292 Words to Change Your Financial Life…Today!!

This post is inspired by Rohit’s brilliant post on how to manage your money. I am borrowing a few of his ideas & adding a few myself.
  • Never depend on just one source of income.
  • Save at least 20% of what you earn from all sources. (Also read why saving a percentage of salary may not be enough).
  • Buy a plain Term Life Insurance of Sum Assured amount equal to at least 30 times your annual expenses.
  • Buy health insurance for yourself and those who depend on you.
  • Create an Emergency Fund equal to 6 months worth of your expenses. Till the time you have not created such a fund, don’t think about investing or buying luxury items.
  • Start Monthly Recurring Deposits of 6 months. At the end of 6 months, use the maturity amount to create a Fixed Deposit for 1 year. Repeat every 6 months. To start with, use 20% of your savings (in step 2) to start Recurring Deposits.
  • Use the remaining 50% of your monthly savings to invest in Stock Markets via SIP in Index Funds or well-established, diversified mutual funds. Do not go for sector funds.
  • Use the remaining 30% of your monthly funds to create a Market Crash Fund (use another RD). Keep saving money in it till the market crashes. When it does, buy quality stocks at low prices. To know which are quality stocks worth buying in market crashes…
  • Gold, silver and precious stones are good for social or religious requirements. These are not investments. These are insurances against bad times. (To understand this point, just think for a moment that will you sell gold or silver in case prices go up? The answer would be a No. You sell these only when everything else is lost. Period.) Do read Using Gold ETFs & Gold Bonds for Long Term Portfolio.
  • And always remember that: i) Investment & Insurance are different things; ii) Investment & Savings are different things, & iii) Do not consider Insurance as Investment or Saving.
Above might work for most of us and does not require any complex rocket science to be implemented.
So go on….say goodbye to your brokers and financial agents. 🙂


  1. Hi,

    I am sorry I didnt understand the intention in this

    “Start Monthly Recurring Deposits of
    6 months. At the end of 6 months, use the maturity amount to create a FD for 1
    year. Repeat every 6 months. To start with, use 20% of your savings (in step 2)
    to start Recurring Deposits.”

    Why FD for only a year? Whats the rationale?

  2. Hi Nitin

    Glad you asked about this point. The rationale is as given below:

    Sometimes, its tough to make lumpsum FDs for average people like us. I suggest using a RD for 6 months to accumulate sufficient funds to make a bigger FD. For example, it might be tough to spare Rs 60K for a FD in one go. But change that to a RD of 10K every month, you have a solid amount of 60K at end of 6 months. You can then make an FD of 60K for one year (or two, three whatever). Once done, you again start an RD to accumulate funds for your next
    FD after 6 months. In this way, after initial one year, you would create a cycle of FDs maturing every 6 months. And the cycle can continue like this.

    This is based on concept of laddering of assets.

    A benefit of this approach is that it helps save decent chunks of money without much botheration. This approach can be used to save funds to make down payments for purchasing assets like real estate.

    Hope above explanation helps.

  3. Actually I was wondering if there was any benefit bcoz rather than make an RD for 6 months and an FD after 6 months, I can make an FD monthly right?
    So in the example above, I can make an FD of 10K monthly right?

  4. Correct. That can be done. Its just that to having an FD of 60K is more manageable than having 6 of 10K each. But that's a personal choice and more about convenience. .

  5. Hi Dev,

    I have been following the same approach for a year now and its very much feasible for avg investors. I recently read an article that talks abouts starting SIPs in good debt funds like a bank RD to take advantage of tax savings and higher returns.

    What do you think of this approach?

  6. Hi Mohan

    Approach can be good if you are saving for the short term (less than 5 years). In case you are in for long and really long term, SIP in equity funds is a better option.

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