Last Updated on April 28, 2022
Go to a bank or post office and you can locate a board that lists typical transaction times. Here is how long each basic step in financial planning will take.
Assumptions:
- You know that equity investing is necessary to combat inflation.
- You recognise the bad investments in your folio and have decided what to do about them. If not, spend a couple of hours over a weekend to sort this out.
- You dont have any debt except a home-loan. If you do, perform steps 1-8 below, clear your debt and then resume.
- You do not ask for product solutions in Asan Ideas for Wealth. Do that and the decision-making time will at least triple.
Announcement: You can be Rich Too With Goal Based Investing is now available at Amazon with a discount of 31% (Rs. 277). Or 37% off at Flipkart for Rs. 251 Grab it now!
1) Scrounge around for extra cash to set up an emergency fund. – 10 mins to think about it and less than a few hours to implement it.
2) Follow it up by allocating at least 10% of your salary each month to this emergency fund until it grows to a decent size – 10 mins to automate this process
3) Use insurance calculator for the young if you are an unmarried earner or this comprehensive child planner if you have kids, to find out how much life insurance you need. This would take 20-30 mins
4) Read How to Buy a Term Life Insurance Policy (20 mins)
5) Shortlist life insurers (do not ask anyone’s opinion). This is personal finance). Find out by either using their online calculators or by contacting them, how much insurance you will get for your profile. If this is more than what you need, you can always reduce. If this is less, return to step (3) and work out how best this sum insured can be utilized. (over 2-3 days since there is correspondence involved. Not more than 30 mins a day)
6) Apply for the policy, take the medical and wait. A single policy is all that you need. If the premium is loaded, you will need to take a call on the sum insured. (over 2-3 days)
7) Read How to Buy a Health Insurance Policy (20 mins)
8) Shortlist health insurers (do not ask anyone’s opinion. This is personal finance). Take a call. Max 2 weekends: One hour in one weekend to shortlist and another hour the next weekend to decide. You have the week in between to mull over.
9) Use the financial plan creator to see where you stand (one hour). Take another hour to introspect. Will your income grow as much as you dream? How are you going to balance your needs and wants. This is list issues. Solutions can be obtained over a course of time.
10) Decide asset allocation (% in equity and % in debt) for each of your financial goals. A simple cheat sheet to get you started. Modify after experience.
- Annual goals and goals less than 5Y away: no equity (choose simple safe instruments immediately)
- Goal between 5-10Y: 20-30% equity (conservative,5-6Y); 60-70% equity (aggressive, choose for 9,10Y ); above that (madness)
- Goal above 10Y: Max 60%-70% equity.
Use this as a thumb rule to get started on goal-based asset allocation. You can always fine tune later.
Spend a few hours over a week and then decide.
11) Decide on investment strategy: one portfolio for all long-term goals or separate. Either will work. Just that you need to think about it. Read moreabout this if you like. Spend a weekend deciding, but not more
12) How will the equity folio be assembled? Same for debt. Aim for minimal no of investments. Too many ways to do this. Best to keep it simple:
Buy index funds! Just a Nifty or Sensex index fund will do.
Debt folio: Use PPF for goals 15 financial years away. Use a money market fund or arbitrage funds for short-term goals.
Suggest you start with this. You can read more and add more later!
13) Choose instruments. With the guides available here(links on top right), it should take you 20 mins to short-list equity funds and 2o mins for debt funds. Worry about tax planning only now. It should be integrated with goal-planning.
14) Begin investing (over the course of 3-4 weeks) in direct mutual funds of course!
14) Monitor only monthly investment and not fund performance each month (10-2o mins)
15) Monitor fund performance after a few years. I have a post on this. You can read it when you find the time. There is no flaming hurry.
Monitor only every few months (10-20 mins)
That is all there is to it. If needed add an accident insurance (same time as health insurance).
To summarize:
- 1 weekend for setting up emergency fund
- 2 weekends for obtaining life insurance
- 2 weekends for obtaining health insurance
- 1 weekend to access financial goals
- 1 week to decide asset allocation (few hours only)
- 1 week to decide investment strategy and assemble folio (few hours only)
- 1 weekend to choose instruments for goals with tax planning integrated into these goals.
- 1 month to start and complete all investments.
- All of the above can be completed in under 3 months or at best 6 months. Recognise that the total amount of hours you will spend will be quite small. When I say weekend, I dont mean the entire weekend – just an hour or so.
Then monthly monitoring of investments each week. Let me know if I missed any activity.
Here is a list of ‘how-to’ articles. If you want more clarity on any of the above activities, let me know.
Review growth after few years. The review process will only take an hour.
Performing these tasks requires only inclination. Confidence will help, but it can be developed. Even those with no confidence and (self-proclaimed) low grasping skills can manage to complete this by spending a few hours over a year. That is no small achievement.
The DIY investor can learn and implement, step by step. He/she can work and enjoy life as usual. The effort associated with DIY will not hamper their activities in any way.
Take it one step at a time and see where it goes. That is all that can be said. The rest is up to the individual.
DIY money management is not for everyone. Those who do have the inclination or time to pull this off can consult a fee-only financial planner, pay for financial advice, but insist on direct mutual fund plans
Use our Robo-advisory Excel Tool for a start-to-finish financial plan! ⇐ More than 1000 investors and advisors use this!
- Follow us on Google News.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Join our YouTube Community and explore more than 1000 videos!
- Have a question? Subscribe to our newsletter with this form.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Explore the site! Search among our 2000+ articles for information and insight!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu gets a superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)