My Personal Finance Journey

1. Introduction: 

Good Morning, 

The reason to specifically wish 'Good Morning' is, if you are reading this, it means you have just woke up to taking some actions on your Personal Finance. That is, work on your Financial Planning. 

Whatever the reason is, which made you decide you need to act now, it is really great to know that you have 'decided'. I just request you to not stop before you have a detailed plan and you actually implement it. 

To make your planning and implementation a tiny bit easier, I thought of sharing how I have planned my personal finance. I am definitely not advertising that I have done something great or this is the best that could be done. Because, most probably there is still a lot of scope for improvement. But I recently felt that I am in a considerably better situation than some people. 

So, consider this as just a practical view of how someone has implemented it, with some details on why they have done whatever they have and how did they come up with numbers related to it. 

I am going to highlight the time (year) in bold so that its easy to relate to the state I was in, the good things did, the better things I should've done, and so on.. I will also mark the actions I felt were good in green and the not so good ones in red.

Disclaimer: Please note that I am not a certified financial planner. All of the below is just my personal experience I acquired by scouring the net for relevant information and the steps I took depending on my own situation and need. 

So, please consider this info as just a light read and not advice of any kind. Please consult a certified financial planner for plans to cater to your specific needs. 

I will also not mention any specific bank / company / scheme over here to avoid influence. 

Before you continue further, this article is going to be a long read. Its definitely not the one you can skim through in a few minutes. Because, I am planning on getting into as much details as possible. So, be mentally prepared for that. 

And, if you want to make the time you spend on this more worthy, have a piece of paper, a pen / pencil or some other way of taking notes. Because, I am sure you will definitely find some things worth making note of and working on them further. 

Now, a little bit of background on why I'm spending my time on writing this.. 

Right now, in August of 2020, I am a 37 year old married Indian with two school going kids - one of them studying since 5 years and another started school this year. I am the single earner in my family as well. 

This background will hopefully help in relating the when/what/why of my actions I'm going to explain in a bit.  

A couple of months ago, in one of the WhatsApp groups I am member of, I just happen to mention some terms like 'Emergency fund', 'Investment', 'Mutual funds', 'Stock trading', etc.,. This group, being one of my school groups, got a few of my friends to push me to explain a little more about what I was 'teasing' in the group. 

I initially thought that they were just pulling my leg for mentioning such basic things which everyone has done. However, later, when the request was repeated multiple times, I realized that I wasn't being made fun of. So, I prepared a basic presentation (a plain ppt with 3-4 slides) listing what I had done and explained why I had done them in a bit more detail in an hour's video call to about a dozen friends. 

The reaction I got was sort of overwhelming. It was because some of them hadn't even thought of most of the actions I had taken. For them, this was an eye opener. Some of them who had thought of it didn't know what to do and how to do it. For these folks, it gave some pointers on what is the next step they can think of taking. 

It didn't only stop here though. Some of those who were there in the call started discussing about this in the group and a few more friends called me to talk about this. 

Further, this also caught attention of the spouse of one of my friends. This person was also doing similar thing of spreading this awareness among friends. So, he gave me a call to talk about it and mentioned that as he also experienced, a lot of people are in the state where they haven't even given a thought towards their Personal Finance, or, if they want to do something about it, don't know where to start. Also, mentioned the thought that something needs to be done to spread this a bit wider than our first circle of friends. In that call, I mentioned that due to my personal commitments, I can't spend more time on it. However, that didn't stop me from thinking about this request. 

Finally, I felt that putting the steps I have taken in these simple words might help a few more people than just my friends. 

The reason I felt the need to explain the above is, as with everything else, there are a lot of books / articles / blogs / videos explaining about Personal Finance and its planning. However, they explain things in too generic way which might not be clear to most people. To be honest, that is where I got pointers for my plan. However, I had to spend a lot of time and effort in converting it to suit my situation. 

So, I hope that explaining the steps I took in a chronological order might give a better view. And, here we are.. 😊 

The story begins.. 

2. My childhood…

As I belong to a proper middle class family, money was always 'spent' and almost never 'wasted'. 

By 'spent', I mean only really 'needed' expenses were incurred, that too, after crossing a few deadlines. 

So, since the beginning itself, I was used to the idea of how valuable money is. Especially, the 'not wasting' and 'saving' side of it. 

A small savings account in one of the (free, government sponsored) boarding schools I studied in helped in getting used to saving a few bucks. 

And, keeping track of my expenses while I was later studying in one of my relatives' house introduced me to 'accounting' (sort of). This, as I can remember, started in 1999. 

I still have some of those hand written entries of my expenses incurred almost 20 years ago in dairies / notebooks. Just going through them feels like getting into a time machine and going back to that time. As, it sort of plays the recording of what I had done on that specific date / time. 😊 

I am happy to have experienced all of these so early in my life. However, I still feel bad for not getting exposed to / educated about / forced to practice the more important thing - INVESTING. Because, all I knew even after I later started earning were: 

• Savings Bank account - which returned pretty much nothing and would get empty faster than I could put money in it
• Gold - especially in form of ornaments, which, I had no interest in
• Real-estate - was a very high hanging fruit and had no idea about.. 😞

3. My earning days…

In 2005, I got my first job - at pretty much the same time 15 years ago. 

Damn!! Its already a decade and a half!!! Feels like I started just a few days ago. 

Anyways, once I started earning, I continued keeping track of expenses. However, after a few months, I started to wonder why I am doing it.. Because, I didn't have to report it back to my parents anymore, like I used to do while I was studying.. Also, I didn't have any financial commitments (loans) or goals (plan to buy something specific) at that time. So, I stopped tracking my money. 

When I look back, this is specifically what makes me feel bad about. I seriously wish someone - 'my parents' / 'any of the relatives' / 'schools' / 'college' / 'the organizations I worked for' - any of them had woke me up, given me some financial goals and made me start saving more. Or even better - make me invest in something worthy. 

In 2006, I got introduced to Stock Market. A few friends and I got ourselves the trading / demat accounts, bought a few good shares, traded for a few months. Unfortunately, that also later took the back seat -> got into the trunk -> fell off somewhere. This is also one of the things 'I wish I had continued'. If I had continued to educate myself on it from that time itself, I probably would've been a better trader today. 

At about the same time, some thing good got into my head and I started with 'Saving before spending'. I think it was probably after I read one of the books about money management. 

In 2007, I opened a new Savings Bank account in a different bank - other than the one I had my salary account in. And, I started transferring a considerable chunk of my salary to it every month as soon as my salary was credited. 

As I recall, I did it for about a year, till I changed my job and moved to another city. Though it was for a small duration, this accumulation helped me when I later needed it. After that, I stopped that habit of monthly saving. This is one of the things I really wish I had continued. But…. 😞

Later, as I progressed in my career, as with everyone else, my pay started increasing, I started seeing some extra funds - when I got paid with variable pay, or, whenever I travelled overseas on assignments. But I neither invested that income nor did I save it. I still wonder what happened to all that money!!

At the end of 2010, I started feeling that the rent I am paying is something I am losing forever. And, getting a house of my own will save me that rent and some income tax as well. 

So, I started looking for properties and eventually found one towards the end of 2011. 

This is when reality struck me real hard. Even after working for 6 years, gathering everything from all my sources, I couldn't come up with the amount worth the booking advance of this property!!! It really felt like I just woke up from coma and couldn't understand what was going on around me. This is the time I wished I had continued with 'Saving before spending' practice I had started in 2006. 

As a side discussion, I agree that this is a topic of a lengthy discussion. There's a ton of valid argument on both the sides of buying a house (or any property) using a loan. 

In my defense, I feel this was one of my wisest decisions, especially given the bad track record I had on saving / investing at that time. If I hadn't taken this step, I probably would have continued the same route blindly and would've continued with the same not-so-useful practice. 

Explaining my current situation a bit more, if I hadn't bought my house that I currently live in, I would have spent almost two-thirds of my home loan EMI in rent and income taxes. So, effectively, I am saving that amount and adding a bit more for something I can live in forever. 

In my case, I feel I really got a good deal. Even my friends / colleagues agree on that. So, let's put this to rest for now as I can't get into any more details about this. 😉

Back to the main track…

Though I was in a situation I didn't like to be, I didn't want to let go of the opportunity as well. 

So, I took the plunge, I borrowed the major chunk of the needed amount as a home loan from a bank. For the remaining part, I borrowed from a lot of friends and relatives. A huge thanks for all of them. :) 

Honestly, I think this is where the real story begins.. :D 

4. My Learning days…

I feel this is when I started with my actual learning - learning to plan my finance. 

As I mentioned above, I had learnt the 'accounting' (I'm referring to tracking my expenses) when I was in my teens. Now, I had to do the 'Budgeting' as well. Because, I had borrowed different amount money from a lot of sources. And, except for the long term home loan at a bank, all of these were short term ones. I wanted to take care of them before those who had helped me got into a situation where they needed it badly. 

So, in early 2013, once I completed the formalities of getting the house to my name, I started with the first task. 

It was to collate all the details of my loans at one place - from whom, how much, when I had committed to return. 

I then prioritized the order of return. 

Next, to come up with a plan to return these loans, I had to forecast how much I can save every month. Also, since I keep getting small bonuses throughout the year, I had to have some idea on what that might be. 

To help me with this, I once again started tracking my expenses - the habit I had stopped in sometime at the end of 2005. 

I used one of the apps on my mobile for this. My wife and I used to enter all the day's expenses into it at the end of every day. I then got a monthly report of the total amount, with category wise breakup. 

This allowed me to come up with my monthly expenses, and in turn, the amount I could save every month. 

Based on the holidays I had planned at work, I also started calculating the bonuses. 

Both of these, when clubbed, gave me an idea of how much I can accumulate, by when. Now, I started communicating the realistic date of returning the loan. 

I then started paying them off as per the plan. And I kept a tight grip on this till all of these short term loans were struck off. 

All this while, I was cautious not to incur any unplanned expenses. Because that would throw my plan off track. 

Summarizing the above: 

• Goal - return my short term loans
• High level steps:  
• List the details of loans -> Prioritize them -> Track the expenses -> Come up with the savings plan -> Return them as prioritized -> Continue the planning for the next one 
• Make sure to avoid any unnecessary expenses 
• Resources
• A tool to list the details - I used Excel / Google Sheets 
• A tool to track the expenses - there are a lot of mobile apps to help with this 

Term Insurance: 

All this while, in 2013, when I was repeatedly going through the plan to return the loans, I sometimes felt that I have taken a bite which is a bit too big for me to comfortably chew. It got me worried about the state it would put my family in if something worse happens. 

So, I started planning for a term insurance - to cover my absence in general and the loans (home / car) in specific, so that my family can lead a normal life with a paid-up home to live in and continue the plans I have for my kids. :) 

My plan, to be exact, was, using the amount from these claims, the following should be taken care of: 

• Close off the home and car loans 
• Keep rest of the amount in a bank fixed deposit and earn sufficient yearly interest to maintain the same lifestyle they are used to: 
• The regular house hold expenses, 
• Kids' school fees, 
• Continue with Health Insurance(s), 
• Maintain the vehicles (insurance / maintenance, etc.,) 
• Continue with the investments I had started - will talk about these in a while,
• And still have some extra bucks to enjoy the life.. :) 

As always, I started researching the what/why/how(much)/where of Term Insurances. And I learnt the following: 

1. Similar to anything else, having too little or even too much of this is not right. Too little is a risk and too much is a waste of money. 
2. It needs to cover 
1. Current financial commitments. 
2. The upcoming commitments. 
3. Do the above while the family leads the same lifestyle they are used to (detailed above). 
4. Considering the possible inflation. 
5. I also remember reading that 'putting all the eggs' in just one basket (single policy / single insurance provider) is also not advisable. This splitting also gave a bit of flexibility for me to 
1. Have partial short term cover - like for my non-bank loans. 
2. Stop some of them as and when I reach my investment goals (you'll get to know of these later). 

So, I performed the following steps to come up with a plan for my Term Insurance: 

1. List all of my loans - to make sure that I cover them - I have already listed them above. 
2. Come up with the duration I need this for - I planned till I expect my kids to be dependent on me, i.e., till they complete their studies and start earning. 
3. List all of my current insurances - 
1. The normal life insurances I had personally taken and 
2. The ones offered by my employer.  Though, I didn't give much weightage for this since it might change if I switch my job. 
4. List all of my monthly expenses and expenses of other frequency - the needed investments, the kids' yearly school fees, yearly insurance premiums (both personal and vehicles'), etc., (screenshot of blank sheet provided below for reference)
5. Check the insurance providers by reviewing / comparing 
1. Their claims settlement ratio as per IRDA, 
2. Their premiums, 
3. Other features 
6. Narrowed down to 3 insurance providers and 4 policies
1. With the first one, 
1. Took 1 policy for a third of my needed coverage 
2. For the duration I had my home loan for
2. With the second one, 
1. Took about 50% coverage 
2. I again split it into 2 different type of policies, 
1. One for the same duration as my home loan 
2. The other for a bit lesser
3. With the third one, 
1. I took 1 policy for the remaining 15% of it - to cover my short term loans. 
2. For a short duration - only 5 years. 
3. From 2019, stopped paying for this as I had cleared off the loans this was supposed to take care of. 

The above is what I planned / bought specifically based on my personal situation and need. The split, the duration, the providers, the number of policies and other stuff detailed above might be totally useless for anyone else. However, the steps I followed should help in understanding what should we consider and the high level steps to follow. 

Sometime in 2017, as I had only the home loan to take care of, I started to see some extra funds getting accumulated in my account. 

Luckily, in 2018, I read another book on investing which explained about a few more concepts, like 'Emergency fund', 'Funds for upcoming expenses', 'Retirement fund', etc., 

Also, since I won't have any full-fledged pension during my retirement, it made real sense for me to plan for these as well. 

So, once again, started the next iteration or 'Research' -> 'Plan' -> 'Implement' cycle. For some reason, I just love doing these activities. :) 

Based on what I read in that book, I listed the following to strike off next: 

• The needs: 
• Emergency fund 
• Retirement fund 
• Education funds - separate fund for each of my kids 
• The wants: 
• Upgrading my car
• Buying a new motorcycle
• Etc.,
• The second income 

The 'Emergency fund': 

This was the one I wanted to close off as soon as possible. 

The main purpose of this was to have some liquid funds available at my disposal in the event of me losing my current job. 

Though I am confident of finding another job soon under normal circumstances, its also a fact that sometimes things won't be under our control and it might take longer to find a new one. 

In such a scenario, I don't want to be in a state of high mental pressure where I have to take some immediate steps like: 

• Disposing off something I own at a lower price or 
• Avail for more loans or 
• Stop my investments and use them - which would push back my plan by at least a few months or 
• Use my long term pension savings (PF / NPS / etc.,) - which would push back the retirement plan by a few years.. 

In a real worst case scenario where I have to take any of the above steps, I wanted to at least have some time to do it in a planned way, with a cooler head - to the possible extent. 

To have that cushion, based on what I had read on this topic, I decided to have at least: 

• Six months' monthly expenses, including my monthly investments and 
• One full year's non-monthly expenses as backup - as I won't know what all necessary expenses I will have to incur when I have to use this fund. 

Since the mode I had decided for this was to use one of my normal Savings Bank Accounts, all I had to do was decide which account to use, come up with the exact amount I need to gather and sources of fund to fulfil it. 

• I decided to use one of the less used bank account
• For the exact amount I need, the expense tracker I had prepared earlier helped a lot. I just had to update it with the latest values for some of them and I had the final number. 
• For the sources, 
• I listed out the extra amount I currently had in my banks' savings accounts, 
• The extra amount I could save monthly, after my regular expenses as per the expense tracker,
• The upcoming bonuses, 
• I even considered my income tax refund - since it was a considerable amount.. :) 

So, after doing the above, I had a plan that looked something like this: 

• Account: of AAA bank
• Target: 123,456.00/-
• Sources: 

    

Every time I got the funds from one of the above sources, I would transfer it to the designated bank account, update the entry in the above table with exact figure and mark it in green. 

By following this, I was able to first accumulate at least the six months worth of expenses in a few months. The yearly part took a bit longer. Still, I was finally able to achieve it. 

I felt like I conquered another big mountain. It, kind of, was a big mountain. Because, I had created a cushion for my second biggest risk. One down, just a few more to go.. :) 

TIP: 

As I had kept this fund in a savings bank account, it was sort of bothering me that it is sitting idle and not earning as much as it could. But didn’t want to risk losing it or locking it in some higher-return instruments. 

So, I recently moved my home loan to a bank which provides a different kind of home loan - where the home loan account will be sort of overdraft account and the amount I park in it will be considered as principal. This will reduce the interest component in my EMI which I can use to pay towards the principal and reduce it to close the loan quicker than earlier. I can take out that amount when I need.

With this, I will still have the flexibility of using the funds in case of an emergency, by getting returns equal to my home loan interest rate which is definitely more than what I used to get earlier. 

Two birds in one stone..!!

I feel this is a better situation to be in without breaking / bending any rules. So, give this also a thought if you have a home loan. 

Kids' education funds: 

The previous one was just a savings plan. However, this and the next funds will be based on investment. Because these are the ones which I won't need immediately and I have quite some time to come up with. 

So, rather than accumulating my own money like I did with the Emergency fund, the best way to achieve these was to use investments which give some regular returns and re-invest them back to use compounding. 

Yeah, these are a lot more complicated than the Emergency fund :( . I still had to face these. 

For these, I decided to use 'Mutual Funds'. This was something new to me. So, I had to read a lot about these. 

As usual, I first listed the high level info and then started filling in the details: 

• Target date - this was the easy one. I just had to figure out when my kids would turn 18. Because that's the age at which a Bachelor's degree would start in India. 
• Target amount - 
• I started with the amount a Bachelor's and a Master's degree would currently need in a good institute. Then, added the inflation for the remaining years to it. There wasn't a better accurate / logical method for this. 
• Also, this was kind of a floating plan as I can't predict what my kids will decide to do with their life. So, 
• if I will have to spend more, I would just go in for Education loans and let my kids take care of it once they earn. 
• Or, if I have to spend less, I will just add the remaining amount to my retirement fund. 
• The main purpose of starting this was to make sure that I have some head start and I (or my kids) won't curse me in the future for not thinking of this and be prepared to at least the possible extent. 
• The frequency of investment - I decided on the logical one - monthly - based on my salary frequency. 
• The realistic yearly returns I can expect - based on my study, I settled with a bit conservative but higher than inflation %age, to avoid deviating too much from the plan. 
• The amount I'll have to regularly invest - I just used a couple of online calculators to come up with this. 
• The schemes I need to invest in - this was probably the most difficult / tricky part. However, I will put the high level plan I finally decided upon: 
• As I had at least a decade to achieve the goal of these funds, to start off, I decided to go with the Equity based Mutual Fund schemes. The reason being the higher returns, with higher risks, of course. 
• The plan, is to later shift them to a bit less risky ones when the goal is a couple of years away. 
• Even within the Equity based ones, I decided to split them between 'Blue Chip', 'Mid Cap' and 'Small Cap' schemes. 
• So, I searched for the schemes from well known fund houses (to reduce the risk to an extent) and finally selected three schemes. 
• I split the amount roughly in 40:35:25 ratio between Blue chip : Mid Cap : Small Cap. 
• I finally created the accounts and started investing by providing standing instructions to auto debit the amount from the bank accounts. 
• Extra factors: 
• I created two separate folios for each of my kids
• Since the duration I had for my kids was different, the amount was different between them. However, I kept the Mutual fund schemes the same and even the split ratio was pretty much same. 
• I made sure these get auto debited from my wife's bank account (instead of mine) so that she is aware of it and continues with these with or without my presence.. 

Retirement fund: 

Unlike the pension facility enjoyed by our previous generation that worked in Government / Public sectors, we don't have any such facility. So, I have to think of it and prepare for it by myself, if I don't want to keep working into my old age. 

Unknowingly, this had already started as soon as I started earning - in the form of 'PF' (Provident Fund) contribution. And, recently with 'NPS' (National Pension System). It was still no where near to what is needed to achieve the needed corpus. 

So, for the remaining part of this, I decided to use 'Mutual Funds'. The research done once helped both of these funds. 

Again, first the high level info and then the details: 

• Target date - I gave myself 15 more years to reach this goal. Once again, there is no logical reason behind it. Its just that I can probably bear only that duration of working like I am now. Given a choice, I would like to retire yesterday.. ;) 
• Target amount - For this, I sort of went with an amount pretty much same as my term insurance. The overall idea was that if I can reach this goal, it would be safe to assume that I will have a paid up home to live in and the funds for my kids' education taken care of. So, I would need very less to live the usual lifestyle. And, if really needed, I can still continue to earn a smaller income. 
• The frequency of investment - Again, I decided on the logical one - monthly - based on my salary frequency. 
• The realistic yearly returns I can expect - based on my study, I settled with a bit conservative but higher than inflation %age, to avoid deviating too much from the plan. 
• The amount I'll have to regularly invest - I just used a couple of online calculators to come up with this. 
• The schemes I need to invest in - As mentioned above I used the info I had gathered while planning the education fund, with minor changes: 
• For this as well, as I had at least a decade to achieve the goal of these funds, I decided to first go with the Equity based Mutual Fund schemes -> later shift to a bit less risky ones when the goal is a couple of years away. 
• Again, within the Equity based ones, I split them between 'Blue Chip', 'Mid Cap' and 'Small Cap' schemes. 
• In terms of schemes, I used two of the well known ones I had used earlier. I then chose a bit lesser known one as it had a better track record. 
• I split the amount roughly in 35:40:25 ratio between Blue chip : Mid Cap : Small Cap. 
• I finally created the accounts and started investing by providing standing instructions to auto debit the amount from my bank accounts. 
• Extra factors: 
• These get auto debited from my own bank account. Since, in a worst case scenario, the term insurance would take care of my wife's retirement, and, continuing with this will be optional. 

Health Insurance: 

This is something which I had in my radar since a couple of years but I prioritized it lower than others. 

In fact, I had actually taken such an insurance about a decade ago. But then stopped it after a couple of years since it didn't feel it was needed. 

The major reason I felt like that was due to the lower medical expenses at that time, and, my employers covering it as part of my cost-to-company (CTC). 

However, off late, it started to feel that the medical expenses are increasing exponentially. Not specifically my expenses but the overall scenario. Because of that, started to feel that I am not covering this risk adequately, especially if I quit / lose my job. Or, switch to another job which doesn't provide the cover that I currently have. 

Also, with kids added to the list and parents growing older (the insurance at my current employer covers parents as well :)), I felt that the current coverage by my employer might not be sufficient. 

Honestly, I didn’t research too much about this. Because, I got an offer from one of the credit cards I had. And, I compared it with some of the others in the market. Though it was a bit expensive, I thought of giving it a try for a year and went for it. 

This covered myself, my wife and my son. My daughter was too young to be included in it. 

So, my plan is to use my office insurance for my parents and my daughter. And this personal insurance for the other three of us covered under it. 

Good thing is, apart from the normal in-patient cover, this also takes care of the out-patient consultations, medicines and things like Gym memberships. So, considering these and the tax benefits I get, I thought it’s a good deal. 

This is not a must for everyone. Still, I am mentioned this here so that this also gets a thought, depending on the situation a person is in. 

One important fact to note is, recently when I tried to get the insurance for my parents who are senior citizen (60+), the premium was huuuuge. I felt that I should have got it for them 15 years ago as soon as I started working and when they were in better shape. 

So, it made even more sense to get it for me and my wife now itself, when we are young and healthy so that I can continue with it later as well. 

Bonus point: if we get it a bit early, the duration of waiting period (of 2 to 4 years) for some selective diseases will (hopefully) be over before we enter that stage. 

I know it sounds like I'm trying to predict the future, or, probably just trying to justify the reason I bought it. 

For me, these are just some valid points to be considered. 

The Second income: 

I know I'm skipping 'The Wants' section of the list :) . The reason is pretty obvious - most of us are experts in it, aren't we?? ;) 

So, once the short term risks (losing a job / medical emergencies, etc.,), long term risks (need to claim the term insurance) and the future plans are taken care of - as in, planned and running on auto-pilot, it made sense to tackle the next important thing. Which is, to arrange for some more income. 

I think of this for two reasons: 

1. To give a boost, along with the current full time job, so that the goals can be achieved for sure, and a bit early. And, if possible, to improve the lifestyle. 
2. To have some fallback income in case there is a disruption with the primary one. Especially since there is just a single engine running the family. :) 

To be honest, I actually started with this in mind even before I thought of the others explained above. 

Trying to secure a second income is the major reason I still have most of my home loan intact. :( 

I'm not going to get into the details of these. Let's just say, I thought of a lot of things I felt I should try out but wasn't in a situation to execute them full time. So, just scrapped most of them. 

However, I did try a few things which didn't go as planned. Few of the reasons are - lack of time, dependency on others, trying to follow all the rules... 

So, my advice is, be very careful when you try something which will risk your hard-earned after-tax money. 

Based on my previous experiences, specifically for my situation, I thought that trading is a better option. Because, it is flexible in terms of time, and I don't have to depend on anyone else. This time, I decided not to enter it blindly and with over-confidence like I had done a couple of years ago. So, I spent a lot of time reading about it and learning how things work. 

Though this is not a sure shot thing to work out, I can keep learning / improving myself for as long as possible. And, if this works out, I can continue with this once I retire from the full time job. 

I am NOT, in any way telling that this is 'the way' or even a 'better way'. Just that I feel this might work for me. 

I won't spend too much on this as I don't have any solid guidelines or experience on what to do or what not to. 

Income Tax - the 'exemptions' part of it: 

After going through the above list of funds, even I get the very valid question - how to arrange for all of these?? 

The main source, obviously, will be the income we get from our occupation. 

Once we earn, the major part of it will be the 'Taxes'. That is, if one doesn't have a plan on routing it properly. 

Since taxes are sort of one-way traffic for most of us middle-class, who don't get any special direct benefits like the lower / no income group of people, I feel that we should lower the taxes as much as possible, using the allowed exemptions. 

I know that there will be some argument against my statement above, to be responsible and contribute to the growth of the nation and all. I am fine with it since I am not asking anyone to break any rules. I am just pointing out something that some people have not given enough attention to and very few have categorically ignored. 

Moreover, no matter how much we try, most of the salaried class will never be able to save full taxes. We can just reduce it by a few percent. 

I know it is a no-brainer to save the tax, right? Why am I even mentioning / spending time on this? 

I am highlighting this since I was surprised when I found out that some of the people are just not worried about claiming the exemptions and are paying full taxes even when they are eligible for exemptions. 

For example, a lot of people pay the rent for their house and pretty much everyone buys one or the other insurances but some of them never claim it. 

It is also true that to save 20-30% of the money, we'll have to save / invest the remaining 70-80%. I just consider the savings as the immediate returns. It also gets us into the habit of 'saving before spending' for our future. And, if invested in some good instruments, it will grow in compounded manner accumulating into a good enough corpus which can be used for future expenses / retirement. 

I will just list some of the instruments I use to avail the exemptions. And, some others those can be used to save some income tax. I won't go into too much details as these can be easily searched about on the web. Also, you can always get in touch with a CA (Chartered Accountant) to fully utilize these. 

The ones I avail (as on September 2020 - as these can change anytime): 

• Pre-salary 
• PF (Provident Fund) 
• NPS (National Pension System) - the part that employer can deduct and pay before paying us the salary - up to 10% of basic component of our salary 
• Post-salary 
• Home Loan
• Interest 
• Principal 
• Insurances
• Kids' education fees
• NPS (National Pension System) - up to 50k beyond the 80C exemptions 

I believe some of my Mutual Fund investments are eligible for this. However, these are part of 80C which are already covered by the others. So, I don't use them as of now. 

I will, however, use them as well once there is any space in my 80C exemptions. 

The others I can consider later are: 

• Mutual Funds
• PPF / VPF - different types of Provident Funds - I haven't used these till now. 

Overall, give this also a thought since it will save some money for you while saving / investing some of it for your future. 

The feedback loop:

So, we finally got most of the things sorted out. Does this mean we can sit back and relax? 

The answer to this is both 'Yes' and 'No'. 

'Yes', because to an extent, we can sit back and be a bit stress free knowing that we have acted on managing our risks. 

'No' because we still need to keep monitoring our situation to make sure we remain on track. Its like keeping our hands on the steering wheel even when the road in front of us is straight. It is to make sure we do the minor course corrections when needed. 

How to do this?? 

It is by periodically reviewing our situation, checking how much of the journey we have covered. And, if needed, 

• add more funds, if possible 
• transfer existing funds to a better instrument 
• Stop unwanted expense - like the insurance taken for short term loans

The frequency at which this has to be reviewed can vary based on our personal preference. 

I initially thought of reviewing it monthly. I did it for a few months as well. Later, it started to feel that I am micro-managing it and it was taking too much of my time. Also, I missed checking it a couple of months and didn't feel good about it. 

So, I later moved it to once a quarter. This frequency seems to be working for me as I have been doing it without fail or feeling over-loaded by it. 

For some people, half yearly or even yearly review might suit. You just need to find your frequency. 

Along with the frequent review, we can even have a glance at other times when there is a change in flow of income - like, 

• Getting more money in hand due to 
• An increment in the current organization 
• A hike at the new job
• Adding a second regular income - spouse's new job / new part time business 
• Getting returns from some older investments
• Reduction in commitment - like closing a loan 
• Reduction in funds
• Having to take a pay cut
• Losing a job 
• Huge expenses - both expected and unexpected 

The intermission: 

I think I have poured out all that I have done till now / had in my head over here. So, this is a logical stage where I can give this blog a break. 

I will keep updating this if there are any minor corrections / additions needed. Or, if I come across something I feel is worth adding to this. 

Once again, I am aware and agree that I haven't touched upon everything related to personal finance. These are just  really high level things I have been through. 

Some of these might feel junk to you or you might feel that I have missed something else which is very important. Please do leave a comment so that I can review and incorporate them in my plan.

Finally, the disclaimer once again: 

I am not a certified financial planner. The above is just high level info on what I have done based on what I felt my life needs. 

So, please do your own research on what you need based on your individual situation. And, if needed, consult a qualified financial planner before you jump into taking actions. 

Good luck with your journey.. :)