Ha to be in your 20s and just starting out!

You are a newly qualified CA, MBA, Engineer, Graduate…..out in the big bad world and all alone! Welcome to the world of finance.

Most of us start life having a very hazy idea of what is finance. Even if you are a CA or a MBA with finance, the chances are you do not know about areas that you have not touched academically. So here is a primer….

1. Confess to yourself that you do not know enough about finances: there is nothing to be ashamed of right? I did not know that 22 was a good age to start investing, but now I do. I can honestly say I wish I had known – but YOU cannot pretend that you do not. Read www.subramoney.com regularly. I tease, insult, joke, criticize, poke, but hey I also teach. There are about 3000 posts, read them.

2. The biggest (only?) asset you have is the future value of your earnings: for those CAs and MBA finance students here is an exercise. Assume you are earning Rs. 8L today..calculate the PV of your next 37 years! Well without getting into any calculation, let us assume it is about 4 crores – this is OBVIOUSLY YOUR BIGGEST ASSET.

3. If you have such a big asset, YOU MUST protect it. Your parent’s asset is YOU. If you were to die, they would be shattered emotionally and perhaps financially too. So go out there and take a term life insurance (Oh how I wish i could say be my client!!) – take it from the cheapest source for a sum of say Rs. 1 crore.

4. Understand debt: most debt is bad. Not that people choose debt, but when they do not have money, you need to borrow. So if you have an education loan, credit card debt, vehicle loan…be careful. Try repaying as fast as possible – see prepayment terms, fines, penalties, …but yes get rid of bad debt first.

5. Make a small start, but do it: a small SIP maybe Rs. 4000 for a period of 5 years or even more. In an ELSS – you will need the 80C benefit too. Make a start today. Kyc, pan card, address proof, sip form — all these words should sound familiar to you soon.

6. Look after your credit score: poor behaviour in terms of defaulting on emi, cheque bouncing, etc. are looked at very poorly by the credit rating agencies, make sure you behave well!

more will follow!

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  1. Well you can also include the following:

    1. Invest in real estate. If flats are out of question start with a shop. Property is something that will definetly give you returns in the long run.

    2. Do an SIP in gold / silver. With technology going the way it is i believe Silver is a steal at 53k levels.

  2. Hi Sir,

    In your new finance book, could you include a section for early retirement, specifically for girls who have a good education, but does not want to work for more than 10 yrs (wants to start a family, has a responsible spouse). How can she plan her finances? Assuming that the husband earns enough and also has term insurance etc.

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