Black Swan

I've been working in personal finance for 35 years as a tax consultant. During this time, I've talked to many clients about their money and investments. The term "Black Swan Event" has caught my attention several times in the past. Surprisingly, I never looked it up in the dictionary, but I understand it means something that no one could predict, something that hasn't happened yet.

 

In simple terms, a Black Swan Event is like a big surprise that causes a lot of problems. Usually, it makes the markets go down. How long the problems last depends on how the economy reacts.

Recently, we faced a situation, and I wondered if it could be a small Black Swan Event for us. So, I searched online to find out what exactly it means. Here's what I learned:

Investopedia says a Black Swan is an event that nobody expects, and it can have really bad consequences. These events are very rare, have a big impact, and people often say they should have seen it coming after it happens.

According to Britannica, a Black Swan Event is a big thing that's hard to predict. It's unexpected and challenging to get ready for, but people often say it was bound to happen when they look back.

 

Wall Street Mojo tells us that a Black Swan Event is something that happens out of the blue, beyond what anyone thought would happen. These events are so rare that when people study patterns to make predictions, they don't even consider them.

The Black Swan Theory is about events that are tough to predict in regular business. They're random and unexpected but have a big impact. These events are like outliers because there's no past information that shows they will happen in the future.

This got me curious, so I read more to find out where the term came from. The idea of a Black Swan comes from the belief that all swans are white because that's what people knew. But in 1697, a Dutch explorer found black swans in Australia, surprising everyone and changing what was known.

This history makes the term more interesting, showing it comes from an unexpected discovery. It proves that events can be unpredictable, a key concept in the world of personal finance's Black Swan Event.

 

In the end, Black Swan events teach us that surprises can happen in money matters. Things we don't expect, like sudden big changes, can mess up our plans. Understanding these rare and unexpected events helps us be ready for anything in our finances. It's like a lesson to be flexible and not assume everything will go as planned. The term itself comes from the idea that not all swans are white, as once believed. This shows us that what we know can change, and we need to stay alert to the unexpected. So, learning about Black Swan events is like having a guide to handle the ups and downs in our money world with smart and flexible thinking.

 

About the Author

 

Accountancy Noble Profession

Before I write about the profession of accountancy let me give a brief background how I happened to be associated with this profession. 

 

It was by chance that I happened to get into this noble profession of Accountancy. I still remember that day in 1983, when I was a junior college student in SIWS NR Swamy College, Wadala, Mumbai. A family friend was on a visit to our house. Casual talk started & the lady wanted to know what the children in the family were studying. When I mentioned I was in XIIth standard in the commerce stream, she enquired immediately whether I wanted to do CA. I was clueless what she was talking about. Ditto for my mother. All my uncles and aunts and their spouses were employed in either a government office or at a public sector bank.

We enquired about this CA course with some relatives and other well-wishers who were employed in the private-sector. We understood that CA stands for Chartered Accountant and that enrolling and completing the CA course would enhance one’s chances of employment greatly and that too at a handsome salary! Also, during that time, for enrolling in the CA course you need not make huge financial commitments like engineering or medical. On the contrary once you successfully complete the entrance level, you can start an apprentice ship training (called article training) under a practicing CA, who would pay you a monthly stipend. This stipend would be like a pocket money which you can use to buy books or use in whatever way you want!

Thus started my journey in this profession. With out knowing the enormity of what I was letting myself in for, I happily appeared for the entrance examination in Nov 1984. Passed the same. Enrolled under CA M H Balasubramanian (my guru, who trained and guided me and several others like me) as an article trainee in March 1985. Along with my commerce graduation I juggled the CA course by attending morning college from 7 AM to 10:00AM and attending office from 10:30 AM to 7:00 PM. Appeared for and passed the intermediate level in Nov 1987, and qualified as a CA by passing the final examination in Nov 1989.

From 1985 to 2023 (as I write this blog on 23 Nov 2023) – over the period of past 38 years I have learnt a lot about this profession.

Accountancy is a noble and highly respected profession that involves the measurement, analysis, interpretation, and communication of financial information. It is a profession that plays a crucial role in the functioning of businesses, governments, and other organizations.

Accountants are responsible for ensuring that financial records are accurate and complete, that taxes are paid on time, and that financial statements are prepared accurately. They also provide advice and guidance to businesses and individuals on financial matters, including budgeting, investment, and risk management.

As I have personally experienced over the past 38 years, the role of accountants has evolved significantly over the years. Today, accountants are expected to have a deep understanding of financial and business principles, as well as strong analytical and communication skills. They must be able to work effectively in a team environment, and be able to adapt quickly to changing business conditions.

 

In addition to recording financial transactions, accountants are also responsible for preparing financial statements. These statements include the balance sheet, income statement, and statement of cash flows. These statements provide a snapshot of the financial health of an organization, and are used by investors, creditors, and other stakeholders to make decisions about the organization.

Another important role of accountants is to ensure that taxes are paid on time and in compliance with tax laws. This involves preparing and filing tax returns, and ensuring that all tax payments are made on time. Accountants also provide advice and guidance to businesses and individuals on tax planning strategies that can help minimize tax liabilities.

Accountants also play a critical role in providing advice and guidance to businesses and individuals on financial matters. This includes helping businesses develop and implement budgeting and forecasting processes, analyzing financial data to identify trends and opportunities, and providing advice on investment and risk management strategies.

One of the most important skills that accountants develop is strong analytical skills. This involves the ability to analyze financial data and identify trends and patterns that can help businesses make informed decisions. Many accountants also develop strong communication skills, as they communicate financial information to stakeholders in a clear and concise manner.

In addition to their technical skills, accountants must also possess a high degree of ethical and professional standards. This includes maintaining confidentiality of financial information, avoiding conflicts of interest, and ensuring that all financial information is presented accurately and honestly.

The field of accountancy is constantly evolving, as new technologies and business models emerge. This requires accountants to continually update their skills and knowledge, and to adapt quickly to changing business conditions. This includes staying up-to-date on accounting standards and regulations, as well as new technologies that can help streamline accounting processes.

 

There are many different career paths within the field of accountancy. Some accountants work in public accounting firms, providing services to a variety of clients. Others work in corporate accounting departments, providing financial analysis and reporting to senior management. Still others work in government or non-profit organizations, providing financial management and reporting services.

Continuing education is also important, as accountants must stay up-to-date on changes in accounting standards and regulations. As a CA in practice, I am required to devote 30 hours in a calendar year to educate myself.

 

In conclusion, the field of accountancy is a noble and highly respected profession that plays a critical role in the functioning of businesses, governments, and other organizations. Accountants are responsible for ensuring that financial records are accurate and complete, that taxes are paid on time, and that financial statements are prepared in accordance with accounting standards.

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Estate Planning

Estate planning means getting things ready for when someone passes away. This involves making a will, saying who should get what, and setting up processes to make sure everything goes as planned. It's a crucial process to make sure that the things a person owns go to the right people after they're gone, without going through a complicated legal process.

 

 

The first thing to do in estate planning is making a will. A will is a document that says what should happen to a person's things when they're not around anymore. In a will, a person can say who should get their stuff and how it should be shared. It can also name someone, called an executor, to make sure everything in the will happens like it should.

When making a will, it's important to follow the rules. The person making the will has to sign it, and at least two other people need to watch and sign too. It's also a good idea to update the will when things change, like when there's a new baby in the family or new things are bought. It is standard procedure to have a doctor’s certificate stating that the person executing the Will is of sound mind.

 

Besides a will, estate planning might also include making trusts. A trust is like an agreement that lets someone else, called a trustee, manage things for someone else, called beneficiaries. There are different types of trusts, like ones that can be changed or others that can't. Trusts can help avoid probate and might have tax benefits.

Naming beneficiaries is another part of estate planning. Beneficiaries are the people who will get things after someone is gone. It's important to name beneficiaries for assets like bank accounts, investments, retirement accounts and life insurance so that everything goes where it's supposed to without a lot of legal trouble.

 

Estate planning can also help with taxes. There are different strategies to lower the taxes that might happen when someone passes away. These include giving away things while still alive, donating to charities, and using trusts in clever ways.

It's not just about paperwork, though. When planning an estate, it's important to talk to everyone involved, like the spouse, sons, and daughters-in-law. If the daughters-in-law are left out, it could cause trust issues and lose out on a lot of help.

 

There are four important tools in estate planning that everyone should have:

1. Will: This is the main document saying what happens to someone's things after they're gone.

 

2. Letter of Guardianship: This tells who should take care of any kids if the parents can't.

 

3. Living Will: This says what medical treatments someone wants or doesn't want if they can't say for themselves.

 

4. Financial Durable POA (Power of Attorney): This lets someone else handle money matters if a person can't.

 

Estate planning might sound complicated, but it's really just making sure everything is in order for the future. It's a way to make sure everything goes smoothly and the right people get what they should without a lot of legal hassle. It's a bit like making a plan for the family's future, and it's a good idea to have a qualified estate planner help to make sure everything is done the right way.

 

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