A Cartoonist tells you all that you need to know about Financial Planning – in just 118 words!

No, it’s not a joke. This famous cartoonist actually tells you all that you need to know to have a healthy financial life and that too in just 118 simple words. What’s more, I think he does a far better job of it than most Financial Advisors!

Scott Adams with Dilbert Image

Who is he? He’s Scott Adams, the author of Dilbert, the popular office humour cartoon strip.

So what does he say?

You can see the original text by clicking here.
  1. Make a will
  2. Pay off your credit cards
  3. Get term life insurance if you have a family to support
  4. Fund your 401k to the maximum
  5. Fund your IRA to the maximum
  6. Buy a house if you want to live in a house and can afford it
  7. Put six months worth of expenses in a money-market account
  8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement

If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio

Of course, Mr. Scott has written the above in the American context.  In our country, things are a bit different. For example, we have neither 401K nor RIA in India.

So what about Mera Bharat Mahaan?

 We need to tweak Mr. Adams’ advice to befit the Indian context.

So here’s my two cents , er..paise:

1. Make a will.
But getting the will probated means 3-6 months waiting period (optimistic scenario), expenses and possible legal hassles to boot.
So do make a will, but also do the following:

  • Have joint holdings wherever possible
  • Nominate

2. Pay off your credit cards
With the insanely high interest costs (36%p.a. to 52%p.a.) and other charges, if you use a credit card, you better pay off the entire amount every month.

3. Get term life insurance if you have a family to support
Also get adequate health insurance – unless you want to depend on governmental/charitable healthcare.

4. Fund your EPF(for employees), NPS for Govt. Employees and PPF (for all) to the maximum
 
5. Aah… We don’t have anything similar to the US IRA account…  And no, do not invest in Pension Plans of insurance companies!

6. Buy a house if you want to live in a house and can afford it
Assume an immediate 50% rise in EMI to test affordability.

7. Put six months worth of expenses in a liquid mutual fund.

8. Take whatever money is left over and invest 70% in the ‘growth’ option of a stock index fund or ETF and 30% in a bond fund through the ‘direct’ mode and never touch it until retirement.
Or invest 100% in balanced funds which will roughly do the same job for you in a tax-efficient manner.

9. If any of this confuses you, or you have something special going on (retirement, college planning, children’s wedding expenses, tax issues), hire a fee-based financial planner, not one who gets commissions from your investments.

Now as to what kind of financial advisor you should not choose, I’ll let Mr. Adams’ characters do the talking 🙂

Brokerage.strip

CareerAmbition.strip

FlyingDebenture.strip

Mansion.strip

ReduceIncomeTax.strip

Advertisements

7 thoughts on “A Cartoonist tells you all that you need to know about Financial Planning – in just 118 words!

  1. Devendra Gandhi

    Good article and nicely picturized.
    I understand The article talks more about lump sum investment but the person who starts from scratch than how he should go about need to be briefed

    Like

    • Thanks Mr. Gandhi! The investments mentioned may be made in lump sums or via SIPs / regular purchases. The principle remains the same, more mode of investment may change.
      However, I will surely be taking your suggestion and writing a separate post for beginners.

      Like

  2. nice one

    Like

  3. very good !!

    Liked by 1 person

  4. Nice article, simple and focused. Keep the good work on.

    Liked by 1 person

Thank you for reading. Your thoughts are vital to the health of this blog. Please spare a moment to let me know what you think...

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s