Personal finance

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Personal finance is important and is a required component for a happy life in society. Don’t forget, money doesn’t solve all your problems but it solves money problems.

Here are a few suggestions from others that worked for me:

  • Have an emergency fund. (I generally would suggest 6 months of your expense multiplied by the average inflation rate of the country you live in). This is a defense against unexpected situations.
  • Don’t use credit card if you can’t pay the total expenses. Credit cards have a few advantages (like credit score, etc) but it tries to exploit the human emotion - instant gratification.
  • Don’t opt for no-cost EMI - even if theres no interest above the price of the product, there’s tax added to amount paid in installments.
  • Don’t use insurance as investments. Stop investing in Unit Linked Insurance Plans.
  • Don’t take any loans (ex. car loans, personal loans, etc). The interest rate for loans is higher than the inflation rate and the loan is most probably used to buy depreciating assets. Home loans, however, can be excused as it has tax benefits, comparatively lower interest rate and land is an asset if bought in the right location.
  • Don’t keep your money idle in savings account or in FDs. The security of your money is high (given that the bank is good) but the rate of return is often below the inflation rate. Also the returns from FDs are taxable.
  • Go through your bank statement once in a while to see for hidden charges levied (even accidentally) on your account.