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Money Tips I Gave To My Son When He Got His First Pay Cheque

1. This cheque is the “real” money. Credit card is not money (it is merely a payment mechanism). Therefore, the cheque amount should determine your spending pattern; not your credit card limit. Utilize only that much limit which you can easily repay at the end of the month.

2. Contrary to popular perception, Cars, TVs, Smartphones, Air Conditioners, Tablets, etc. are NOT assets. They are liabilities. Because they depreciate. Because you need money to use and maintain them. So don’t accumulate too much of such “fake” assets.

3. For greater transparency, flexibility, liquidity, simplicity, convenience and better returns keep insurance and investment separate. So don’t buy policies that combine investment with insurance. Stick to pure insurance plans to insure against unfortunate eventualities.

4. Borrowing means spending tomorrow’s unearned (and possibly uncertain) income today. So be very careful. If you have to borrow, borrow for the “right purpose”, borrow the “right amount” and borrow at the “right cost”.

5. Start early, invest regularly and stay invested. Time makes money. Fixed deposits, shares, mutual funds, property, gold, etc. are merely the tools that Time employs to make money for you.

6. Saving tax is important… but not at the cost of investing in a bad product. Also, do not wait till the year-end to do your tax planning. Do it at the start of the year itself.

7. Keep things Simple. A simple term plan, a simple mutual fund, a simple medical insurance plan, etc. will work well in most cases. Don’t be under the false impression that complicated products do a better job.

8. Buying shares? Leave it to the experts. Just because you know how to drive a car, doesn’t make you eligible to participate in F1 race. Mutual Funds work like a car-pool… Mutually Beneficial, Universally Convenient and Highly Economical.

9. Don’t be misled by rosy promises and hi-profile advertisements (By the way, my son is an advertisement professional.) Promises of unreasonably high returns are often false.

10. Personal finance is not a difficult subject. It is lot simpler than trigonometry and calculus; chemical reactions, equations and formulas; Newton’s and Einstein’s laws; and all the commerce, history, geography, etc. that you studied in school and college. So “spend” some months learning about money matters, before you start “spending” your money.