Let's Talk Money - By Monika Halan

Let's Talk Money - By Monika Halan

Summary:

Chapter 1: The Money Order

The author explains how we should go about managing our finances. She introduces the concept of the “money box” that everyone should make for themselves. The purpose of the money box isn’t to keep only your investments, instead, it is to streamline your cashflows.

Chapter 2: Don’t stash that cash!

The author talks about building a cash flow system in this chapter. She shares her system of keeping 3 accounts: The income account, the ‘spend-it’ account, and the investment account. At the start of the month, she moves out her monthly expenditures from the income account to the ‘spend-it’ account. The remaining amount is transferred to the investment account.

Chapter 3: Emergences need a fund

The author explains the importance of keeping an emergency fund. Keep about six months’ worth of your expenditures stored in case of an emergency. She recommends using a short-term debt fund to store your emergency fund.

Chapter 4: Building Your Protection

The author now talks about getting yourself a medical cover. She explains that good medical coverage is more important than having life insurance. Before getting a medical cover, however, she asks you to ensure that it doesn’t have a ‘co-pay’ clause, a ‘pre-existing’ disease clause, or a ‘disease waiting period’ clause. Lastly, the author advises readers to research the claim history of the company to make an informed decision before choosing a policy.

Chapter 5: What if you die?

The author explains the importance of life insurance and recommends purchasing it online to save on agent commission costs. She advises that the sum assured should be 8-10 times your annual income or 15 to 20 times your annual expenditure.

Chapter 6: Finally, we’re investing

The 4 big reasons one puts off investing are that they 1) Don’t have enough money, 2) want to store money for a future emergency, 3) are afraid of making mistakes, 4) lack the knowledge. If you have followed her advice from the earlier chapters points 1 and 2 have already been addressed and the next two points will be addressed in the following chapters. For now, she urges you to write down your near-term, medium-term, and long-term monetary goals.

Chapter 7: Let’s de-jargon investing

Debt is an umbrella term for all financial products that are based on borrowing, equity is ownership of a business and the risk that it brings, and real assets are those that can be physically seen. The role of debt products (provident funds, public provident funds, etc) in your money box is to provide money at short notice and to provide stability to your long-term investments. Debt allocation should correspond to your age. For example, at age 30 your debt allocation should be 30% of your portfolio.

Chapter 8: Equity

Before investing in equity products, you must understand that it is a slow process and that you must wait 7 to 10 years to see returns. The best way for you to invest as an average person would be to do it through mutual funds. If you aren’t able to choose a particular fund, invest through index funds.

Chapter 9: Mutual Funds

A mutual fund is a way to pool the money of a large number of small investors and hand it over to experts to manage it. You can buy 3 kinds of asset classes through mutual funds – debt, gold, and equity.

Chapter 10: Putting it all together

To summarize, these are the compartments that you must keep in your money box: A cash flow cell (the 3 accounts mentioned in Chapter 2), an emergency funds cell, a medical insurance cell, a life insurance cell, a short-term goals cell, a medium-term goals cell, a long-term goals cell, and a retirement fund.

Chapter 11: My Retirement

Try saving 10 to 15% of your income towards your retirement. By age sixty you would want 18 to 35 times your annual spending in your retirement fund.

Chapter 12: Redo the Box

Our lives are constantly changing, and so must our money box. our expenses decrease as our children become independent, etc. Set two dates within the year when you make changes to your money box to better fit your needs. When thinking of replacing a financial product in our box, make sure that it is either cheaper or gives better returns, or both. Don’t be influenced by markets rising or falling when making your changes.

Chapter 13: Will It

No matter your age, you should make a will so that it is easier for your family to use the proceeds of your insurance policies and your assets in your absence. Make sure your family knows about the existence and details of your will.

Chapter 14: What kills a Money box?

What kills a money box? Excessive spending, borrowing too much, and participating in market manias out of greed. Make sure your spending is in control and that you pay off your credit card bills as they arrive. Control your borrowing as well, don’t borrow what you can’t pay back. Lastly, don’t engage in market manias like bitcoin, etc.