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10 steps to financial nirvana by Vishal Khandelwal


Ever dream about financial freedom? Of course you do. We’re sure friends and family give you all sorts of advice, but take it from Vishal Khandelwal, a financial analyst and founder of Safal Niveshak, gives us some advice that has worked for him.


I feel I am too young to dispel any life-changing advice on how to remove all financial worries from you life, but I am happy to share 10 rules that have changed my life for the better over the past few years, and how these can also benefit anyone who practices them with discipline and integrity.


1. Save, Save, Save
Save at least 10 per cent of your net take home pay during the first year of your career, 20 per cent in the second year, and so on. Plan to increase it to 50 per cent in five years. Saving more is always good, but 50 per cent is a number you must certainly target.  The best way to meet this target is to first save, then spend of what remains.


2. Restrict loan repayments
Never have your combined loan repayments at more than 30 per cent of your net income. If you have reached this limit, don’t borrow any more money.

The highest I ever went was 40 per cent after I bought my car in 2007, but brought it down to under 30 per cent after I repaid the car loan in 2008 from my savings.


3. Create Emergency Fund
Create an emergency fund that is at least six months of your household expenditure. Keep this money in your bank account or in a liquid fund.

Don’t touch this money to pay for a new car’s down payment! This money would help you when misfortune strikes in the form of a job loss or illness.


4. Buy Medical Insurance
Even if your company provides one, buy a personal medical insurance policy that will cover you and your family even when you quit your job or are out of job.

I know the importance of having a medical insurance, as I benefited from it when my daughter fell seriously ill when she was just two years of age. Not having a medical insurance would have enhanced my trauma.


6. Pay off High Cost Loans
Try to avoid high interest loan like credit card or personal loan. But if you are unfortunate enough to owe one, pay off as fast as you can. As Charlie Munger says – “Once you get into debt, it’s hell to get out. Don’t let credit card debt carry over. You can’t get ahead paying 18 per cent.” I have never borrowed a credit card or personal loan, as I know these are things that could kill me financially. Remember – If you wouldn’t buy something in cash, don’t buy just because you can use a credit card or borrow a personal loan.

7. Never Borrow for Liabilities
Avoid paying interest on anything that loses value. A car, especially a flashy one that you don’t really need, tops this list. Electronic toys, such as mobiles, tablets, LCD screens, come next. You can still buy a car on loan, but try to repay that loan as fast as possible. Also, see to it that the payments don’t lead you to cross the 30 per cent repayment limit.


8. Repaying Home Loan
If you have an option of paying off your home loan versus investing that money, know that it’s both a financial and an emotional decision. Avoiding paying off a six per cent interest (post-tax) home loan and instead sensibly investing that money to earn 12-15 per cent return is a good financial decision. On the other hand, clearing the home loan instead of investing that money is a nice emotional decision.


9. Know the Priorities
Don’t invest in the stock market – directly or through mutual funds – till you have an emergency fund, medical insurance, and term insurance in your kitty, and also till you repay all high-interest debt. In fact, don’t invest any money in the stock market that you may need in the next one to two years. If your stocks fall in this short period of time, your financial life may get compromised.


10. It’s Not (Always) about the Money
While these rules will help you take better care of your money and financial life, remember to not get too focused on these things that you lose out spending time on the real joys of life. As a wise man, or maybe a woman, once said, “No matter how hard you hug your money, it never hugs back.”

The Best You

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