What should be the ideal ratio for home loan EMI to yearly earnings as Seafarer

What should be the ideal ratio for home loan EMI to yearly earnings as Seafarer

Taking a home loan for a seafarer maybe a little different than that for a land based worker because he has a ability to pay it off earlier. We shall try to analyse and determine this on the basis of the following:

1. First determining factor I would say would be the rank of a person. For example the cash flow from salary would be quite different for the 4th engineer and a master. In case of the latter even if he takes the entire sum on loan he can easily pay off in a few years time. Whereas a junior officer might require many years which may extend to 10 or more than that.

2. Second determining factor would be the the cash available with the buyer.

If the amount in savings is substantial but parked in NRI or fcnr accounts then naturally a large portion of it can be used. However if the sum is properly invested over long periods of time then it would naturally be getting returns in the range of 12 to 15% over 5 to 10 years period in that case there should be no need to disturb that investment and go in for a loan of the amount desired.

3. Third determining factor would be the price of the property. If the price is prohibitively high then it would be prudent to go for at least 50 to 70% of the loan amount .

4. Next most important point is to maintain liquidity with oneself under all circumstances considering the unpredictability of life that we seafarers face. And with this I mean that take the loan, on as low rate of interest as possible with prepayment facility but secure it properly by taking good term plan and the insurance on the property as well.

So as you can see that the loan amount will depend upon some qualitative factors rather than the quantitative ones and a person should be careful enough to structure his finances properly after taking the loan.

In the view of the above. Up to a loan of 1.25 crore I can say that you can easily take UPTO 90 lacs or 1 crore secure it with very good insurances and try to pay off of repay the loan if the rate of interest is high by paying about 8 to 10% of the principal every year.

Having done this the next step become more important by which you should start investing your salary in a very disciplined way. Though the facility of the loan account of SBI and erstwhile HSBC seems very attractive but I am not a very big fan of it as it prevents you from investing your money as soon as it earned.

You must remember that loan is a liability and higher the amount means higher the liability and should be paid off as soon as possible unless the rate of interest is ridiculously low.

From the loan issuers point of view a home loan is the most secured loan which he can recover by taking control of the property at any given time.

a point that I would like to bring out in the circumstances is based upon two cases that came to my notice in last few years. It happens that somewhere in the mid career a person takes a exorbitant loan to buy home and very soon after he gets an opportunity to take up a shore job. Now these two offices workout between the devil and the deep sea because the house for which they had taken a huge loan prevented them from taking up the shore job abroad.

Now you can imagine why something as simple as a home loan can become tricky under circumstances.

A fleeting moment in a journey called Life

                              A fleeting moment in a journey called Life

Joginder uncle lost his life partner Toshi Auntie yesterday. I got 4 missed calls from him which I couldn't take as I was in a group Meditation. When I called him back he was talking in a matter of fact and balanced voice- बाकी सब ठीक है बेटा, तोशी कल चली गयी, आज उसे 11 बजे पहुंचाने जाएंगे।

When I met him a bit later, he must be the only person whom I met as always- hugging and laughing. Onlookers were horrified.

Why was that? Read on to find out...

We met first time exactly 25 years to the date when I bought my first house and he had also shifted to his new house just opposite mine after his retirement.

I wasn't even 30 and he was an experienced wise man, full of humility and life's philosophy, which I didn't understand at that stage.

In due course, he became a family member rather a family head and may be even more than that. 

During my absence from Dehradun and while I was on board the ship, he would stand like the rock of Gibraltar for my wife and daughter. I have never seen him complaining about his personal problems which were aplenty.

I came back once on leave, it was after Diwali only to discover that he had lost his younger son who was a full grown adult during the gallbladder operation at the hands of a local doctor.

His elder son was suffering from childhood hematological problem which he wasn't properly aware of. When I took both of them to a specialist, while taking out some papers from his pocket the receipt of the firewood which were purchased for cremating his younger son fell out.

Even the doctor was shaken and looked at me with questioning gaze.

Soon enough his elder son also passed away.

After both the losses he had very casually said that he looked after his sons as long as they were with him and now let almighty take care of them.

He never complaint about any God and nor did he become an atheist.

Then I bought another house and moved to a different locality but would meet uncle once in awhile. We would always hug each other like long-lost friends and chat away refusing to listen to each other and more interested in talking about ourselves.

5 years ago ,I had lost my mother and was quite in grief. A few days later Uncle came to see me and before he could utter a word , I jumped and hugged him laughingly. I did not need his sympathies and was instantly rejuvenated.

And since we both understood each other so perfectly, when I met him today I did not see any reason to put on artificially sad face and sympathize with him.

Uncle doesn't need it.

While leaving the cremation ground he told me that now he is free to come for Vipassana.

I told him , sorry we don't need a teacher right now.

Do not Procrastinate- SAVE what you have less and need more- TIME.

Do not Procrastinate- SAVE what you have less and need more- TIME.

Last week I was in quite a spot late at night. 

By quite a coincidence  three young officers were all about to join their vessels within a week and were already out of their home town.
All three of them had their financial matters quite muddled up.
To quantify the problem all three of them had collectively over 1 crore rupees to invest in various avenues but no time.
All of them had been on leave and at home from  3 to 5 months.
Why they could not take such an important decision earlier, warrants an informal enquiry.
We cannot trust the matters simply on psychological uncertainty and write it away.
The reason for such dalliance comes because of the nature of the employment of marine professionals.
When they're at Sea , they are earning money but they do not see it accumulating. More importantly they do not see the money being consumed because they are not aware of actual expenses at home.
Hence any financial decision in terms of investment does not get taken when they are at Sea because they feel that the money will be needed for various things when they come home on vacation.
Similarly when they are on leave the Marine professional is not aware when he would actually be in employment and when he would start earning as a result he likes to keep a mental buffer amount ready for any contingency.
Above are other two reasons why the Marine professional starts accumulating his money in the bank and more importantly in the basic savings account where the money does not grow but rather depletes due to inflation.
This may have been a situation earlier but in the last two decades world over few trustworthy avenues have come up in form of mutual funds where one can keep his accumulated wealth from a few days to a few years.
As I have pointed out earlier to all the seafarers across the world irrespective of their nationality that they must investigate the possibility of keeping their funds in a category of mutual funds called liquid or ready to use funds.
I have investigated that in other countries too ( like India) there is a possibility of keeping their money  in these liquid funds. These type of funds give a better return than in the bank and a possibility to withdraw at a very short notice and utilize them for their needs. Beyond creating this buffer for their mental uncertainty and mental peace they must start a system by way of which a very small amount start getting invested every month into various equity or stock based mutual funds.
In the beginning this amount needs to be small in just a few dollars a week and then as they educate themselves in the field they can let this investment amount grow.
However it is imperative that the first saving or the first investment of a person is done as early as when he is a cadet , and not wait till he becomes a full fledged officer.
Investing in efficient avenues like Mutual Funds is exactly like planting a seed of a fruit tree.

 It does not matter how many seeds you plant but it is the time which will make sure that the tree grows.
This growth of a tree in financial terms is called compounding.
In order to benefit from this concept of compounding about which you may have already heard a lot on the net, in books and magazines please stop procrastinating stop postponing for tomorrow and act today.

As a slightly older and experienced person, I would suggest to younger colleagues that they start planning their leave before they actually leave the ship. Whether it is about going on a holiday, or completing documentations or going for professional courses, they must plan it with their spouses or parents (if not married) in advance . Taking all the important Financial and Non-financial decisions in the first few weeks of coming on leave will help them spend rest of the time in peace and also see that any of the jobs that they have done has actually been completed from the service Provider’s end.

Please do not Procrastinate, it is a serious lacunae that I find with the Seafarers. Most of our counterparts on land are very used to paying bills on last date, or filing  returns a day before- but since we have sufficient funds but lack of time- we must save what we have less and need more – TIME.

ON EXCHANGE TRADED FUNDS

                                              ON EXCHANGE TRADED FUNDS

With all the good things that we hear and say about ETFs , main is the liquidity. The extremely low availability and asset size of the ETFs prevents sizeable exposure to the asset class. If you would try to buy MoST Nasdaq 100, you maybe surprised that though you are ready to pay the price , there are no sellers. Similar situation may also occur when you wish to sell. So consider this aspect while deciding to invest at this point of time.

Report On Vth Seminar On Personal Finance

Report On Vth Seminar On Personal Finance

The seminar on personal finance and mutual funds held on the 9th June 2018 at Hotel Pacific was Co-hosted by SS investments , DSWA and  sponsored by Reliance Mutual Fund.

The event started with the launch of the magazine of Dehradun seafarers called Lighthouse. It was launched by Dr Ajay Saksena the principal of DAV PG College.

After the launch Dr Saksena wove a beautiful speech starting from the traders of Pre Christ era and how the  ships were attacked by pirates and how only the stronger Nations could manage to get their goods back. From there on linking Machiavelli to strong Nation theory and talking about India pre and post liberalisation he very nicely connected Political Science, History and Economics and even personal finance.

It was quite enlightening to have a Academician amongst us giving some cerebral input.

The feature presentation by the Reliance trainer was very informative though despite request he could not shed much light on the latest changes in the MF industry.
All must be reminded that due to SEBI regulations MF houses have made two types of basic changes to their funds.
Firstly they have changed the name of their funds to self explanatory type which can indicate the type of fund i.e. Large cap,Mid cap, Multi Cap or multi Asset or Debt -Equity hybrid instead of just balanced or Prudence etc.
Second important change that has been effected is that similar type of funds of an AMC have been combined together or their mandate changed.
Yours truly had collated few questions received from various Seafarers which I managed to put upto him. The reply to them will be covered in the next article.
Quite a few questions were asked by the audience which he replied to their satisfaction in most cases.
Something very outstanding about this seminar was that there was a greater share of the non seafaring community as opposed the only seafarers who used to attend the previous seminars.
It was an intentional attempt to bridge the chasm between the Marine Professionals and those who work ashore. This also helps in the shore people understanding what DSWA as an association doing for the society at large.
Quite a few of invitations were extended on the basis of the request received  from the guests ever since the last seminar. It was quite encouraging for the organisers when the wife of a very senior Master whom DSWA had given the lifetime achievement award requested to attend the function. I was personally very humbled by her enthusiasm and keenness to learn even at this age when all her financial goals have been met.
The seminar also marked attendance from 9 outstation attendees from as far as Rudrapur,Tehri, Noida and Haridwar.
Every such event requires a high level of preparation, but what the reader must understand is that all the organisers in these events are Sailing professionals. Most of them have just started their families. For them to be able to take out so much time out of their leave is indeed a great sacrifice for which they must be lauded .
In future also the attempt will be to bring out more such learning experiences for those in need, not just for those in Dehradun but those in other cities as well.
 

Vth SEMINAR ON PERSONAL FINANCE AT HOTEL PACIFIC