Let’s talk money

Shall we

You have worked hard for it , now make it work for you

This is my first financial book I have ever read and I love reading this book.
While I was reading this book I can imagine the reaction of those who are
reading it in their age 30-40 years. They were like I wish I could have read it
early, now I have little time left to redo all what I have done wrong with my
hard earned money and so on.
But thankfully I have read this book at the right age of 22 even before I have
started earning my daily bread by myself. Now I get an idea I will I go ahead
with managing my money and can become a good financial planner of at least
my own money .
So lets begin with summarizing this book for those who not yet read this book
but want to know about it after reading my opening paragraph because we
all want to manage our hard earned money.
For the ease of understanding I am dividing the entire book into 5 parts

1. Know your money, why you need money and where it actually goes.

2. Build your protection, what if you die untimely

3. Where, when and how much to invest

4. Putting it all together and preparing a money box which pay you on your retirement

5. Redo the money box as and when needed.

 Know your money, why you need money and
where it actually goes.
People earn money. Some start earning early whereas others earn late, nothing new in it.
But what difference it makes is where that money goes. Everyone incurs monthly expenses in
form of grocery bills, telephone& electricity bills, EMIs of home, car, credit cards and the
like.
After all expenses incurred, the money which is left is utilized by people in 2 different
ways-
A) shopping, eating out, movies, trips and left with nothing B) Save all what is left and not
enjoying the life
This is what we call as the mismanagement of your money. To solve this problem follow the
following steps-
Prepare three accounts:
• The income account: Where your salary, other income received in the form of cash gift
by parents or relatives, a bonus, rent from property, etc. are to be credited to this
account.
• The Spend-it account: Part of your income which you spends goes into this account. Put
10-15% more than what you spend into your Spend-it Account.
• Invest-it account: Now whatever is left in your income account, move it into invest-it
account. To move money from Invest-it to Spent-it is not allowed.
This book says that as soon as you get something your income account segregate it into
other two this helps you to keep track of what you spend and what you invest.
Build your protection, what if you die untimely
Not to save taxes, not for secure retirement, not because the ad agency put together
images of happy families doing cool things together, you need insurance only and only
to “protect your family’s financial health if you die and untimely death”.
Rules to take care while buying insurance are
• Buy insurance as soon as you have dependent or the possibility of getting
dependent arises.
• Stay away from insurance-cum-investment product they give you bare minimum
returns on your investment.( they ask you to give 50,000rs for 5 years and get
150000 after 15years, now can calculate the interest it is just 4.15%p.a.
• Buy a cover that gets you till you are financially independent. The job of life
insurance cover is to serve you till you are debt free and financially independent. So
buy a cover that is 8-10 times your annual take home salary. Generally a policy
with a premium of 8000-10,000rs p.a. for 25years give you a cover of 1 cr. Look
for such policies.
• Get a cheap plan: Buy an online plan, it removes the agent’s commission (up to 42%
of your first-year premium).
• When buying a cover, check claim experience of the insurance firm. If the company
pays 95% of claims filed go and buy that plan, if not then don’t buy it.

But not buy a cover not only for your death but also for your medical claims.
Getting a good medical cover is probably more important than buying life insurance-
you’re more likely to go to hospital with an illness or accident than die.
You need a cover of 3-15lakhs per person. 3 lakhs for smaller town 15 lakhs for metro
cities.
Before purchasing the cover look for following benefits:
• Ensure that you have a policy that does not have something called a ‘co-pay’ clause for
example your hospitalization expenses turned out 2,00,000rs you agreed to pay 10%
of it and the remaining 90% will be paid by insurance company.
• Check for ‘pre-existing’ disease clause: insurance company will not cover disease that
you already have when you take the policy.
• Check if your policy has a ‘disease waiting period ’ many companies have 30-90 days
as cool-off period during which they will not pay claims. Look for the policy that does
not having waiting period.
• Check if policy have sub-limit: It is a limitation on what the company out for specific
things. Don’t confuse it with co-pays.
• Check for exclusions : Policy list out the diseases which does not cover. Always be mindful
of this list.
• Ask how much of the cost before and after hospitalization the policy will cover for
example diagnosis of cancer will incur certain charges before going for chemotherapy.
Check that if you can claim these costs or not.
• Ask for a list of ‘day-care’ procedure that don’t need you to get hospitalize: not every
disease require the person to get hospitalized therefore check for the day-care clause
of the product, what it will cover, and how much it will pay.
• Look at ‘no-claims bonus’ feature: When you don’t make any claim some policies
reward you by giving ‘No-claim bonus’. For example you get a policy of 15lakhs for a
premium of 25,000rs, company will give 10% more of your policy amount for the same
premium as ‘No-claim bonus’.
• How many claims does company settle? If company has the record of settling more than
95% of the claims go for it otherwise say no to such policy.
• Lastly look at the claim-complaints data and look for a policy that has less than 30
complaints on every 10,000rs claims made.
 Lets de-jargon investing
Now when we are done with the medical and life insurance cover, we will move ahead
with investing our money in various investment products.
There is purpose for each product you buy, and each product needs to fight with others to
grab that place in your box.
This book broadly talked about 5 types of investing products:
DEBT: It includes bank FDs, tax-free bonds, public provident funds. Debt product are good
for stability but not for growth. Hence, your debt allocation must be equal to your age; at
the age of 30, no more than 30% of your portfolio is in debt products, at the age of 70
not more than 70% in debt product.
GOLD: Not more that 5-10% of your total portfolio goes into gold, that too in the form
of coins, bars, ETFs, and gold bonds from govt. DO NOT buy jewelry as investment.
REAL ESTATE: Author says that if you own one house as the roof over your head
don’t buy another because of the fact that it is illiquid involving huge maintenance cost and
you never know when your investment turns valueless ( what happened in 2008 with
property price)
EQUITY: Author have written a chapter on it but to be precise “Equity is slow cook and not
an instant noodle”. Equity can give maximum returns but for that you must have patience
of at least 7-10 years .
If you have that patience go for equity. Invest according to your risk appetite, Large-
cap index are safe whereas mid-cap and small-cap are risky but risk comes with higher
returns.
Investment in equity should be 100 minus your age i.e. if you are 30 invest 70% in
equity and if you are 70 invest 30% in equity.
MUTUAL FUNDS: There is no money box without mutual funds. There are different types
of mutual funds like Debt fund, Equity fund, Gold fund, Active and Passive funds,
Balanced fund etc. Do invest in these funds as per your short, medium and long term
goals and obviously your risk appetite.
 Putting it all together and preparing a money
box which pay you on your retirement

You need money to achieve your goals and also for your retirement needs.
Put your money into different cells as below by investing into various products as
mentioned in earlier slides depending on the duration of cash needs.

Cash Flow Cell Emergency Cell Medical Insurance

Cell
Life Insurance Almost There Cell In Some Time
Cell Investment

Far Away Retirement Fund Gold and Real estate

Investment
 Redo the money box as and when needed
Things change- you get older, personal situations change, the economic environment
changes, the financial product changes. You need to look at your money box again to
keep it up to date with all these changes.
• Set up dates twice a year to redo your money box.
• Rebalance your portfolio and return to your asset allocation, i.e. sell some equity
when a bull run is raging
• A personal situation changes hence reconfigure the box accordingly to suit the
change.

Overall it is a good read and not a get-rich-quick guide, this book helps you build a
smart system to live your dream life, rather than stay worried about the ‘right’
investment or ‘perfect’ insurance. Unlike many personal finance book “Let’s Talk
Money” is written specially for you and me, keeping Indian context in mind.
Thank
You