Money Management: Where to Start and How to Start

Published: March 10, 2016 at 8:51 am

Last Updated on

‘I would like to start managing my money better, but do not know where to start and how to start’. Is a statement I have come across in many forms. I have been accused of ‘providing mathematical answers’. So in this post, I try to do something different.

Where to Start and How to Start?

Let instinct be thy guide! Many, if not most people who are successful in money management have one thing in common – they are prepared for the worst.

So ask yourself which is your worst financial nightmare? I am talking ‘worst’ here – your inability to buy the new Apple product does not count!

I am not referring to dreams being squashed but, but your and the existence of your loved ones threatened.

For example,

For someone paying a loan EMI: The worst nightmare could be =’What if I lose my job?’, ‘What if I die tomorrow, sorry make that today?’

The answer to this is

  1. Adequate Term Life Insurance
  2. Adequate Emergency fund just for paying EMIs for at least a couple of months

The answer is not a product, but a generic solution. For each generic solution, you can the go about searching for the optmal solution.

My point is, one should know priorities.  When it comes to money management, that is quite simple

Step 1 List worst financial nightmare

Ask what can be done about it

Enter this question in Google (or in the search option above!)

Read at least 5 articles to get an idea.

Decide on generic product

Purchase it (after research/paid consultation)

All this is done in one week flat.

Step 2 List next worst financial nightmare

Ask what can be done about it

Enter this question in Google (or in the search option above!)

Read at least 5 articles to get an idea.

Decide on generic product

Purchase it (after research/paid consultation)

All this is done in one week flat.

Step 3 List next worst financial nightmare  ……

Here are some generic answers to some common financial nightmares:

‘What if I die today?’  –> Get yourself adequate Term Life insurance.

What if I am laid off? –> Adequate private health insurance, adequate rainy day money.

What if my children cannot study where they want?  –>Understand the importance of inflation and how best to combat it.

What if I am not financialy secure in retirement? –>Understand the importance of inflation and how best to combat it.

Questions marked in green are instinctive questions most people are likely to ask.  Questions marked in red are not instinctive to many.

‘How best should I save tax?’  Is not a financial nightare!  However, for many the universe revolves around that!

Recognising what is NOT important is perhaps more important than recognising what is!

Here is a couple of e-books that maybe of help:

Ebook: Starting Early, Starting Right

E-book on DIY money management

Photo Credit BK
Photo Credit BK
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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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  1. sir
    first step is doing a sincere budget seeing where money goes out in big lump also bleeding in small small amounts.
    increasing cash flow is most urgent and most important.
    what you said are not urgent but most important.

    it is really funny people chant warren buffett name for stock picking using free cash flow but they themselves dont have free cash flow!

  2. Sir, this is one the best articles that I have come across in more than 7-8 years, to entice the mind and actually nudge one to take control of money matters. THIS IS REALLY A GEM A Koh-i-Noor.
    Thank you for writing it.

  3. From the perspective of a dual nationality/resident Canadian/British now into semi retirement at 73 having spent my life in Economics, Business, Sales and Finance and currently earning my desired top up retirement income by working as a Certified Financial Paraplanner preparing Suitability Reports for Independent Financial Advisers in the UK, first I find your articles stimulating and a good insight into the personal finance world in India, and second, I want to share three basic rules of thumb that I feel are crucial to long term financial success.
    First, encourage yourself and your children that from the very first time you are given or earn money, consider 10% as not yours but rather for the old person you will become. For example if one is given or earns £1,000 gross before tax, immediately put £100 away in an account you can call “UNTOUCHABLE”. Allocating money from your budget as a first step and keeping it in that account consistently is far more important than how you invest it. Only 90% of what you ever earn during your money accumulation stage of your life is yours to spend on taxes and other expenditures. That’s the first and most essential rule.
    Second, focus on your Net Worth each year and plan to try to make it grow by 10% to 25% per year.
    Third, you don’t need to take much risk with the investment of your “UNTOUCHABLE” account. Initially, just keep it as cash savings in an account that offers tax sheltered growth, then look for a good international mutual fund. For example, during my lifetime, I could have focused all my investments in Templeton Growth Fund and done quite well enough out of it all. Quite simple really!
    Hope this all helps some of you. While simple, these rules are very difficult to keep following. I wish I had done so myself!

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