Money Management: Where to Start and How to Start

Published: March 10, 2016 at 8:51 am

‘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 Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman 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. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
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