10 commandments

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					10 commandments of personal finance

We all work and earn money. Do we manage our hard earned money
effectively and efficiently? New Year is the time to take
resolutions. Why don’t you take a resolution to prioritize and
organize your personal finance? Here are the 10 commandments
of personal finance that can help you in managing your
personal finance better.

  1. Create a budget

     Most of us hesitate to make a budget because we think it
     is about cutting all the fun in life. Budgeting is not
     about cutting all the fun; it is about conscious
     allocation of funds. Once we start spending consciously,
     our mind will find out a whole new way of having fun
     within the budget. You need to create a workable budget
     that gives you extra money and life.

  2. Spend smarter and save more

     Spending less and saving more are lifelong living skills
     that need time to develop. Unless and otherwise, you have
     a clear written budget, you will lose your focus and go
     after consumerism and materialism.

     To save more, obviously you need to spend smarter. To
     spend smarter, you need to understand your own spending
     patterns. Consciously you need to track all your expenses
     on a daily or weekly basis. So that you can find out what
     influences your spending pattern and you can stay away
     from those influencers.

  3. Family protection

     As a bread winner, you provide a lifestyle to your
     family. This life style need to be protected with
     sufficient life insurance cover. Otherwise your family
     may not be able to continue the same lifestyle in case of
     any mishappening to you. A word of caution here, don't
     fall prey to ULIP schemes. Opt instead for a pure term
     insurance policy. These policies give you high coverage
     with low premium.

     Also cover yourself and your family members with adequate
     health insurance coverage. The coverage amount of the
     health insurance policy needs to be decided based on your
     health consciousness, your family health history, and the
     class of hospital you choose for treatments.

  4. Asset protection
  Before starting to build fresh wealth, it is our duty to
  protect our existing assets. Assets like house, flat, or
  car can be insured against accident and natural perils.
  The event of earthquake or terrorist attack to our
  flat/house seems to be remote. But the impact of such
  things could change our financial stability upside down.
  So protect your house and other major assets with proper

5. Emergency reserve

  You need to accrue savings for some surprise situations
  like loss of job, break in job or sudden expenses like a
  major repair to your car or house. Generally, the
  emergency fund needs to be in the range of three to six
  months' family expenses. If you have created this
  contingency fund, in the event of an emergency you need
  not pre-close your other investments and thus you avoid
  paying penalty or booking losses.

6. Debt payoff plan

  If you are in debt, you need to create a debt payoff plan
  with different scenarios. So that you can find out how
  some more savings or a different repayment order will
  help you get out of debt faster. When creating a plan,
  you need to choose one which fits your attitude.

7. Setout goals & layout plan

  If you don’t know where you are going, you may end up
  somewhere you don’t want to be. Decide your financial
  goals first. It may be buying a home, buying a car, or
  children’s higher education. To get where you want to go
  in life, it is important to decide in advance how you
  will get there. What you need is a roadmap, a financial
  plan to achieve your financial goals.

  So create a financial plan for you and your family.

8. Retirement plan

  In spite of the world wide pension crisis and a growing
  acceptance that we must plan and save for our retirement,
  the harsh reality is we are actually not saving enough.
  Research reports reveal that only 15% of the individuals
  are saving sufficiently for their retired life. Don't put
  off today what you can't afford to do tomorrow. Do your
     retirement plan TODAY to have a comfortable and enjoyable
     retired life.

  9. Review

     You need to check up your financial plan and investments
     semi-annually so that when there is any deviation from
     our original plan, you can take corrective measures to
     control the deviation.

  10.     Work together with a professional financial planner

     There is a lot of help available for you online to create
     a financial plan in various websites with financial
     calculators. But if you want to create a complete,
     comprehensive, customized and workable financial plan,
     you may seek assistance from professional financial

     You really need a professional assistance when you want
     to review your financial plan and investments, when you
     want to add a new goal, or when you want to pre pone or
     postpone one of your goals.

If you follow these simple but authentic 10 commandments, by
next year you will be richer than what you are this year.
Celebrate the New Year with much more confidence and peace of
mind by following these simple steps for financial success.

The author is Ramalingam K, an MBA (Finance) and
Certified Financial Planner. He is the Director and Chief
Financial Planner of Holistic Investment Planners
( a firm that offers Financial
Planning and Wealth Management. He can be reached at

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