Monday, January 25, 2016

The first step towards family and personal finance planning is to understand the financial situation. Because I live in India it's equally important to understand my CIBIL score too.

Bank account:
Opened a google sheet and started to enter the bank accounts with account numbers we had and then check if we had any internet banking enabled. To my surprise everyone had more than two bank accounts and had no purpose to hold. I then checked that these were paying very low interest for the savings.

It took few hours to sit with my parents and list down what are loans my family had and how much we were paying interest every month. Also it made sense to list down what are the future big functions we anticipate.

Being a middle class, salary was the only source of income we had. I wish we had multiple source of income like rent, interest, mutual fund and FD etc.

Yet to collect details, still my mom is searching for docs. See we make payments but we don't maintain it on a proper file. So had started to file all the purchase and terms documents.

Shocked to know that we did not have any investments which could grow on compound interest.

Utility bills:
The most unnecessary spending was on our phone bills. (on an average 4*1.5K = 6K)
Travel was my second most on the bar. Last year was crazy and i had travelled on an average 10 days a month. Thanks Redbus and PayTM for offer coupons.

Late fee:
Was broken down when i learnt how much late fee was paid by us in multiple bills due to lack of clarity on who will pay and when is the due date.

Automate bill payments:
I decided to make all the payments link to my credit card hence it's recorded and paid on time. Though not i save here but was able to avoid late fee charges.

Understanding the basics on cash:
We may have some savings today, consider I have 100 rupees today but the same won't be 100 rupees in reality because of the inflation. So, having savings is not a great think, making sure we invest where it grows on compound interest is the smart way.

Underestimating the power of CIBIL score was my biggest mistake. Last year since i was running a startup in a bootstrapped mode, it took all my savings and i could not pay the education loans on time it had affected a lot on my score. So, it's a really important for us to download our CIBIL score atleast once a year so we know where we stand. 

Just like that, I took this year resolution as finance management but fortunately i'm happy that it's teaching me lot of value. Once i had thought I'm educated and can make money any time using it, but now i realise it's not about how capable we are, it's all about how we mange what we earn by saving it.

Please share your thought about what are the basics of financial management and planning. Look forward to learn.


You've got a good thing going, Mohan. Made me go into a thinking mode, too.