Financial planning

You can manage your money yourself or get an adviser to help you with managing it. But don't think of not managing it at all. Not managing finances at all is what most of us practice. But financial problems don't go away just because we decide to look the other way. Keep piling up credit card debt or think about retirement a year or two before it happens and you are heading towards financial chaos. So get a handle on your finances, brush up on the basic concepts and make informed decisions on what you would like to do with your money. Most advisers are either brokers or portfolio managers, more interested in pushing through investment products that earn them a commission than taking care of your financial interests. Nobody manages your money better than you do not because you are a financial genius (though you could be one) but simply because you have no conflict of interest in managing your own money, like earning commissions, to be bothered about. Before we get started on the journey to financial independence, we need to know where we stand and we need to get organized. Getting organized Putting the pieces together Before you start putting your financial situation in perspective, get your financial records organized. For most of us record keeping is chaos. Many of us don't even remember what we own or in which cupboard or locker or stack of files the documents for the investments are. Even when we do have things neatly stacked up in zillions of files, it is impossible to find what we are looking for. To get organized, I suggest you set up two (and only two block files or folders), one for financial statements and one for ownership proofs. In one folder let's get our bank statements, our investment statements and all other financial documents. In the other folder, let's put all the physical share and bond certificates, property ownership proofs, depository account statements (since they are proofs of ownership of your depository shares) and other proof of ownership of any asset (excluding consumption assets like car, etc.) lying in cupboards, the office and the many other places we tend to leave them. Once they are in the folder, let's stack them away in a safe place, preferably a locker. The important thing is to get it all together at one place. Make sure you keep a copy of every ownership document in another file that you can keep at home. If you lose your originals and don't have copies, getting another set of originals may be a nightmare in certain cases. Once you have your documents organized, prepare the following worksheets (the job gets simpler if you have a computer): 1) Your personal financial information list your assets at market value (i.e., house, shares, bonds, company deposits, PPF and any other productive investment) and your liabilities (housing loans, car loans, credit card loans and any other borrowings you need to pay back). The difference will give you your financial net worth. Your investment inventory just set up a small table or spreadsheet listing all your ownership documents (investment type, serial numbers, etc). Prepare a will. And don't forget to tell someone in your family where you have kept the two folders. Educate yourself The key problem with most investors is that they don't understand, or have not researched enough, the investment products they purchase. Check out the choices you have for investment. This book gives you the rundown on just about every investment available to you in India currently. Most new investors are intimidated by the investment jungle and just prefer the plain old bank account. The problem with this approach is that you are not getting the best value for your money. All it takes to get better returns on your investments is just a little time reading up on what is available.