A few financial lessons for life

Here, I want to share some important steps you can take to keep your financial life secure. I have learned these from various sources and from my own experience. I hope you will do even better than I have as you read this.

Please note that I am assuming you are an Indian citizen, have a job, and possess basic financial knowledge.

Here, I am dividing the journey into three phases and beyond. You can start your financial journey at any age or time, based on your life situation. But whenever you begin, start with the first stage, then move to the second and third, and add your own phases as you grow.

As always, take what you like and leave the rest. So, let’s start:

First phase

In the first phase, I want you to focus on building a strong financial foundation and protecting yourself from unexpected events.

Take health insurance for you and your family as early as possible.
Take term insurance if your family depends on you. It will give them financial protection if something happens to you.
Start saving as early as possible. It is better to begin with low risk methods such as recurring deposits or fixed deposits.
Try to save at least 20 percent of your income. If you do not have much money, start with 100 rupees. Remember that compounding is powerful.
Create an emergency fund that covers at least ten months of your expenses. Keep that money in low-volatility funds (Fixed assets, Liquid funds, etc) and maintain a low cost credit card for sudden emergencies.
Remember if you tap into your emergency fund, make it a priority to replenish it as soon as possible.
Update the beneficiary in all your financial accounts.
Keep track of your income and expenses. If you track them, you can control them. Start with a simple Excel sheet with Income, Expenses, and Balance columns.

Second phase

In the second phase, I want you to focus on growing your money patiently.

Try to increase your income over time by improving your skills or by switching jobs.
Just because your salary increases doesn’t mean you need to spend more. Keep your lifestyle simple and invest the extra.
Prepare your short-term and long-term goals such as gadgets, car, vacation, home, child expenses, or retirement, and start saving accordingly in different schemes.
Invest in the stock market directly or through SIPs, and stay invested for a long time.
Diversify your assets into equity, gold, debt funds, real estate, pension schemes, fixed deposits, and other options. Do this according to your risk tolerance, but do not put all your eggs in one basket.
Review your investments once a year and rebalance if necessary.
Avoid unnecessary loans and high interest debt whenever possible.

Third phase

In the third and final phase, I want you to organise your finances and prepare for the long term.

Make a monthly and yearly budget to understand and analyse your financial life.
Maintain a list of all your assets and liabilities and update it once a month. Knowing this will help you make financial decisions more easily.
Think about your retirement and identify how much money you will require for it. You can find the formulas on the web and save accordingly.
Keep your documents such as insurance papers, loan documents, stock market investments, gold records, and your asset and liability list somewhere safe. Also store the passwords for your banks, stock market, and other accounts securely. Make sure your partner or loved ones can access them if something happens to you.
Understand how much is enough for you. After that point, you may simply be chasing more.

Beyond the above

After covering all the above phases, I hope you will be able to figure out what to do next and create your own financial success. So go on and create your own destiny.

Few things to keep in mind

Keep learning about personal finance. Start with money management, taxation, inflation, etc. It will help you in the long run.
Find one or two people you trust and discuss important financial matters with them when needed.
Don’t be greedy. Help when you can. Kindness transcends.
The best investment you can make is investing in yourself. Spend money on things that make you happy and help you grow.
Save money so that you can live your life well, not the other way around.

I hope at some point you will realise that money is only a tool. What really matters is how you live your life. Life is short. Live it well.

Disclaimer

Sometimes I fail to follow what I say, but I never fail to try. Everything I say may be wrong.

Updates

Some of you asked for detailed references for the above notes. So here I am updating some resources for your references.