Most of us are good at managing our personal long term ALM but terrible at short term ALM.
I assume, many of us have a hard time managing our short term cash flows effectively … matching the in/out cash flows for paying bills, salary credit, rent, purchase, SIPs etc. I personally often end up parking a lot in SB account at a very low interest rates thereby losing on un-invested sum.
I might ask a dumb question, but bear with me. What is ALM?
ALM: Asset and Liability Management
Is there an article that I can check out here or read about it ?
This is what I am doing. I have salary account with hdfc and all SIPs are from it.
When salary is credited here, I move everything to digibank account where the interest on savings is higher than hdfc. I schedule transfer requests from digibank to hdfc for a day before SIP dates.
I used to do the same, park money in Digibank. I hope you are updated that Digibank has slashed interest rate to 3.50% on balance up to Rs 1 lakh from the previous 6%.
Knew that they moved to 5.5 or something. This is news for me. They used to promptly inform about any changes in interest rates. Didn’t get any notification from them when they slashed it to 3.5. Thought they are different. But, seems everyone is same.
Any idea when interest changed to 3.5%?
I dont do short term ALM.
Since the principal is not large enough to make any impact in absolute terms with difference of a few percentage in interest rates. ROI on time is not justifiable , so i dont do short term ALM.
I try to save more by curtailing on expenses. They add up to a lot and there is a lot of scope to save.
Plus if you consider the security of your savings account , then it is better to keep money in a low-interest rate bank with high security like HDFC or SBI or ICICI
You can keep in co-operatives at high interest and loose all your money. Higher risk , higher return , low risk low return.
They perhaps followed the suit, almost all the banks have lowered rates in a last few months, managing Net Interest Margin (NIM) has been the primary reason for most of the banks.
Wow thats a nice idea, I didn’t bother as of now on how to optimise on that short term level as I thought it’s too much pain to move money from here to there. But what you do is efficient.
For me, usually the cc bill is on 5th, epf is on 5th, sips are all over the place so I give rent and cc bill in first week and then keep the amount for sips and rest of the money goes to liquid fund to be utilised later sorts of.
Hope this elaborate description of ALM helps