When I was growing up, discussions of shares and stocks, Interest Rates, Sensex, and Money in general, were as alien to me, as Machiavellianism is to Rahul Gandhi. In my family, the discussions at the dinner table were mostly related to *wait-for-it* just dinner. On the contrary, some of my close friends knew about all these financial terms and games very well. I liked to believe that it could be a caste thing. But then it turned out that being money-minded and knowledgeable about Finance isn’t a crime but rather a necessity in life.
I recently read that the author of ‘Rich Dad Poor Dad’ Robert Kiyosaki was himself under a debt of billions of dollars. Morgan Housel’s Psychology of Money also made it clear that it is one thing to earn money, but it is a different thing to gain wealth. And to gain anything, one needs to be smart with money.
I kept delaying understanding finance and the nitty-gritty of markets and thought of myself as a Nerd who felt elated only when some PSLV took off, or when India’s run rate went up and not when the market went bullish or bearish. This continued even when I started earning. However, the reality that some smart people do spend time planning their finances pretty early in life, hit me when my bank balance remained, even after years of working, in the figures that looked more like an OTP and less like a Mobile Phone Number.
But one cannot remain ignorant for long. I did start learning about things slowly and steadily and learned to save and invest in safe havens, where risk is minimal. I also came across help from friends and acquaintances who told me a thing or two. One grudge I always had is that Articles and Videos I came across had so much jargon that I would watch Chess or Golf instead.
But times have changed, YouTube nowadays has a plethora of good information in a language you can easily understand. There are shorts and reels as well, in which people dance and tell you which Mutual Fund for how long would make you a Crorepati. There are playlists after playlists you can watch and become an expert yourself and start your own finance-related podcasts. Kids nowadays (sigh) have become much more knowledgeable due to the rise of Fintechs than surely my age group.
I wanted to remove the clutter and learn things slowly (or rather reconfirm my understanding) that come from some experts who could break down things into a not-so-complicated manner and give information without ads. That can happen only with a Book.
I came across The Bee, the Beetle, and the Money Bug: The Bankbazaar Guide to the Financial Wild by Adhil Shetty and A.R. Hemant. I have known the co-author @arhemant since Minimal Movie Posters days. I found this book a pretty good primer in explaining a lot of things that can be beneficial to a salaried employee like me who is between 30-40 or even younger. It also convinced me that I am not an idiot after all and some decisions which I had taken early in my career were rather good. It also gave me insights about what can I do now to secure the next 20-30 years and beyond as I am now reaching the middle of my career (mid-life-crisis is looming large). If one has a family to support, this book does cover whatever options are available at this point at our disposal.
To summarize, it is late but never too late to take stock of our finance-related knowledge. This book (and nowadays there are several such books) can help anyone who is looking to learn personal finance and see through the noise.
Here are some of my notes with a disclaimer like they say:
Please read the offer documents clearly as everything below is subject to market risks. This is not an investment advice blog. Or any advice blog for that matter.
Emergency Fund
Anything can happen to anyone at any time. So, try to have at least six times your monthly income as an Emergency Fund in a secure but liquid fund such as a Fixed Deposit. One needn’t complicate this but aim to review this as salary increases. When created at the same bank, FDs and RDs offer the same returns. While an RD is ideal for creating your emergency fund, an FD is ideal for holding it. During an urgent need, you can liquidate either. You will only lose a portion of your interest for the premature liquidation.
Don’t put all eggs in one basket
Diversity in savings and investment is necessary. It is advisable to park the bulk of your savings with large, stable banks and go for a carefully calibrated exposure when it comes to smaller banks.
Learn about sweep-in FD facility
Here, your bank automatically transfers surplus funds from your FD and never lets your bank balance go below the minimum level.
One basis point is one-hundredth of a percentage. That’s all.
Don’t Do just FDs
Avoid making the mistake of investing only through FDs. This is because they yield low post-tax returns. Therefore, a 7 percent FD returns only 4.9 percent if your highest marginal income tax rate is 30 percent.
Kya Mutual Funds sach mein Sahi Hain?
Equity funds buy stocks in high-performing companies. Debt funds invest in the government and corporate bond markets. Liquid funds invest in money market instruments—highly liquid debt instruments, such as treasury bills issued by the Government of India.
While picking any MF, do look at its past performance, the fund manager’s credentials, and the quality of securities it is composed of. You may want to refer to its fund rating. Several MF research websites analyze funds on various parameters, such as performance, risks, and costs.
Laddering
Split the money into five deposits at different rates. Each deposit will renew at different intervals of one, two, three, four, and five years. Doing so ensures better average returns.
Highs and Lows
When the rates are high, go for longer tenures with your deposits. When they are low, ladder them and wait for higher returns.
Credit score
Your credit score is a measure of your ability to repay your past loans. A lower score—anything under 750—implies you have had trouble paying your loans on time.
FOMO-JOMO
Turn your FOMO into JOMO—the joy of missing out. You might save yourself from wasteful expenditure.
Using Corporate Insurance Wisely
You have the privilege of working for an employer that provides great health coverage, do not waste it. Port the policy when you leave that job, and continue with the coverage—it will help you protect your family because getting coverage for your parents only gets tougher with time.
When your policy is due for renewal, you have the option of shifting it to another insurance provider. This ensures you will not lose the waiting periods already served when the term for your new policy begins.
50-30-20
50 percent to be set aside for essential monthly expenses. These can be for rent, groceries, utilities, education costs, or insurance payments. Then, 30 percent can be spent at your discretion—visiting the mall, upgrading your gadgets, or taking a vacation. Lastly, the 20 percent should be set aside for savings and investments—the minimum amount of money you need to compulsorily lock away.
MoSCoW Method
It stands for Must Have, Should Have, Could Have, and Won’t Have.
Eisenhower Matrix
If something is important, do it now. If it is urgent, but not important, delegate it. If something is not urgent but important, schedule it for later. If it is neither important nor urgent, avoid doing it.
Invest and Forget and let the Power of Compounding do its magic
Companies by Market Cap
India’s top 100 companies by market capitalization would be called large-cap. Mid-cap companies would now be those ranked from 101 to 250. And small-cap companies would be any company ranked 251 onwards.
To rephrase physicist Richard Feynman talking on quantum physics, if you think you understand taxation, you probably do not understand taxation.
Keep your family in Loop about your finances
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