Thread Starter
#1
I see that many of us are knowledgeable on many things in life like music, movies and shopping. When it comes to managing finances, not many have an idea of even the most fundamental of the rules.
I am salaried and wanted to know how best to manage my salary. So I spent a considerable time going through a good amount of material to understand the ideas of financial planning. Here are my learnings about managing and growing the money that we get each month. See if you can benefit from these.
1. Make sure the total monthly expenses are less than the income
2. Get adequate insurance cover
3. Set funds aside for unemployment for a limited duration
4. Have a methodical investment plan with a proportional allocation to debt and equity
5. Periodically revisit your financial plan
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For the interested, I mentioned a few formulae that can help you with your planning.
Income = (1/4 expenses + 3/4 savings) <= range <= (3/4 expenses + 1/4 savings)
Life insurance = Monthly income * 24 <= term coverage range <= Monthly income * 60
(Prefer term insurance to other types)
Annual medical insurance = 1 * major illness cost <= coverage <= 2 * major illness cost
(Prefer group medical insurance such as company plans)
Unemployment fund = Monthly expenses * 6 <= Reserves <= monthly expense * 12
Investment allocation = Present age % for debt + Unemployment fund + 10% gold + Remaining for equity
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Some terms and their meaning
Term Insurance A type of insurance plan where death benefit is provided for the duration of the plan; involves no returns on maturity
Debt A type of investment option where the returns are assured for a duration and the capital is not diminished
Equity A type of investment option where the returns are not assured and has a risk of capital erosion
I am salaried and wanted to know how best to manage my salary. So I spent a considerable time going through a good amount of material to understand the ideas of financial planning. Here are my learnings about managing and growing the money that we get each month. See if you can benefit from these.
1. Make sure the total monthly expenses are less than the income
2. Get adequate insurance cover
3. Set funds aside for unemployment for a limited duration
4. Have a methodical investment plan with a proportional allocation to debt and equity
5. Periodically revisit your financial plan
----------------------------------------
For the interested, I mentioned a few formulae that can help you with your planning.
Income = (1/4 expenses + 3/4 savings) <= range <= (3/4 expenses + 1/4 savings)
Life insurance = Monthly income * 24 <= term coverage range <= Monthly income * 60
(Prefer term insurance to other types)
Annual medical insurance = 1 * major illness cost <= coverage <= 2 * major illness cost
(Prefer group medical insurance such as company plans)
Unemployment fund = Monthly expenses * 6 <= Reserves <= monthly expense * 12
Investment allocation = Present age % for debt + Unemployment fund + 10% gold + Remaining for equity
----------------------------------------
Some terms and their meaning
Term Insurance A type of insurance plan where death benefit is provided for the duration of the plan; involves no returns on maturity
Debt A type of investment option where the returns are assured for a duration and the capital is not diminished
Equity A type of investment option where the returns are not assured and has a risk of capital erosion
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