XYZ car dealer.

Local car dealer in your city

You can sell your car to any dealer, the price you get from a dealer is generally much better compared to the exchange offer, but you do not get any exchange bonus here. However, still, you can get a decent price.

My personal example

I recently sold my old car (I was the second owner) for Rs 91,000 to a local dealer. I had tried selling it to showroom in the exchange offer, but I was getting the valuation of only Rs 65,000 along with the exchange bonus of Rs 10,000. So in total they were offering Rs 75,000 only (this was TATA showroom)

It looks me close to 1 hour in selling the car and the local dealer went with me to his bank and did the NEFT transaction and I got the money in my account in the next 15 min only. So overall I sold my car in 90 min and got the money in my account. I got the proof of sale, and the RC transfer to a new owner is in the process now (looks like they have sold the car to someone)

I also went to Cars24 but got the pricing of Rs 85,000 only, which I declined as I had the offer of 91,000 already with a local dealer.

When to sell your car to the dealer?

So coming back to the discussion, you can some times get a very good deal with the dealer itself. Yes, its a business for them and they will not give you the real worth of the car, but your time is also important and if you are looking for a speedy fast transaction, dealers can be a good option.

This also turns out to be a great option, especially if your old car is technically working great, but from outside it seems too bad. Like if there are too many dents, scratches, etc. If your car is making too much sound etc. In this case, dealers can paint it, service it well and make it look like a new car and then sell it off at a good price and make money.

Pros of selling the old car to Dealer

  • Better pricing than exchange offer (without considering exchange bonus)
  • Very Convenient – Just take your car to them, they will inspect it and give you the quote. If everything is fine, you can sell your cars to them within hours
  • Its a great option if your car is quite popular because it’s very easy for dealers to sell them to new buyers
  • Some big dealers give you option of both cash payment or direct bank transfer.
  • Some room for negotiation (make sure you quote your expected price 50% higher than what you really need)

Cons of selling used car to dealers

  • If the dealer is not professional, it can turn out to be a bad experience
  • Often the small dealers will offer you only cash and there is no proof of sale

Important points to note 

  • Do not rush when dealing with the dealer. Take your time and enquire at 2-3 dealers.
  • Do mention to them that you are looking at other dealers
  • Always take the sale invoice and enquire with them about the RC transfer and when you will be informed about it.
  • Note that you can not fool the dealers. They are the masters of the game and they do this day in and out. It’s their full-time job. Don’t try to be smart with them. You can negotiate with them (you should), but don’t try to give them wrong information about cars and how great your car is. They can’t figure out things just by looking at the car.

Option # 3: Sell your car to CARS24 or SPINNY

In the last few years, some startups (now full-grown business model) are bringing innovation in the used car buying and selling markets. The biggest player in this market is CARS24 and a new entrant is Spinny. I have strictly chosen these two options because these websites directly buy your car from you and give you the money, without you waiting for a third buyer.

Spinny is a website where you can choose to get your car evaluated. They will come to your doorstep, inspect your car and offer you a price. If you accept it, the payment will be made instantly and they can take away the car. They sell the car to the end buyers (people who are going to use it for their own purpose)

However Cars24 is a little different. with Cars24, you need to take your car to them. They will inspect your car (takes around 1 hour) and then they will make a report which will have all the details of the car, its issues, its good points etc and they will upload that report online.

Cars24 process car buying

They have a network of dealers who are registered with them. These dealers can bid for the price and the highest bidder gets the car. Then cars24 delivers the car to that dealer and after that dealer can sell the car to the end party. Many businesses are also registered with cars24 who use the car for taxi purposes for as cabs.

Best part about CARS24

The best part about CARS24 is that its a fast and safe way to sell your car. The payment is instant (within few minutes but Rs 1,000 less) or 2 days (NEFT , but full payment)

The prices you get from Cars24 can be a good price (but not always). As I said, I got a quote of Rs 85,000 from Cars24, but I sold it to a dealer for Rs 91,000 one the same day

However, I suggest you can go with Cars24 if you are looking for a speedy and hassle-free transaction with a “not so bad” price. There are lots of people who are ready to settle for 10% less money if it comes without any issues and risk. You need to decide for yourself.

Real-life experience with CARS24

Here is one real-life experience by Mr. Atul who sold his car in Pune branch. He had some RC transfer issue which you should know about before you want to go to CARS24

I recently sold my car via cars24 Pune Kharadi branch. Let me share my experience.

I booked the appointment, got the reminder message before the appointment. I reached cars24 office on time for inspection. They did the inspection & offered me 2.05 lack. He said is the final max price.I simply said NO to that price because I know my should be around 2.15L to 2.30L.

Then the negotiation started. He came to 2.10 then followed by 2.15 then finally 2.17 L. I still said NO & came back to home. Next day I got the call from the same person he offered me 2.25L. I said yes handed over the keys on the same day. I got amount next day.

Lesson learnt – Although Cars24 executive says its the final highest price but there is certainly scope for negotiation, In fact I would recommend all cars24 customer to negotiate. You can expect 5-10% more after negotiation. They pretend that it’s the final price but it’s not true.

I sold the car in Nov 17. It’s been more than 3 months now. I have been told that RC transfer would take max 90 days. but it’s not yet transferred. Everytime I call customer care they say car is with the inventory partner only it means car is not yet sold to the end user. This is simple pathetic. I keep on calling those guys(1800112233) & send mail to [email protected] but no concrete response. Everytime I get following generic response.

“Thank you for writing to Cars24
We would like to express our deepest regret for the inconvenience caused due to delay in response. We would require some more time in order to resolve your case.
We have also sent your concern/query to the concerned department. We hope this experience will not dilute our relationship and that you will allow us to rebuild your confidence in us.
Please contact us via phone at 1800 11 22 33 or write back to us for any further assistance.
Happy to help,
Team Cars24”

I already got the money, the only concern is RC transfer. Who would be liable till RC is not yet transferred? When I asked the same question to them they say cars24 would be liable but on paper & in govt records car is on my name. Please suggest how to solve this problem.

Overall I would not recommend cars24 to anybody because of RC transfer issue. There is no timeline when car would be actually sold to the user & RC transfer would be done. customer care is really bad. No SLA or escalation matrix defined which can help customer to resolve the issue.

Pros of selling your car to Cars24

  • Very professional attitude
  • Speedy transaction (expect 2X time, which is fair)
  • Instant Payment
  • FREE and Assured RC transfer .. it’s safe
  • A good way to inspect your car even if you just want to get a valuation

Cons of selling your car to Cars24

  • Not the best price (they need to make money too …), but still better than exchange offer
  • No time to time and wait (if you agree on price, you need to sell instantly .. or at best within 24 hours)

Important points to consider when selling your car to Cars24

  • Always go to cars24 with 1-2 more offers in hand, so that you know if you want to accept their offer or not
  • Its suggest to fix small issues in car before you go to them
  • Always carry various documents which can increase your car worth like extended warranty, servicing invoices for past few months, insurance documents, warranty cards, etc.
  • It’s better to have 2-3 hours in hand when you go to Cars24. Do not go expecting that process will compete in 1 hour (especially if you are going on weekends)
  • Always negotiate. They offered me a little higher pricing (only a little).

Option #4 – Directly to end buyer by listing on various website

Another option to sell your car is directly to the end-user – someone who is going to buy the car for their own use.

If you can get an end buyer directly through your network of friends and family circle, its a great option. You can trust the person and the transaction is smooth most of the time. But most of the times it does not work that way.

So the next best option is to list your second-hand car on various online portals. You will have to get your car details, pictures etc and then the prospective buyers will contact you and then you can negotiate with them and take the conversation forward.

While there are tons of portals for selling a used cars these days, and I will list all of them here. But I will mainly talk about OLX in this section, because I have used it personally.

The best part about this way of selling your car is you can get really good price if you come across a genuine and reasonable buyer. There is no intermediary and there is no cut for anyone. It’s good for you and its good for the buyer also. You get better pricing compared to what the dealer gives you and the buyer also gets better pricing than what he would have bought it for from the dealer.

The biggest disadvantage of selling directly to the buyer

The biggest issue with this approach is that you will get a lot of junk inquiries and broken promises and conversations which will frustrate you. Lots of people will contact you and offer you lower prices. Then lots of people will start conversation and look genuine, but they will never come back.

Then there will be people who will come and look at the car, but not move ahead. So the point is that selling directly to buyer is easy, but only when you come across a nice and genuine buyer. But if you through OLX/QUIKR route, be ready to get a lot of non-serious enquires

I got 50 enquires on OLX

I had listed my car on OLX and within 24 hours, I got around 50 enquires. People were offering prices which was 50% of what I quoted (1.4 lacs). Some people called to get more information. Some people offered to bring cash (50%) and take away my car instantly. Some of them were from nearby towns (as far as 200 km). One guy came to have a look (it was a genuine buyer), but we could not agree on the price.

I am just sharing my experience here and not declaring that you always get junk leads. I have sold some other things from OLX and overall the experience was great. But some category of items like automobiles is different because there is a big market for it and risks are involved.

Apart from OLX / QUICKR, there are many other famous options and let me give you the list of these portals along with their links

[su_table url=”” responsive=”no” class=””]

Website Link
OLX https://www.olx.in/
Quikr https://www.quikr.com/
Cardekho.com https://www.cardekho.com/sell-used-car
Carwale.com https://www.carwale.com/used/sell/
Team-BHP https://classifieds.team-bhp.com/
Cartrade.com https://www.cartrade.com/sell-used-car
Auto Portal https://autoportal.com/usedcars/
Zigwheels https://www.zigwheels.com/sell-car
Droom https://droom.in/quicksell

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How to find the right price for your car?

When you are selling to the end buyer, the biggest problem is the PRICE. Your price should be realistic and fair. It should be a price which makes you (seller) and buyer both happy.

Note that when you sell your car to dealer, he is going to make some profits (around 10-15%) on that and sell it to the end buyer. So you are also not getting the best price and the buyer is also not getting the best price.

Right price for your old car

 

If you quote your car at a price that is somewhere between what you are getting to the dealer and what the buyer is paying to dealer, then its a win-win situation and you both benefit.

So the best way to find the realistic price of your old car is as follows

  • Go to meet 2 dealers with your car and check the valuation of your car
  • Negotiate with them the best price they are ready to offer and take an average of that
  • Inflate the amount by 15%. This is roughly the price at which the dealer is going to sell your car to someone else
  • So if you get an average price of 4 lacs from the dealer, you can assume that he sell this car to another prospective buyer at 4.6 lacs (15% margin). He will quote the car at 4.8 lacs, and then sell it at 4.6 lacs finally
  • So now you know that the reasonable price at which you should sell the car is anywhere from 4.3 lacs – 4.5 lacs.
  • This way, you also get higher price and the buyer also gets it at cheaper price compared to a dealer.
  • You can also visit few dealers (without your car) and show interest to buy the car (your model, KM driven), you will get a rough idea of what is the selling price going on for a car similar to yours.

Bonus Tip : Always quote your expected car price 20% higher than your expected price (the price at which you will be ready to sell). On OLX, people always bargain, no matter what. So if you quote it your expected price, you will get mad looking at how people bargain.

Make sure you complete the documentation

One headache when you deal with the direct buyer is that you need to make sure that the car is transferred to the new owner. The RTO related works are to be completed. Never sell the car without making sure that the documentation is complete. Else in case of any accidents or criminal cases where a car is involved, you will be considered as the owner because the RC book has your name on it.

I think if you are getting a good price (not the highest) and you come across a genuine nice buyer, it’s better to close the deal rather than trying to maximize the deal and lose the good buyer in process.

It also makes sense to tell the buyer that you will help in RTO work. It helps in selling the car faster and also you can be convinced that the documentation work will happen properly.

Pros of selling your car directly to end buyer

  • Possibility of fetching the best value for your car
  • If your car is great and popular, you will close the deal faster
  • Minor issues with a car may go unnoticed as buyers don’t have full knowledge sometimes

Cons of selling your car directly to end buyer

  • Can take too much time as lots of junk inquiries come
  • Too many followups may be required
  • Takes too much time and effort

Important points to remember while selling the car to direct buyer

  • Always ask the buyer to carry their ID proofs like Adhaar card or PAN card with them.
  • Do not hand over your car (or 2 wheeler) for a test drive without taking their ID Proofs. Always accompany them when they do the test drive
  • It’s better to enquire on phone with the candidate if they are end buyer or a dealer. There are too many dealers on olx and quikr now a days
  • Do not handover the car unless the full payment is done and you see the amount credited by logging into your bank account (not by looking at the SMS .. there are frauds going on where you receive fake SMS of amount credited)
  • It’s better to take a small token from the potential buyer to lock the deal (even a small amount like Rs 500 is ok to test his genuineness)

Which is the best way to sell the used car?

By now, you must have understood that it depends from case to case and there is no single way that every car owner can follow. To summarize things, here is a table which will guide you on which option you should follow and how these options are different one various parameters

[su_table url=”” responsive=”no” class=””]

Criteria Exchange Offer To Dealer Direct to Buyer Cars24/Spinny
Sale Price
Convenience
Ease of RC transfer
Safety and Security
How quick you get money
Speed of Transaction

[/su_table]

Documents checklist for selling your car

Make sure you take extra care of the documentation part when selling your car to someone. While it’s not an exhaustive list, here are some most important documents required to sell the car

Mandatory Documents

  • RC (registration certificate)
  • PUC
  • Insurance Invoice
  • 3 copies Form 28 (with 3 imprints of chassis)
  • 2 copies of Form 29
  • 2 copies of Form 30
  • Pan Card and Address Proof
  • 2 Photographs

There may be many more documents required if its the case of interstate sale, and insurance transfer and things like that.

7 steps to follow when you want to sell your old car

We have discussed different ways to sell your car and what are the important points to consider. But now let’s look at some of the steps you can take and process you should follow to sell your car the best price and without any hassles

  1. Do all the minor fixes – If your car has some minor issues like some dents, scratches, paints coming off, make sound, or things like these. It makes sense to get them fixed first. You can choose to get things fixed at a local service station if you do not want to spend a lot
  2. Clean the car before selling – It strongly suggested that you clean the car properly and make it look very good. These things matter a lot. The first impression which the potential buyer gets by looking at the car changes the way they feel about the other aspects of the car. Always remember, a clean car makes less sound, and drives move smoothly. It’s totally worth to go for a professional clean up if your car is a little expensive one. However, if your car is too old and in bad shape, no amount of fixes and cleanup will help in increasing the price.
  3. Post good photos online if you are listing it – If you are listing your car at some portal, make sure you click good pictures from all angles and give all the required information along with details
  4. Have 3-4 offers in hand – Make sure you find out the valuation of your car in exchange offer (if you are planning to buy a new car), with dealers (one branded dealer like true value and 1-2 local dealer). It’s suggested that you take a day off for this. Start from the morning.. Go to a showroom and then dealers .. and finally go to Cars24 to find out their pricing
  5. Give higher expected price – If you are ready to sell your car for 2 lacs, then start from 3 lacs expected price. Don’t worry about embarrassment. Its a game of maximizing the price, everyone plays it. Quote 3 lacs, show surprise if the other party offer 2.1 lacs, negotiate it for 2.4 lacs at least and then finally accept what you get (if it’s fair)
  6. Carry your documents – Carry a copy of your PAN, Adhaar card or another address proof and photos (just in case)
  7. Make sure the documentation is complete – Whatever channel you sell your car, always make sure that the documentation is complete in next 30-40 days. Prefer the payment to be done online so that the payment can be tracked back if required and always take SALE proof. If you are selling it to direct buyer, its worth to get it done on a Rs 100 stamp paper.

Some Real-Life Experience (and Tips)

This section is empty right now. When you add your experience in the comments section below, I will add your experience here in this section.

Do please contribute here in the comments section to enrich this article for others benefit

10 uncomfortable truths about your job no one wants to admit

Posted on by Jagoinvestor

Today you are going to read 10 truths about your job and why you should accept them and act upon them as soon as possible. We all start our jobs with big dreams and future, but somewhere we are so lost in our daily routine that we do not observe some important things.

10 uncomfortable truths about your job no one wants to admit

This is a guest article by Mr. Hory Sankar Mukerjee, who has been working in the industry for the last 15 years. He has worked with banks, FMCG, media and Information Technology companies. He currently trains people. He is an author for Oxford University Press. He blogs, trains and loves to travel.

So let’s see some lessons which you should keep in mind. Detailed description of these 10 points is done later.

[su_table responsive=”yes” alternate=”no”]

Lesson #1 

Jobs are a transactional relationship between you & employer

 Lesson #2 

Hiring and firing are two sides of the same coin
Lesson #3

You may need to a plan B anytime, be ready with it

 Lesson #4

Promotions stagnate at one point, hence invest in yourself
Lesson #5

Start investing your money – Don’t depend on your active income forever

 Lesson #6

Don’t get ‘caged’, ‘institutionalized or ‘comfortable at your workplace
Lesson #7

Work on a second income, while working in your current job

 Lesson #8

There is a life beyond the job
Lesson #9

Live within your salary

 Lesson #10

The biggest lesson – Understand how companies work!

[/su_table]

Lesson #1 – Jobs are a transactional relationship between you & employer

If you ask, ‘why did your organization hire you?’ The answer is obvious. You were probably the best choice, the right fit and there was work for you in the organization. It also implied that the organization where you are currently working has hired your ‘skills’ and have agreed to remunerate you for your ‘time’ and ‘skills’ in exchange for money.

Another hypothetical but obvious logical question, therefore, is: What happens if the organization, ‘does not need your skill set, or you, or your time’? You simply get ‘FIRED’.

[clickToTweet tweet=”Love your job but don’t love your company, because you may not know when your company stops loving you” quote=” Love your job but don’t love your company, because you may not know when your company stops loving you” theme=”style2″]

Relationships in and with organizations are transactional. You can be fired for anything. (E.g.: Global unrest because of North Korea firing a nuclear missile on USJ). Jobs are about: ‘give and take’. You give your time and skills and they give you money in exchange. The day they do not need you, they will not keep you.

Implication #1: Never ever get emotionally attached to your organization.

Lesson #2 – Hiring and firing are two sides of the same coin

You have been hired and you can also be fired. While this was not so common, while my/your parents were working in the government sector, this is true today, especially for private-sector employees.

If your arguments are otherwise and you feel, my sector or my company is the safest, you need to re-think.

Take this example – Teaching is considered to be one of the safest professions. Unfortunately in my career, I have come across many educational institutes, which have fired people on a days’ notice. Across my experience in multiple industries, hiring and firing is just another process for the organization.

The trauma is for the person and his family who have been fired. Firing can cut across industries, roles, skills, technology, and jobs. Firing does not need a reason. Therefore there is no need to ‘feel secure’.

Implication #2: Just as you have been hired, you can be fired. Be ready.

Lesson #3: You may need to a plan B anytime, be ready with it

Jobs, like life, is very capable of throwing ‘surprises’. We may like some of them but would love to dislike most of them. In ‘jobs’ that we are in, we also need to mitigate the ‘uncertainty/unpleasant surprises’. We, therefore, need a Plan B.

Plan B is a plan that you keep close to your chest, (a ‘good’ hidden agenda) while playing a game of cards or a plan which helps the hero of a movie escape in case the rogues have understood your earlier plan. That is your ‘escape route’.

Do you have a plan B for your job loss?

While in a job be ready with your Plan B. It could be teaching, opening a road side restaurant, wedding photography or a rental income. It could also being an entrepreneur, life coach, and writer, encouraging your spouse to work or selling homemade pickles online.

Your Plan B essentially has the power to bring ‘food back to the table’ in case you face the risk of losing your job. It is also capable of taking care of your ‘needs’ during an emergency.

Implication # 3: Ask yourself ‘what is your plan B’? Have you started working on it? Do you have something to fall back upon if you lose your job today?

Lesson #4: Promotions stagnate at one point, hence invest in yourself

Wouldn’t it be great if our employers had granted us lifelong employment, secured jobs, yearly growths, and lifelong benefits? We all love ‘risk-free’ and ‘guaranteed returns’ like our love for FDs, KVPs, PPFs, LICs, and NSCs. However, returns from these like any other investments are either not guaranteed nor risk-free.

[clickToTweet tweet=”There is only 1 investment that gives ‘guaranteed and risk-free’ returns: ‘INVESTING IN YOURSELF'” quote=” There is only 1 investment that gives ‘guaranteed and risk-free’ returns: ‘INVESTING IN YOURSELF'” theme=”style6″]

Any investments that you do on yourself, like walking, hitting the gym, learning new technologies, not eating junk, staying healthy, getting up early, quit smoking, getting certified, learning to cook, getting back to the college to earn a higher degree, learning about stocks and mutual funds, pay you in the long run. Some other day this skill comes very handily.

Let me give you an example

The global head of an organization met me for a coffee and told me about his interest to do a doctorate. I asked him, ‘what motivated him to do that?’ He said, ‘I do not see a future for myself anymore here. Our organization is getting top-heavy.

Promotions are stagnating.

However since I am extremely interested in teaching, (Plan B) I want to quickly pursue it and move into teaching.’ After a year or two, I saw him getting registered into a doctoral program and working seriously on it.’

Implication #4: While you are in the job, do not stop investing in yourself. What is that you wanted to learn and you could not do it? Get back and re-start investing in yourself. This could be your Plan B.

Lesson #5: Start investing your money – Don’t depend on your active income forever

Would you not love it, if your employer kept paying you even after you left the company? Wow…I would love to die to join such a company.

But it never happens.

The money that you earn not only takes care of your today but also takes care of your tomorrow when you stop earning. (Retirement)

Earning is essential but not sufficient. It loses value. Start investing. Investing helps to save you from the rainy days of your future. Saving and investing, therefore, are not one and the same.

When I started working in 2003, had I invested Rs 1000 a month, in Franklin India Bluechip Fund, the fund value today, would have been Rs 5.4 lakhs. Unfortunately I did not.

I did invest. But the investments were in ‘stupid financial products’. Choose the right products. When you need term insurance, do not buy a traditional life insurance policy. When you do not have the expertise to invest in stocks, invest in mutual funds.

When you do not need a house, do not take a loan to buy it, especially when you are young. There is no dearth of financial products. But choose the right ones, which you understand.

Lead a frugal life.

Frugality is not depriving yourself.

Frugality is living simple and with a minimal. Many rich people are known for their frugal lifestyle. Frugality has its own advantages. The best of course is to ‘achieve financial freedom’.

Showing off could be deadly. Make a list of things ‘you have bought’, which you never made use of. It will throw a lot of surprises.  Remember that an elephant has two sets of teeth. One is for eating and the other for a ‘show-off’. It gets ‘killed’ for the one it shows off.

On a thumb rule, invest (not save) what you spend.

personal finance equation

Implication #5: Saving money is useless unless you invest it. Even more useless, is to save in the wrong set of products. The most ‘useless’ thing, is planning to invest after you have spent. Trust me you will never be able to.

Lesson #6: Don’t get ‘caged’, ‘institutionalized or ‘comfortable at your workplace

Three things that kill employee’s morale, growth and prospects of doing great. First is getting caged, second is getting institutionalized and third the idea of being comfortable at work. Let us understand them.

Caged: ‘Who will hire me after 10 years in the banking industry? I am lost and I cannot get out of this mess. Even if I want to, my family problems are not allowing me to.’

Institutionalized: ‘I am so comfortable with this place that I do not feel like changing. This company gives me respect and I am happy. Everyone knows me in this company. Let it go on. I am planning to retire from this place.’

Comfortable: ‘This place gives me peace. I am happy doing whatever I am doing. I do not want to change. It is the same soup everywhere. Why do you want to change, when things are so good here?’

Getting caged, institutionalized and being comfortable is when we set boundaries to ourselves. We are unwilling to try new things, find new solutions or unwilling to look beyond the ordinary.

Remember that the relationship with the organization is transactional. The day they do not need us, we are all gone.

Physical boundaries, mental and emotional boundaries tie us up.

A couple of my colleague’s hometown is in Kolkata. They intend to settle in Kolkata, post-retirement, however, they have bought homes in Gurgaon, where they currently work. Some of them are getting better opportunities in other cities of India, are unable to move, because of their emotional attachment to their newly-bought houses. (And the banks’ love for their home loan interests.)

Implication #6: Set yourself free. Do not get attached to your organization and look beyond the boundaries. Any change will initially bring discomfort and then things will settle down. You will then start enjoying it.

Lesson #7: Work on a second income, while working in your current job

My father retired from the Indian Army without a job in hand. In those days, getting a job was difficult. One day while he was worried, my mom said, ‘Why are you worried? You should not be. I have mine and that will be good enough till the time you do not find another one.’ This comforted my father. However, within 3-4 months, he got a new one.

The lesson to be learned is that, a second income is not bad. It gives you a cushion. This is very true especially for people with non-working spouses. Second income, gives you some extra luxury, some extra investments, and faster financial freedom.

Remember not to splurge the extra income that you generate, but invest a significant part of it. Also, ensure not to overburden yourself with that ‘extra work’. It should be something that you would enjoy doing.

Manish has already written on some nice ideas to create a second income, go read it and get some fresh ideas to work on

Implication #7: A second income is great. It gives you comfort, extra savings and after all a place to fall back upon in cases of emergency. In a world of uncertainty, this is surely a cushion.

Lesson #8: There is a life beyond the job

The work that you do was there before you joined the organisation. The work will be there after you leave. Work will never get over. Therefore there is no reason to panic. It is not a sprint, but a marathon. Have a life beyond the office. Spend some time with your GF, spouse, family or children.

They are the ones who will support and cushion you in your bad times. Spend some time in a week doing charitable work, teaching the poor, helping your wife cook or taking your old parents for a walk.

work life balance

It will help you learn ‘life skills ’and make you more ‘humane’. Someone had asked Dalai Lama, what surprises him the most. He said, ‘Man…Because he sacrifices his health in order to make money. Then he sacrifices money to recuperate his health.

And then he is so anxious about the future that he does not enjoy the present; the result being that he does not live in the present or the future; he lives as if he is never going to die, and then dies having never really lived.”

Implication #8: Family is equally and more important than your job. Your work can wait. The time that you did not see your child grow up, will never come back.

Lesson #9: Live within your salary

Jobs and salaries do not imply living beyond your means. It gives you a right to spend, but not the authority to splurge. It is not only about you, but the ecosystem supported by your salary- Spouse, child, parents, grandparents, maid, milkman and the driver.

It also does not authorize taking more loans because the banks are willing. It also does not authorize purchasing five shirts or trousers, when you already have ten. Living a life, ‘paycheck to paycheck’ is risky and unworthy. It disturbs the ecosystem surviving on you.

Keep it simple – One house, one car, one bank account, a few shirts and trousers, one credit card, one debit card, one health, and one term insurance. Spend all the remaining time that you are left with into something more meaningful.

Every Diwali, when the newspapers are filled with offers and bargains, ensure that you are not the ones jumping in to buy. When you buy at a discount, you save, 50 percent, but when you choose not to respond or buy, you save, 100%. Ask, ‘Is it really needed?’

Implication #9: Debts are needed but not at the cost of destroying our mental peace.

Lesson #10: The biggest lesson – Understand how companies work!

The day Cyrus Mistry was fired, I learned the biggest lesson of my life. If a person of his stature can be fired, we are no one at our jobs? For the organization, we are dispensable.

If we feel that we are ‘assets’ for the organization we work with, the organization may think of us as an ‘ass’ (minus the ‘et’). After all, organizations are run by people. People change and so does their culture, values, and priorities.

Implication #10: Stop treating yourself or pretend to treat yourself as an asset and make sure you understand the realities of working with an organization.

Can you add another point?

I would like to know if you have any more point from your side? Can you add the 11th point in the comments section?

Also share with us, if you liked this article?

12 things about Budget 2018 which is related to middle class

Posted on by Jagoinvestor

This was the last budget of BJP govt before the next elections and it was expected that they would announce some very good changes in budget which will be for middle class. From last many years, the tax slab rates have not seen any major changes (except few small changes) . The 80C limit and housing loan interest deducted limits were revised few years back, but still the common man expected some really good news.

While the budget was very good for farmers and rural sectors in general and also for senior citizens, it was extremely disappointing for middle class who are mainly into jobs.

On twitter, I asked about people opinion on the budget and as expected, most of the people were not happy about it.

budget 2018 poll

12 Things related to the middle class in 2018 BUDGET :

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1. No change in Tax Slabs 2. Standard Deduction of Rs 40,000
3. Long Term Capital gain Tax on Equity Gains at 10% 4. Dividend Distribution tax of 10% on Equity
5. Increase in Health and Education Cess to 3% to 4% 6. No tax on interest from Deposits up to Rs 50,000 for senior citizens
7. No TDS for deposits for Senior Citizens up Rs 50,000 8. Health Insurance deduction increased from 30,000 to 50,000 for senior citizens
9. Increase in limits for critical illness treatments 10. Corporate tax @25% for companies with turnover of less than 250 crores
11. EPF contribution of new women workers capped at 8% 12. Health Insurance Scheme for 5 lacs sum assured for majority

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1. No change in Tax Slabs

One of the biggest disappointments for everyone in this budget was that the tax slabs were not changed at all. In media we keep hearing on how the minimum limit for taxation should be raised from 2.5 lacs to 5 lacs, but it was not even raised to 3 lacs.

Below are the slabs.

So you will still pay the taxes as per old slab rates only.

2. Standard Deduction of Rs 40,000

There is a standard deduction of Rs 40,000 allowed in this budget, which means that you can now reduce your taxable salary by Rs 40,000 directly along with other deductions and benefits. But this only looks great on paper, because the transport allowance of Rs 19,200 and medical reimbursement of Rs 15,000 are now removed as benefits.

So earlier anyways one was able to claim around Rs 34,200 ,so the added advantage is only for Rs 5,800 more.

You will only save a little headache of providing the medical bills which you used to do for claiming Rs 15,000 (a lot of people used to provide fake bills). So now the process will be simple

3. Long Term Capital gain Tax on Equity Gains at 10%

The biggest news in this budget was the reintroduction of 10% tax on long term capital gains on equity without Indexation benefits. Let me touch base on this a bit as this is very important to understand, however I will make another details article soon on this.

Till now, if you held equity stocks or equity mutual funds for more than 1 yr, then all the profits you made were tax free when you sold them. However now you will have to pay 10% tax on the profits on profits above Rs 1 lac.

However this will only apply on the profits made after 31st Jan 2018 and if you sell your holdings after 31st Mar 2018. All the gains you have made till 31st Jan 2018, are protected and now they will be considered as your cost price.

So if you had bought a stock or equity mutual funds for Rs 1 lacs in May 2017, and its value on 31st Jan 2018 was 1.2 lacs, then you do not pay any tax on this profit of Rs 20,000 . Now your cost price will become 1.2 lacs .

Now if you sell it in let’s say Dec 2018 for Rs 1.5 lacs , then your capital gains will be 1.5 lacs – 1.2 lacs = Rs 30,000 (not 50k).

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Particulars Before Budget After Budget
Buy Date : 1st June 2016 Rs 5,00,000 Rs 5,00,000
Sell Date : 1st July 2019 Rs 10,00,000 Rs 10,00,000
Price on 31st Jan 2018 Rs 7,00,000 Rs 7,00,000
Purchase Price Considered Rs 5,00,000 Rs 7,00,000
Capital Gains Rs 5,00,000 Rs 3,00,000
Capital Gains Exempted Rs 5,00,000 (100%) Rs 1,00,000 (as per new rule)
Capital Gains which will be taxes Rs 0 Rs 2,00,000
Tax Rate NIL 10%
Tax Payable NIL Rs 20,000

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Note that the capital tax gains will come into picture only when you sell your holdings and the tax will be applicable only on the profits above Rs 1 lac.

Capital gains on equity was already there before 2004, At that time it was 20% on profits with indexation or 10% without indexation. Now they are reintroduced.

Note that if you sell your holdings before 31st March 2018, the old rules still apply. This new rules are only going to be in picture if you sell after 1st April, 2018.

What should you do?

Nothing!

Dont get too emotional about the tax part. I know people hate paying tax in any form, and especially when it comes as a surprise. But the truth is that the capital gains tax was there before 2004. Its not reintroduced. You should feel happy that for 13 yrs, there was no taxes on equity gains and those of you who have made great returns in past decade enjoyed it tax free.

Also, the capital gains tax on equity is one of the lowest in India at 10% . Most of the other countries tax it at anywhere from 15-35% . So we are not in bad shape.

Equities are still one of the best asset classes, and now lets focus on your wealth creation over long term. The fundamentals are still strong and the equity is set to give great returns over long term. Even with this 10% tax, equities are the best thing to invest in (for long term)

4. Dividend Distribution tax of 10% on Equity

Before of the LTCG on equity , now the dividends from equity mutual funds and stocks will also be taxed at 10%. However this will at source. Which means that it will get deducted by the company itself and you will get the dividend post deduction of 10% . You will not be paying any tax at your end, so there is no headache of all that calculation and CA work

For example, if the company announces Rs 10 dividend per share/unit and you are suppose to get Rs 10,000 dividend , then you will get Rs 9,000 and Rs 1,000 will be paid to govt directly by the company.

This applies to both dividend and dividend reinvestment option in mutual funds.

The dividend distribution tax and treatment for debt mutual funds is still the same. No changes in that.

5. Increase in Health and Education Cess to 3% to 4%

The cess was increased from 3% to 4% in this budget.

Cess is something which you pay extra on the income tax. So if you are in 20% income tax bracket, then you will pay 4% more on 20% , which will make your income tax rate as 20.8% .

If your income tax amount comes to Rs 20,000 per year, then your cess will be 4% of Rs 20,000 = Rs 800.

With 1% increase in cess, you will pay Rs 200 more now (if your income tax is 20,000). This will increase your tax burden by a very marginal amount.

6. No tax on interest from Deposits up to Rs 50,000 for senior citizens

This budget has given a lot of benefits for senior citizens.

One big benefit is that now there won’t be any tax on interest on all the deposits and bank interest up to Rs 50,000 for senior citizens. This will include interest of saving bank account, fixed deposits and recurring deposits.

7. No TDS for deposits for Senior Citizens up Rs 50,000

Now there won’t be any TDS deductions for interest from deposits (fixed deposits and recurring deposits) upto Rs 50,000. Till now the TDS was deducted as per provisions of section 194A , if the interest was above Rs 10,000 , but now it will be Rs 50,000 limit.

8. Health Insurance deduction increased from 30,000 to 50,000 for senior citizens

Under section 80D, there was an exemption of up to 30,000 per year for health insurance premiums for senior citizens, but now it has been increased up to Rs 50,000 . It’s a major relief because for senior citizens the health insurance premiums are very high and in most cases, it’s more than 40-50k anyways.

9. Increase in limits for critical illness treatments

There is an increase in the deduction limit for medical expenditure for certain illness up to Rs 1 lac for all senior citizens under section 80DDB . So in a particular year, if a senior citizen spends money on treatment of these illness, they can claim deduction on up to Rs 1 lac.

Here is the list of all illness covered under Sec 80DDB

  • Dementia
  • Dystonia Musculorum Deformans
  • Motor Neuron Disease
  • Ataxia
  • Chorea
  • Hemiballismus
  • Aphasia
  • Parkinsons Disease
  • Malignant Cancers
  • Full Blown Acquired Immuno-Deficiency Syndrome (AIDS)
  • Chronic Renal failure
  • Hematological disorders
  • Hemophilia
  • Thalassaemia

Increase in deduction limit for medical expenditure for certain critical illness from Rs. 60,000 (in case of senior citizens) and from Rs. 80,000 (in case of very senior citizens) to Rs. 1 lakh for all senior citizens, under section 80DDB.

10. Corporate tax @25% for companies with turnover of less than 250 crores

Those of you who are running any companies, the good news is that the tax rate will be 25% now instead of 30%, provided your turnover is less than Rs 250 crores yearly.

11. EPF contribution of new women workers capped at 8%

Now all the new women how will join the workforce for the first time, their EPF will be deducted @8% only instead of 12% for the first 3 yrs, also the govt will now provide 12% from their side also. It’s still not clear if the employer contribution will also be extra other than govt contribution.

12. Health Insurance Scheme for 5 lacs sum assured for majority

Another big news was that now govt is bringing a health insurance scheme for masses, where each family will be entitled for Rs 5 lac sum assured each year. But this will be mostly for weaker section of society and I don’t think any of our readers will be eligible for this.

There are no details about this scheme right now in budget and no allocations is made for this. I would rather wait for more details before commenting on this more. However if successfully implemented it would be wonderful for our country.

Let us know what do you think about the budget? What is one major disappointment and one great thing about the budget for you?