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Golden Rules to manage Personal Finance

1. Split your Term Insurance

Your should split your Term Insurance for two reason . Top most reason is flexibility in Decreasing the
cover later , So in case you need cover of 60 lacs , you can divide the cover into 30:30 or 20:40 and then
in future whenever you need that your insurance requirement has gone down , you can just stop one of
the policy .

2. Invest in Tax Saving Products for long term goals

Most of the people still invest in Tax saving funds for their shot term financial Goals . The fact that the
money invested there will get locked for long term should be taken in positive way and hence you
should invest in these for your Long term goals , so that you dont feel bad about the lock in period
because you anyways need money after many years for those goals . For example Child Education ,
Retirement , Holidays abroad after many years . For short term goals like Buying , saving for some short
term commitment should not be taken care by Tax saving Instruments , You should use Fixed Deposit ,
Fixed Maturity Plans , Debt Funds , Balanced funds and Non Tax saving Equity Funds (Risky) for Short
term goals . Once you think like this , the lock in period will not matter to you at all

3. Investing in GOLD ETFs instead of physical GOLD

Why do you want to invest in Physical Gold ? The biggest reason is for Daughters Marriage and
Jewellery , But the underlying reason always is capital appreciation . So why not always invest in Gold
ETFs [ Understand what is ETF ] and whenever you need Physical gold , sell the ETFs , take the money
and Buy the Physical Gold at that time . Most of the people invest in Gold physically for Daughters
education , But the better way would be to invest in ETFs and when time comes you buy the physical
gold by selling the ETFs . That is a better way because its more flexible , safe and easy route .

4. Use your LTA , HRA and Medical Reimbursement

I am amazed to see that many Salaried Employees especially youngsters do not care to take the benefit
of LTA , Medical reimbursements and HRA , just because of laziness . So make sure you take advantages
of these , even if you partly use these things you will save couple of thousands in Tax . All you have to do
is , save the bills , take the xerox and walk couple of steps to your Finance department and submit them
, dont you think its worth if its can save you couple of thousands in tax saving .

5. Control your Credit taking Habit

Most of the people take Debt more than they can afford or deserve . Criteria for giving credit is mainly
how much you earn . The company never knows your expenses and your future goals, your risk appetite
your future plans . People earning 5 lacs per annam take debt of 30 lacs for Home , unnecessary
personal loans for buying LCDs , going vacation and other non-priorities in life . This can have ill-effects
later . Also companies are now keeping an eye on your credit taking behaviour and it affects your credit
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score , which companies in India have started using as a decision making variable . So watch out your
credit taking behaviour . Dont over-do it .

6. Dont Over monitor your Portfolio

Keeping an eye over your portfolio is great , You should look at your shares , mutual funds , ULIPs etc .
But overdoing it can be fatal sometimes . Some of us have this obsession of watching our shares ,
mutual funds NAV and ULIPs NAV on daily or may be weekly basis . See How much time you should
invest in Personal Finance . This is not a good sign for long term investing especially for people like us
who are into regular jobs and have no much time to contribute in your Finances . When you are a long
term investor, why keep track of short term movements , these moves will have no much value in your
all growth and short term movements will affect you mentally and tempt you take take decisions in
short term because your money is either going up or down fast . More of anything is bad and same
things is true for your involvement. Couple of hours per month or every quarter is good enough . Dont
get a feeling that successful financial life means more action.

7. Share your Financials with Family

If you are dead in another 1 hour, do you think your Family will be able to find out all your investments
and Insurance documents and successfully claim them? . Are they unaware of the fact that you took a
huge Insurance cover for them or you invested 50,000 in a ULIP last month.Most of us graduate from
novice investors to a good investor but still are left behind in taking care of this extremely critical point
of sharing each and every details of our finances and making sure that the documents are within reach .
Let your wife , children have a good idea of where the documents are and where your investments are
have xerox copies of every document and have them at 2-3 different places and make sure people know
about them . Emotional pain of loosing some one and no idea of the finances which will take care of
them is a kind of situation you never want you loved ones to be into.

8. Dont compare your returns with others

You are different, be proud of this fact . If your returns are less than your friend mutual funds , thats fine
. Dont compare your self with others , there are many things which determines what you get in life like
knowledge , luck , skills , timing etc . So just make sure that you are getting what you try for . Dont loose
focus from your goals , your main aim in life is to achieve your financial goals easily and smoothly ,
Financial Planning is a race where everyone who reaches their personal target is winner, Make sure
you dont hurt yourself by competing with others .

9. Investigate everything before you Buy it

When you buy something, make sure you try to get information on Internet , ask on forums at different
websites and make sure you find out maximum about thing product you are buying . Spending 30
minutes investigating your product can save you from lot of trouble . One person I know recently took a
home loan from HDFC and went for additional Life over from same bank for 30 lacs. He didnt
investigate much about the cost . It was around 9k per year for the term Insurance . When some days
back we saw quotes from other company , Just think what is the loss of spending some time
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investigating your product .How many of you took an ULIP after agent explained it to you and didnt
inspect much about it .

10. Invest and Spend , not vice Versa

You receive your salary -> then you spend all your money -> then save or invest if you are left with
something . This is not a right attitude .You should change it to Get Salary -> Invest your money as per
your future goals -> Spend the rest . Once you saving some part of your salary, somehow you will find
ways to spend on things which are of first priority and would refrain from spending on things which can
be avoided , But if you spend first and try to save later, you will end up spending on unnecessary things .
So better change the order of spending and saving . You can definitely live with your 90% salary , so at
least save 10% . There is no harm in trying out this . If it does not work , you can go back to spend and
save .

11. Build your Emergency Fund now

Make sure you have emergency fund , if you are listening about this from long time and havent done it
yet , the best thing would be to take a pen and paper right now and plan for it. This is the money whose
aim is to provide you immediate access, not growth of money. Dont concentrate on getting great
returns from this part of your portfolio. The aim of this part is just to give you high liquidity in case of
emergency , Thats all .. So simple rule is 2 months of expenses in Cash which you can access in minutes
from ATM and 3-4 months of expenses in Liquid funds, which you can get back in 3-4 days . This is
preparation for a situation like if you loose you job and need time to search for something you really like
, or get a long term illness and cannot earn money in short term or special emergencies . You can always
reach out to close friends and Family for money , but why to depend when you can be self-dependent .
Its all about strong planning .

12. Equity for Long term , Debt for Short term

I say this again and again, this is the golden rule , one of the fundamentals of Strong financial planning.
Long term goals whose target date is more than 7-8 yrs like Child Education and Retirement should
always be linked with Equity products like Equity Mutual funds , Direct Stocks , ULIPs , Index ETFs ,
Index Funds. Thats because you can get great returns in long run from these things with lesser risk. On
the other hand short term goals should be achieved by debt products like FDs , Debt Funds , Recurring
Deposit , Short term bonds . You can also use Balanced funds if you have moderate risk appetite and
time horizon is 3-4 yrs .

13. If you dont understand , Dont take it

How many investors understand how their ULIP works and what are different costs and how to use it
efficiently ? Not more than 3-4 % i believe . How many people know why they have invested in Mutual
funds which had a fancy name and which makes you feel like you have invested in something great and
how many Endowment Policy holders know the overall final return they would get from their Policies ?
Investors get into products which they do not understand well and then they cant make best use of it
which defeats the purpose. In reality the best products are least complicated ones like Mutual funds ,
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FDs , Term Insurance , ETFs , Gold ETFs etc . So if you dont invest in something which looks fancy, you
are privileged and should be thankful to god . Companies come up with complicated things which makes
general investors feel that they are dumb and these companies are some big shot high class super
knowledgeable in field of finance.

14. Try new products now

There was a time when LIC policies , FDs , NSC and PPF were the only thing in ones portfolio .There was
no much choice and people were risk averse . That was a different time . Things have changed today and
Finance world if different now and its more complicated now compared to old days because of lots of
choices in Financial products for us today . Dont hesitate by trying out new stuff . There are different
products these days like Index ETFs , Index Funds , GOLD ETFs , Mutual funds , Reverse Mortgage etc .
Dont be stuck in same products like our Fathers and grand fathers have done.

15. Take Personal Loan to pay off your Credit Card Debt

Incase you have any Credit card debt and you have converted it to EMI , It would be a better to take a
personal loan and pay off your Credit card debt as soon as possible . Credit card interest charges are
anywhere from 36% to 48% per annum which you dont realise because it sucks your money slowly and
its not significant per month so you dont feel it. So taking a personal loan is a better choice and pay 15-
20% interest on that. You should always try to stay away from Credit card debt at the first place anyways

16. Educate your self more

At the end, you have to learn stuff. No need to become a pro ,but you should keep updating yourself
every month with basic things through Financial Literacy

Find a right Financial Advisor :Most Important find some one whom you trusted he is within
your budget and you are comfortable with .( Not any friend OR relative who work with XYZ
company )

Meet only Indivdual Financial Planner who works Indivdually and having good knowledge
with stronge experience with all option.

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For Further Details kindly Contact :

Thanks and Regards,

Kirang Gandhi
Corporate Financial Planner
www.kgandhi.anindia.com
M-9271267305,8055151555