Impact of raising interest rates.

RBI has been increasing the base for interest rates quite often in 2011. This measure is primarily aimed at containing inflation.
Inflation has already had a severe impact on the middle class. If one is paying a home loan under floating rates, their EMIs are bound to go up.

If the impact is severe  on you and you are wondering what to do, here are some possible suggestions.

1) Have a look at your budgets and actual expenses , determine the areas where you can cut down your expenses ( nice to have expenses). If you have not been budgeting or recording your expenses , this is the right time to start doing now.

2) If you have had any decision to purchase some electronic gadget or a home appliance, pull of the purchase under the carpet for some time.

3) If you are using a credit card, put that in a locker for few months , so that your impulsive purchases can be avoided. Moreover, you tend to spend less when you pay through cash ( when compared to a card or cheque payment).

4) Pre-pay your loan as much as possible . Spare money ( except that kept aside for contingency) should be used to pre-pay your loans and don't even think of investing with an idea to make quick returns.

5) Finally, be prepared for another hike and make a provision for that too.

One simple question

I was being followed up regularly by a company (where I hold a demat account) for an attractive investment option. When I asked for details, I got to know that ' It is a single premium product' and the returns from the product has been around 16% last year.

One more ULIP sale. I asked them one simple question. How much of the premium would actually be invested in the scheme??. The answer was that regulations on ULIP have changed and the invested amount has actually gone up. I wanted a quantified answer. If  I am say investing 1 lakh rupees into the scheme, for what portion do I get NAV allotted?

The answer was 94000. 

i.e. Out of the 1 lakh , I would invest ......The units allocated would actually be 94,000. Based on past returns , If the fund manager provides 16% returns next year then I would actually get the return of 16% in 94,000. (((6,000 gone somewhere immediately on investing  and my investment actually starts growing form 94,000)))

So, when you are sold any product ask this simple questions.

" How much of my money will actually be invested ??"

Ensure it's somewhere around 100%.  :-) and never club insurance with investment.

Simple Indian Food - Feel @home ( Best veg food blog )

" A Ship is safe when it is in Harbour, but the ship was not built for that"


These are just opinions/ ideas exchanged. No one can claim us responsible for any investment failures /losses based on the ideas expressed here.

Feel free to mail your queries/ comments to