Purists believe that one should do what one is best at and outsource the rest to others. That is why we approach doctors to treat our illnesses and rarely indulge in self-medication. Also,we turn to service providers like tailors,carpenters,cobblers etc for services that they are best equipped to offer. However,many a times,when it comes to managing our money,we do not know whom to turn to. By convention,many approach their chartered accountants for financial advice even though s/he may be best equipped only to file your tax returns. Alternatively,we knock on the doors of the friendly neighbourhood insurance agent or mutual fund distributor,hoping to get the right advice. When all else fails,we rely on the advice and experiences of our friends and neighbours. There is a new breed of advisors known as Certified Financial Planners who profess to impart holistic financial advice. However,these planners are few and far between and our old mental block regarding paying for financial advice stands in the way of us approaching them. The way things stand,managing money is apparently harder than earning it. Contained below are a few simple guidelines to make the task a little easier : l Keep a tab on expenses : This is easier said than done. However,this is the foundation of money management. Money often slips between our fingers like particles of sand and at the end of the month (or is that too optimistic ? For many it is well before the month end) we wonder where it all went. You may maintain a diary for this purpose of use any good online software. If logging on is too painful how about trying out mobile applications such as LightWallet() for the same. Once you have a handle on your expenses,you can begin weeding out the frivolous ones (say by reducing the number of taxi rides from five in a week to three). I am sure you agree that while we remember the big ticket expenses (say the purchase of a washing machine or a holiday abroad),it is the smaller expenses that slip below our radar. These can add up to a large amount in some time. l Are your ratios in proportion ? : Condensing your finances into a few key financial ratios could make it easier to know where you stand. For instance,if you decide to maintain your savings ratio at twenty percent of your income you automatically know the amount you can spend. Also,you can set aside this amount first and then spend the rest. An extension of this ratio is the Investment / Savings Ratio. After all,there is no point in having your savings languishing in a savings bank account and not being invested. A couple of other useful pointers include : 1. Liquid funds equal to at least three months of recurring monthly expenses,2. Your EMI payment not exceeding 40 per cent of your monthly income. l Cut costs while insuring and investing : A rupee saved is a rupee earned. Today you can save a packet by opting for online insurance (both life and medical) and also investing in mutual funds and shares online. An online term insurance plan costs around 30 per cent less than a term plan taken through an insurance agent. The number of companies offering such plans is growing rapidly. Similarly,most brokers offer discounted brokerage rates for online trading accounts. If you are averse to investing directly in stocks and bonds you may opt for mutual funds through online portals such as www.fundsupermart.com or www.fundsindia.com. Of course,bypassing an agent or advisor will mean that you will have to invest some time in building up a knowledge base. You could do this either through reading some personal finance publications or visiting some good websites. Today,most reputed publications have a section dedicated to personal finance. While insuring and investing,opt for products which you can understand easily and which entail low transaction costs l Get a second opinion : This may sound incongruous in a DIY article. However,there is no harm in approaching someone you trust and who possesses some domain knowledge,for an unbiased second opinion. When that person realises that you have done your homework s/he may also be more forthcoming with their views as opposed to you blindly approaching someone and expecting help from scratch. Of course you may not be able to do everything yourself. Even if you can,sometimes,it may make more sense to outsource. For instance,although today one can even file taxes online it is not an entirely seamless process. Hence approaching a tax advisor could be more effective. Similarly,while you yourself can draft a simple Will it is preferable to approach a lawyer if you foresee some complications. Such issues notwithstanding,you as financial consumers today have an array of self-help tools available and I believe you must make the most of them. After all,the buck ultimately stops with us (no pun intended !). Author is Vice President,PPFAS
