Money Management: Taking it to the next level

Published: July 15, 2016 at 12:42 pm

Last Updated on

So, you have term insurance, health insurance, emergency fund, understand the need to beat inflation and have started investing towards that. Congratulations, you have reached the base camp! The summit still has to be climbed! Here are some ways to take money management to the next level.

In the recently concluded Chennai investor discussion meet, I was pleasantly surprised to find that the audience was quite knowledgeable and wanted to discuss beyond the basics.

Only three people in a group of 50+ did not have a term plan! None of those three needed one! They knew about asset allocation, goal-based investing, how much to expect from equity and the like!

To me, this is a clear indication that with each passing day, more and more investors are ready to move from money management 101 to 202.

Here are some steps to take money management to the ‘next level’

1. Define and document your investment strategy

  • I am investing for  X, Y and Z goals.
  • I am investing in A, B and C asset classes for these goals.
  • I am aware of the risk vs reward profile of these asset classes.
  • I will not invest in any product I do not understand.
  • I do not need any other product for my goals
  • I review  my investments with personalised benchmarks and not because someone said something, somewhere
  • …..

2. It boils down to attitude

Once the basics are covered, and a clear investment strategy is laid down, it boils down to attitude.

  • How calmly do we handle (read, ignore) the .. er .. “information” from social media, media, crap blogs like this etc.
  • How strongly do we believe in our strategy? Do we throw it out just because someone claims it is all wrong and will not work, or do stick to our guns?

3. Defining expectations

It is important to define our goals. It is even more important to define our expectations. Wanting the ‘best’ return or mutual fund is plain immature. Expectations w

Expectations have to be quantified. For eg.  “10-12% return from equity will make me happy”

Clarity hones attitude.

4. Quantifying risk

Learning never stops. We naturally learn how to quantify the growth of our investments – CAGR, XIRR etc.

The next step is to quantify the risk associated each of our investments and the portfolio.

Related tasks:

What is a risk-adjusted return?

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Quantifying Portfolio Diversification

5. Learning to review investments

Our investments have to be reviewed with our benchmarks. Here are some posts on the subject that maybe of help:

How to Review Your Mutual Fund SIPs

How to review a mutual fund portfolio

Basics of Personal Portfolio Management

Simple Steps to De-risk Your Investment Portfolio

6. Learning to review goals

At least once a year, we need to know ‘where we stand’ with respect to our financial goals:

What is the current worth of my retirement corpus or my child’s education corpus? These questions can be answered without worrying about current returns.


Review Your Financial Freedom Portfolio in Seven Easy Steps

How to track financial goals?

You may also consider using this

Google Spreadsheet for tracking progress to financial freedom

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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)
Want to conduct a sales-free "basics of money management" session in your office?
I conduct free seminars to employees or societies. Only the very basics and getting-started steps are discussed (no scary math):For example: How to define financial goals, how to save tax with a clear goal in mind; How to use a credit card for maximum benefit; When to buy a house; How to start investing; where to invest; how to invest for and after retirement etc. depending on the audience. If you are interested, you can contact me: freefincal [at] Gmail [dot] com. I can do the talk via conferencing software, so there is no cost for your company. If you want me to travel, you need to cover my airfare (I live in Chennai)

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1 Comment

  1. In truth once you’re set on the path, there’s really no need to optimize it to the micro level. You run to catch the train, but once you’re on the train, stop running, settle down and think of other things in life. The destination will arrive, sooner or later, all you have to do is just be on the train.

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