COST OF MONEY VS TIME

 COST OF MONEY VS TIME

 
Isn't that a weird headline ?
How do you attach cost to money when money provides for all costs?
How can money be cheap or expensive?
Let's modify it slightly and call it-
" Cost of accessing money"!
Does it make things better?
Still not ? Ok then let's get some scenarios.
Imagine a person starts working in a different city or country and gets his salary check every month. But he does not get time to open a bank account and deposit that cheque.
Another scenario...
A retired person has to go the bank to get his pension only to be informed that the pension has not been deposited yet by the government or his employer.
He also has to provide a once a year Life certificate.
Yet another relevant one...
You work on a ship and receive your monthly salary in USD in cash at the end of the month. You find the remittance cost by your employer to be bit high and the banks ashore do not accept cash for telegraphic transfer.
Another one...
While applying for some exams or US Visa you need to send a bank demand draft of a particular bank which is quite far from your home.
Yet another one...
While going for a business loan by a MSME or a smaller company the charges for processing are deducted.
 
 
All these are examples of accessing cost of money. These are charges which necessarily reduce the net worth for accessing for any product or service or the utility value.
We balk at 2% MDR charges by a seller on credit cards but do not think twice about 20% something that bookmyshow charges for booking a ticket.
Not only all these charges but also the time spent to access that money must be taken into account as opportunity cost.
But how does this affect us  "The Mariners" as investors, consumers and service receivers.
If you start applying first principles think about how much time, fuel and cost of vehicle your spouse or you spend at visiting the bank to withdraw some money, make a bank DD, book a ticket, pay a bill. If you start quantifying your time with money that you earn on board it will make you lose sleep.
But that is what modern financial technology combined with information technology combined with electronic communication has done to the cost of accessing money.
All the above examples were given to make you realise what the scenario was just a decade ago when for various document renewals we had to visit Mumbai.
The cost of travel, stay, lining up outside offices and banks used to take away a third of the precious leave period..
Now imagine the agencies like banks that have brought these Fintech services to you on your mobile , how are they getting paid.
By reducing the cost of mutual funds purchases by almost 150% today how are AMCs still managing to make money for you.
By now you must have got the picture and what I'm intending to drive at.
Your salary coming by every month end into your account is a service that your employer does to you.
If that facility was not provided the results could be disastrous.
Not only you would have to provide money to your family before joining ship, you wouldn't be able to invest it during your stay( this problem still exist with some Indian companies whose ships are plying mostly in foreign waters).
Yes now the cost of accessing money has shifted to a different paradigm now! Mobile and the portable computing.
All these facilities reduce the load on your leave time and provide you with ample opportunity to use it as quality time till learn and do new things and also teach your children - some new things.
This is possible as long as these devices don't become your " devices for destruction of your time ."
I personally have been very cautious and miser with my time .
I always used to quantify my every minute with the salary that I earned and later on became so paranoid that I wouldn't even waste it to make some quick money by dabbling in the stock market. As a result I was able to travel with my small family - far and wide and gain so much in experience.
The effect of this was seen on my daughter's ICSE - history exam. There used to be a question of identifying the picture that was given of a historical monument and some related questions on that.
Her class teacher complained that she is showing off by saying that she had seen the monument. I had to charm the teacher by saying that she had so enthused my daughter that now we actually travel to see these monuments.
Anyway... Back to the cost of money.
Please appreciate, accept and use the modern methods of money handling. Set up systems to efficiently use your cash flows so that you don't have any liabilities and your money can be invested by the 5th of the month.
Don't waste your time in trading or speculation about money, rather use it too acquire newer skills, read news books, get more degrees, develop new hobbies empower your family, raise your children in the true sense.
All this has been made possible because the Speed and Cost of accessing money has gone down leaving you lot of quality time to spare.
Even good roads, highways, efficient cars, cheaper flights... All these have added to reducing the cost of accessing money and services and leaving you time which if used correctly will pay you rich dividends and if missed it will leave you very poor.
Just to share with you even this article has been written on a flight from Mumbai to Dehradun today- reducing the cost of Money by utilising time you see...
 

© Rajeeve Kaushik
10Feb2023
 
 
 
 
 

How much you save as a Mariner

 Rajeeve Kaushik, [17-03-2023 08:43]
How much you save as a Mariner

No the topic is not about what you may be thinking.
I have a habit of collecting data to generally get an idea about various aspects of the society. In the peak of demonetisation I had done a survey on how much cash do Indian families require from minimum to maximum.
Later another survey of energy requirements of Indian families.
Recently I was preparing a self assessment of energy and communication expenses tik prepare for another survey. During that it struck me to to prepare the hidden expenses of mariners which they never pay for.
From my very childhood I never appreciated two things about a salaried employment.

 First was getting up at on early hour and commuting long distances for one's job.

Second was an early realisation in life that what ever one earns he or she spends the large amount of it in simply performing age keeping that job,  this can be equally applicable to a school teacher or highly paid executive.

Luckily, like you I landed in a profession where I did not have to commute daily nor was there much expense involved in performing that job.
Around 4 years ago my daughter got married and both of them landed in what is perceived as premier services in the country. While helping them settle in their jobs and set up their households I realised that their salary was nowhere close to even being sufficient for bare survival.
This further provided some input to my thought process which has triggered writing this article to help you appreciate at actually how much you are earning in real terms by working in the merchant Navy.
An article is never considered good if it is written in a tabulated way but I have no choice but to write in a mixed format.
1. Training for the job: the cost incurred for your training is at par with any private training institution, in fact now even a government funded IIT requires almost half of the cost of college education as compared in merchant Navy. So that levels the ground here .
2. Joining first time: most of the jobs required you to travel on your own where as in merchant Navy you are given a flight ticket along with Hotel accommodation at both ends and the agent taking care of your taxi expenses.
3. When a person on shore joins his job in a new city he pays for the rental accommodation the brokerage for that rental accommodation setting up the house for minimum at least including furniture even if not any kitchen expenses. Cost involved is minimum 25000 monthly + 1,50000 for other paraphernalia requirements.
4. When you are working in a city you would require a television at a cost of at least ₹25000. Monthly cable network at rupees 700.
5. Wi-Fi requirement for internet and OTT is about ₹1500.
6. Even if you do not maintain a kitchen while working on shore, and want to order by swiggy or Zomato you will have to keep minimum requirements for breakfast which will start at cost for the fridge at ₹ 30000-50,000. Otherwise where will you keep the beer.
7a. Daily breakfast at minimum rupees 150.
7b. Lunch in dinner from outside at a daily cost of about ₹600 minimum. However the meals that you get on board a certainly worth much more and cost the company at least 9 to $10 a day.
8. Daily travelling aur commuting to work may involve your own vehicle or a public transport or a cab and none will cost you less than rupees 250 a day. Let's not count the cost of a 2 or 4 wheeler.
9. The clothes required for your office require minimum upkeep but certainly ₹50,000 a year or ₹ 4200 a month.
10. Let's even out the cost of mobile phone which you would have to pay from your pocket in either of the cases.
11. Electricity for power and microwave would be at least ₹2000 a month.
12. If you manage to maintain your NRI status simply enhance your monthly salary by 35% instead of deducting anything else.

So a salary of $2500 a month actually becomes 3375 and pro rata for senior ranks.Considering above we realise how much we're saving without doing anything, so all the more reason for us to stat saving and then investing the saved amount.
Now please do not respond by mentioning the difficulties encountered while working at sea because that is not the topic of discussion. The topic of discussion is that in real terms your salary is more by the minimum amount that I have mentioned above. So you certainly have a case of investing regularly and more than your shore counter part.
Please do let me know how much you're saving.

© Rajeeve Kaushik

Accumulating your first crore why it is difficult and how to do it or Mission OCR

 1 crore is not a magical figure which will make any major difference in your life.
It is a Psychological barrier in Indian context which makes one feel a sense of achievement .
There was a time when OneCRore was considered to be more than sufficient for one's comfortable life and all major expenses and was advocated by none other than my revered Guru AN ShanBagh.
Later on the figure remain fixed but it required to be accumulated to carry on with life and it's intermediate goals like children education and maybe the marriage, but was a figure considered to be separate from the retiral benefits .
In the context that I mention OCR - specially for the Seafarers is for them to be assured that they are on the correct path and must proceed on without much deviation.
In the process of accumulation of this figure one learns about various necessities of money & the ways to go about accumulating it by saving first and then investing it -I call it the learning stage though the professional advisors call it accumulation stage.
In the journey towards this OCR a person starts learning about virtues of patience and self discipline. One sees the money grow by a few percentage points every year but also going down by a large amount at another time frame and yet bouncing back in another much shorter time.
What OCR represents is also biggest mental block and challenge because one faces it at a time in the beginning of ones professional life when his salary is at its minimum and exposure to life is equally low.
With a thousands to maybe a lakh of salary one starts multiplying it by a factor to see how fast one will achieve it.
In the beginning of one's life one does not understand where one CR stands in his overall life planning and what it can help him achieve what with the parental experience thrust upon him he does realise that it must be a very big figure and difficult to achieve.
He faces various hurdles and impediments thrown at him in form of dubious saving schemes and low yielding plans of ULIPS , endowment  and money back schemes.
It becomes very difficult for him to let go of the secure thread of the parental guidance or advice procured from conventional sources and resources.
He is constantly reminded that equity means stock means speculation or Satta and why it is not good for people from good families to invest in it.
Of course nowadays things have been made much simple by the constant advertisements about "mutual fund sahi hai" but does create doubt in minds of the people and of course confusion because there are thousands of schemes available to choose from.
He gets easily beguiled by terms like debt and risk.
The tea-time advice from seniors on board  also does nothing to make things easier.
How to go about OCR
1. To start your journey towards accumulating OCR one first must understand that what is possible by and through equity in the capital market is not possible through any other method. One must break down one's thought process to understanding that when he invest in a company stock or mutual fund which are nothing better than collection of various company shares and his actually part ownership into those companies.
One must clearly understand that as these companies will grow the business the value of the companies will increase and will be exhibited by the share price of that company.
He must further appreciate that these companies are the backbone of the country and its economy. I such depending up on the policies of the government either these companies why the virtue of their management will do well or not. He should further appreciate that by taking stand in these companies he is actually making himself a participant in the countries economy* .

Which means if the country grows he grows in terms of his personal wealth.
Not only equity but even debt has an important role in the economy of the country, as it is debt market which provides the money required to create infrastructure and grow various businesses.
For that matter even a passive investment like gold which may be seen to grow at a very slow rate but actually it is a store of value for uncertain Times.

2. With this knowledge intact one must approach one's first Mutual Fund in form of passive fund or a index fund purchase directly with the AMC other mutual fund company.
Mutual fund offices are available even in Suburban towns or otherwise the RTA is or the registrar and transfer agents which means CAMS or KFINTECH offices in these small towns can also do the job.
As I have always advised , one just needs to go to these offices with one's CDC, passport last contract form, cheque book ,Aadhar Card & PAN card .
Start the process of investing in anyone index Fund with the minimum amount which is 5000 and also commit to SIP for at least 1 year which he can extend later.
After the system is set for the first fund one can start investment into another index fund or a Flexi cap fund which comes in the active fund management category.
One must try to outlay at least 35% of one's annual income divided over 12 months.
As one can observe from the Excel sheet that I have circulated quite a bit by now that the money would slowly start growing like a train chugging out of the station.
Once a person has started off investing into three funds he can add one or two more inform of midcap fund and a small cap fund. This will complete the portfolio that one needs to achieve one CR as it is the investment from one own side that will do the job.
3. Ups and downs:Now all that will happen on the way is  that the market will fluctuate and thereby the value of equity fund also go up and down in fact it will go up and down even for the debt funds.
This is where person will have to observe Equanimity which means he will have to be in a steady state in whatever happens to him and his portfolio.
 Because you must understand that a falling market is actually good for you as it provides the opportunity to invest your current money at previous or old prices when you did not have that money.
It is this singular habit of not changing your funds too often and not stopping your investments even for a month that will ultimately prove as a boost to your investment portfolio.
4. Experience: ultimately it is his habit which will propel him forward and the events en route' to his OCR journey that will add to his experience.
By the time he arrives at the train station of one CR he would have gained knowledge of all the avenues where he can invest and will start advising people around him also.
He will understand the pitfalls of various other avenues available to him and of course will also take inform decision in direct stock investing.
Since no two people are equal .it is possible that a few  may boost their portfolio by direct stock investing.
However if this stage arrives after he reaches his station of OCR it will be very beneficial.
If one just starts dabbling in direct stocks or any other avenue to enhance his capital it might result as a heavy opportunity cost for him.
5. Finally the OCR station: one day our young investor finds that the total assets in his portfolio manager are indicating this magical figure of ocr. Though this may have taken him a few years but it does provide a sense of joy and achievement.
By now he will become substantially confident of his method and methodology.
What has taken him a few years to achieve in terms of OCR will now take much less to get to 2Cr because by now his salary has increased and so has his confidence and faith in the system which will propel him to invest more  in the system.
Now his stage is like a youngster who has been learning cycling with the help of a trial wheel and now he is ready to remove the trial wheel from his bicycle and can properly ride a bicycle.
You can also compare his stage to a tree which has grown out of a sapling .
This sapling requires lot of care ,nurture, manure of fertilizer regular watering and beyond everything protecting it from outside animals and stray cows to be eaten up.
Now that the tree has grown by a few feet and the trunk has become reasonably strong,it does not require any protection and does not even require watering or fertilizer as he will draw its own nourishment from the ground.
Even from the stand point of mathematics and observation of the historical market data to grow from one CR to 2 CR and four CR will take only for the 4 years and 8 years respectively