Thursday, August 4, 2022
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All the financial advice you need can fit in a 3×5 inch card!


When Dilbert cartoonist Scott Adams could not find a publisher for a one-page book on “Everything you need to know about financial planning”, he was forced to write a 368-page book – Dilbert and the Way of the Weasels. (Ref: MyMoneyBlog)

You don’t even need a page to hold all the advice that Adams gives. All you need is an index card! To all those who have used a library before the era of computerized indexing, an index card is a 3-inch by 5-inch card on which authors are catalogued.

LA2-katalogkort.jpg
LA2-katalogkort” by This photo (C) by Lars Aronsson.

In Jan 2016, the New York Times tweeted the following.

Best-financial-advice-on-a-index-card

The image above is the index card created by Dilbert cartoonist Scott Adams.

The following is an updated commentary on the advice for Indian young earners.

Point 4: This would be EPF or NPS for us. If NPS comes with employer contributions, it is a good idea to opt for it if you are unlikely to shift jobs. Otherwise, stay away from NPS. Learn more: Three changes that can make the NPS an attractive retirement solution.

In any case, it is incorrect to maximise EPF/NPS or PPF just for the sake of it! Asset allocation is the key. See: Why I maximized PPF investment only after ten years.

Point 5: Buying a house is not a bad idea; buying a house with a large EMI is a terrible idea. Do not rush to buy a house (if you need one). Buy one with a home loan after you can reasonably balance the EMI with investments and expenses. See: How to buy a house with a home loan: Tips to maximize benefits.

In any case, never buy property as an investment. See Five reasons why I will never invest in real estate.

Point 6: Six months’ worth of expenses is good; Even after you hit this mark, keep away 10% for emergencies until your networth becomes significant.

Point 7 – Minimise fees (essentially) When I first wrote about this, I did not have the comprehensive evidence available today that half of the actively managed mutual funds struggle to beat the benchmarks consistently.

Today we have that:

So we can fall right in line with his advice with one caveat: choose Index mutual funds and not ETFs. Indian ETFs have significant tracking errors and liquidity issues. Finding a buyer for your units can be difficult when you need to exit.

Point 8: DIY or choose a financial advisor who charges a flat fee only!

If you are a DIY investor, this does not apply to you. If you need some help with DIYing, start with this free step-by-step guide: Free ebook: Re-assemble Step by step money management basics.

If you want to create your own financial plan, you can consider our robo advisory tool.

If you are looking for someone to offer you professional advice, I suggest the following steps:

Step 1: Choose only a SEBI Registered Investment Adviser (RIA) – SEBI has cautioned investors not to deal with others. You can choose from our curated list: List of Fee-only Financial Planners in India (SEBI RIAs)

 Step 2: Tell them upfront that you will only pay for financial advice and will invest in direct mutual fund plans. You don’t need to worry about this if you are working with someone from our list. Want some proof? See: 685 investors rate their experience with SEBI registered fee-only advisors. Currently, more than 1000 readers are working with them.

Step 3: Tell them upfront that you will only pay a flat fee initially for plan creation and every year for review. Do not accept a fee based on your net worth. You might as well invest in regular mutual fund plans. Again, you don’t need to worry about this if you are working with someone from our list.

Step 4:  Creating a financial plan is only the first step. Reviewing it each year is crucial.

That is it! All the financial advice you need can fit in a 3×5 inch index card! Writing them down is easy, but implementing them is hard. Take one step at a time consistently and see the improvement.

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Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.


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Our new book for kids: “Chinchu gets a superpower!” is now available!

Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.

Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life, what would it be? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!

Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!

Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. – Arun.

Buy the book: Chinchu gets a superpower for your child!


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About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)


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