Sanjay Matai, a financial adviser and author, penned this advice for his son when he got his first job and first paycheque.
1. The cheque is the "real" money, not the credit card. Therefore, the cheque amount you receive as salary should determine your spending pattern; not your credit card limit.
Utilise your card to the limit that you can comfortably settle at the end of the month.
2. Contrary to popular perception, cars, televisions and phones are NOT assets.
They are liabilities, because they depreciate and because you need money to use and maintain them.
So don't accumulate too many "fake" assets.
3. For greater transparency, flexibility, liquidity, simplicity, convenience and better returns, do not mix insurance and investments.
Avoid policies that combine investment with insurance.
4. Borrowing means spending tomorrow's unearned (and possibly uncertain) income today. So be very careful.
If you have to borrow, borrow for the "right purpose", the "right amount" and at the "right cost".
5. Start early, invest regularly and stay invested. Time makes money. Fixed deposits, stocks, mutual funds, property, gold, and other such assets, are merely the tools that time employs to make money for you.
6. Saving tax is important, but not at the cost of investing in a bad product. Also, do not wait till March to do your tax planning. Do it at the start of the financial year -- April 1.
7. Keep things simple. A simple term plan, a simple mutual fund, and a simple medical insurance plan will work well in most cases.
Don't be under the false impression that complicated and more sophisticated products do a better job.
8. Buying shares? Leave it to the experts.
Just because you know how to drive a car, does not make you qualified to participate in Formula racing. Mutual funds work like a car pool -- mutually beneficial, universally convenient and highly economical.
9. Don't be misled by rosy promises and hi-profile advertisements. (By the way, my son is an advertisement professional).
10. Personal finance is not a difficult subject. It is lot simpler than trigonometry and calculus; chemical reactions, equations and formulas; Newton's and Einstein's laws; and all the commerce, history, geography, that you studied in school and college.
So "spend" some months learning about money matters, before you start "spending" your money.
Of course, these tips are universally applicable and useful for all age groups, not just the financial toddlers.
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