The Very Basics of Personal Finance Planning

If, like me, you are starting on a journey to financial independence then you need to sort out these Very Basics. 

• INSURANCE:
  • Term Insurance for every earning member 
    • There is an article with more details on this, do read it.
  • Medical insurance 
    • Even if your employer provides you with this, you should get one now. This is another ‘no compromise’ expense and you cannot postpone this.
• EMERGENCY:
  • Set aside money enough to last you between 6-9 months in case you need to walk out of your job (some call it F U money, but I would just call it walkout funds)
• SAVING:
  • Understand what is your spare capacity to invest every month and start an SIP in an ETF or Index Fund – 
    • For this one, please invest in an index fund, typically the entire index might be the best thing – Nifty 50, Nifty 100 etc. is where I put my money (lately I have also signed up to invest in the S&P 500)
    • DO NOT START BUYING AND SELLING STOCK – unless you are a seasoned investor, in which case what are you doing here reading my blog?
• LOANS:
  • Pay off any loans as soon as you are able and do not roll over credit card balance, pay it all off, prioritize this over savings if you need to
• PLANNING:
  • There is a lot written about this, spend time understanding the number for yourself. If you need a thumb rule, some have 25x of your current expense as the number at which you can hang your boots while others look at 40x – again we will discuss this in more detail 
• INVEST:
  • No, not in the stock market, invest in yourself. Read, listen, discuss and understand what personal financial planning is all about. It does not matter how much money you earn, you still need to take your financial plans into your own hands.

These are the building blocks for your financial independence. Whatever you may hear elsewhere, however, fancy a term thrown at you. These are the fundamentals, the Very Basics that you need to sort out.

You can also read about my personal finance journey, how it started and the ten fundamentals.