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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Dilbert on Personal Finance

Posted by Muthu on November 24, 2013

Thanks for your birthday wishes. I was flooded with many emails and sms and am grateful to you for the same.

Now a days I’m writing a piece once in 3 weeks or so. I’ve been writing regularly since 2010 and have slowed down in the last few months. This is because I’ve covered almost everything that is required in personal finance and has only been repeating the same thing again and again. But I try my best to keep it interesting and readable.

I’ll continue to do the same but with lesser frequency:-) 

Personal finance and investments are very simple and not complex. There is nothing much to write or preach. What is important is following few things with determination and will power. That’s why I keep repeating few things. Another reason why I write is that it gives me opportunity to connect with you all at least once a month. 

You may know Scott Adams, the creator of popular Dilbert comic strip. 

He is good at investments and personal finance and wanted to write a book on the same. 

Finally he ended up writing a one pager containing 127 words. He named it as ‘‘Everything You Need to Know About Financial Planning”. These one hundred and twenty seven words divided into 9 points cover lot of basics of personal finance. I’ve reproduced the same below.

1)     Make a will.

 2)     Pay off your credit cards.

 3)     Get term life insurance if you have a family to support.

 4)     Fund your 401k to the maximum.

 5)     Fund your IRA to the maximum.

 6)     Buy a house if you want to live in a house and can afford it.

 7)     Put six months worth of expenses in a money-market account.

 8)     Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement.

 9)     If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio. “

Point 4 & 5 is not applicable to India. The nearest equivalent of 401K and IRA is EPF (Employee Provident Fund) and PPF (Public Provident Fund).

Point 8 is about saving and investing the surplus regularly with an asset allocation of 70% in equity and 30% in debt. Your SIPs take of regular saving and investing.  

As far as point 9 is concerned- higher the intermediary cost, lower would be your returns. That is why we don’t charge you anything once you become our client. After trying various models, we decided that the money we make as trail commission through your mutual fund investments routed through us is good enough for us. This would ensure that the intermediary cost for you does not go up. I’ve written before about the kind of charges and expenses you as an investor incur through PMS (Portfolio Management Services), private banking, wealth management firms etc. In personal finance and investments, higher cost doesn’t mean higher quality. It simply means lower returns and getting ripped off. 

Creating wealth though it needs lot of time and patience is not a difficult thing. All it requires is covering risks through proper insurance, avoiding debt, saving and investing regularly by completely ignoring non stop noises from media in the form of news and opinions.

You are all on the right direction. Enjoy the journey.

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