My Personal Finance Management Cheat Sheet

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I have been thinking about writing a post on this for quite sometime. Personal Finance - especially inculcating healthy financial management habits early in profession career. When I started, high on newly acquired financial freedom I managed to spend more than I earned. And I never felt I was doing anything wrong, thinking that my earnings will catch up.

And boy I was wrong.

I learnt it the hard way. (Well not that hard, but yes, if I had corrected my course earlier, I probably would have been little richer :)

I see the new work force of the day doing the same mistakes - every day. There is no lack of material on this topic, but it is strange that money - which every covets and works for - gets neglected totally in terms of its management when it actually arrives!

My thoughts and tips which I am going to describe have been formed by reading innumerable posts on great personal finance blogs like JagoInvestor, and sites like MoneyControl apart from excellent answers on Quora. However I thought it is worth while to publish a cheat sheet, probably for my own reference than leaving anything for posterity.

So much so for the preamble, time for actual tips -

1. Open a PPF account
PPF account matures in about 15 fifteen years (why about - read article on JagoInvestor). Once it matures, it can be renewed for 5 years. If you open early, you get past the lockin period early. Interst accrued is tax free and this makes it a fairly safe haven for convervative investor. I am not asking to put huge chunks of money in PPF, however, it is good to open it early for the lockin.

2. Open an account which helps transact Mutual Funds online
Try FundsIndia, or - or any platform of your choice which lets you buy, redeem MFs on click of mouse. MFs generally get the power of riskier investment options like Equity markets with the wisdom of professionals and their exprience, this reducing the risk to the end investor.

3. Take Term Insurance
Take a term insurance early in your life if your family is dependent on your income. Term Insurance helps you get substantial cover (think of 1 Crore as typical cover) at a nominal premium (think of 5-6 K for a young health person). Earlier you take, lower is the premium

4. Take Accidental Insurance
Term insurance kicks in the unfortunate event of person's demise. But there is no survival benefit. Accident insurance helps in cases where income gets temporarily or permanently hampered due to a condition arising out of accident. Premiums are very low.

5. Take Health Insurance
Again, earlier the better. This should be in addition to the corporate cover you get from your employer as with no claim situation, cover increases every year. Especially helpful should you decide to pursue something on your own and no longer have the luxury of corporate cover

6. Take a good credit card, use it like a debit card
A credit card essentially gives you unsecured loan. Therefore interest rates are as high as 36-48% per annum. But if the full amount due is paid within due date - you do not accrue any interest. On the contrary - your money earns interest in the bank account - and your earn reward points, as well as credit history.

So much so for now, will come back with more tips later. Time to catch a wink now...


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