My SCRAPBOOK (సేకరణలు): A COLLECTION of articles in English and Telugu(తెలుగు), from various sources, on varied subjects. I do not claim credit for any of the contents of these postings as my own.A student's declaration made at the end of his answer paper, holds good to the articles here too:"I hereby declare that the answers written above are true to the best of my friend's knowledge and I claim no responsibility whatsoever of the correctness of the answers."

Saturday, February 08, 2014

1338- dilbert's9 point financial plan -will it work for india?

Adam Scott’s secret nine point formula is here and many people have said it deserves the Nobel prize.
Ha! simplicity is in. However all the people who want simplicity in THEORY actually LOVE to make their lives more COMPLEX. Given a choice between Idli and Aloo Parathan if you choose A.P, remember you are choosing craving over hunger and nutrition. Nothing wrong, but you will live with the consequences. That is all.
Notice its simple brilliance in the exact reproduction of his formula:
1. Make a will:- I have said this enough number of times on Subramoney. com, however results are a consequence of action, NOT GOOD INTENTIONS. How many of you actually got down to do it – that is the question.
2. Pay off your credit cards:- More an American problem, but yes pay off all your credit cards, cut up all your credit cards, except one, and hey learn to live within your income.  
3. Get term life insurance:- (approx.10times annual income) if you have a family to support. Even if you are in business – say you are a partner you will need business insurance. Make sure that the firm pays the premium and insures the partners. So that in case of a partners demise the firm does not suffer.
 4. Fund your 401k to the maximum:- In the Indian context this can mean the PPF or the NPS. I fully agree with the PPF, but hate to say that I do not like the NPS.  
5. Fund your IRA to the maximum:- If this is your personal pension plan, yes fund it to the fullest -but remember if by paying this and PPF if all your investment surplus is exhausted, you will have to make alterations.
6. Buy a house:- if you want to live in a house and can afford it Absolutely brilliant. To me affordable house is when you pay 50% downpayment for the house, not 10% contribution and a 90% loan and a 10% personal loan to pay for the stamp duty and party for friends.
7. Put six months worth of expenses in a money-market account:- A combination of SB account, M M Fund, and bank FD could also work.
8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement.

If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio.

Ok these are all NICE TO DO. Let us say what happens in real life. People go to a planner and have a nice ‘MUST DO LIST’ then they go and do what ever they want! No point in telling the dietician that you are going to have idli…..and then saying ‘Oh my friends forced me…so I had butter chicken’ . Just Do It. But do remember 3 of Nikes heroes are now in trouble!
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