5 Golden Rules of Personal Finance

5 Golden Rules of Personal Finance5 Golden Rules of Personal Finance

Personal Finance is a very important aspect of ones Life. Here are 5 golden rules of personal finance, which can lead you to have a Happy, Planned and a stress free life.

1. Start Saving Early

Cannot emphasize more on the importance of this habit of SAVING EARLY IN LIFE. A Structured financial approach will make your life more enjoyable and carefree. How much one earns is not so important, as to how much one saves, and where does one invest has a much higher significance, relevance and makes all the difference in ones Life.

2. Insure Yourself And Family

Life Insurance

Have an Adequate life cover. Buy a term plan with adequate cover (10 times or 20 times of annual income).

Insurance is not an investment product as the cost of traditional endowment plans and money back plans is high and returns are lower than fixed deposit interest. ULIPs have higher cost than equity mutual funds.

Health Insurance or Mediclaim

Adequate health care for the whole family. Medical emergencies come without any warning and hence can put lot of financial burden on the family. Start early cover yourself, spouse and children under one plan. Have a separate health plan for parents.

3. Expect the Unexpected : Emergency Fund

Jobs are unpredictable. All of us need to create an emergency fund (3 to 6 months’ salary) to be able to provide for urgent unwarranted expenses. We should not touch our long-term investments for ad-hoc requirements.

4. Set Financial Goals in Life

Set proper timelines and corpus targets for all types of goals in life. It could be,

  1. Purchase of house
  2. Owning a Car
  3. Education
  4. Marriage
  5. Holiday, vacations etc

Plan them well.

Do not get caught under the mercy of loans. Loans are costly and need to be availed only for needs (essentials say your first home) and not for every want and desire (luxury and enjoyment).

Loans actually mean you are spending more than what you are earning. Have a proper investment plan for each goal.

Short-term goals can be managed with short-term investment plans and long-term goals can be managed with combination of direct equity, balanced funds, diversified equity funds and a small portion into thematic or sectoral funds.

5 Golden Rules - Personal Finance

5 Golden Rules – Personal Finance

5. Plan your Retirement fund

Life cannot be taken for granted. Sudden death of an earning member puts the whole family into jeopardy. While Life insurance takes care of that eventuality, with improved healthcare, life expectancy of human beings is going up. Medical emergencies need to be taken care; quality of life needs to be maintained without source of earning.

Hence, need to plan for retirement fund, which will take care of all the needs that arise post retirement.

Start Saving Early, Invest Early, Invest Wisely, and Live a Happy, Planned & Stress Free Life

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About the Author

Amit Kulkarni
Amit Kulkarni, an erstwhile banking professional, is currently a professional financial advisor, and does consulting on Investments and Personal Finance. Amit is reachable on amitshivram@gmail.com

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