Why Personal Finance Articles & Advice is Useless

Posted on August 11, 2009 by Ranjan

In a previous post, I refer to a conversation with my Sister where she tells me that she knew how to handle her money. She was polite and didn’t tell me that she doesn’t need a personal finance blog to tell her how!

Even though it hurts my “Personal Finance Blogger” ego, I do concede that she’s right.

Everybody who has a bit of common sense, can manage their money. This post is about the value of personal finance advice and articles. It is important to not just believe blindly on the advice given, but to have an eye on how to apply those advice to your situation.

Let’s take a look at the various sources of advice/articles on money management.

Gurus: We read personal finance articles by gurus/experts and we discover new ways to invest our money, rebuild our credit or acquire loans. There is nothing inherently wrong with this research, except there is a hidden trap to believing everything these personal finance articles describe.

Unfortunately, an Insurance expert will not say anything against ULIPs. The Stocks guy will only explain the advantages of investing in stocks and point to the costs of investing in Mutual Funds.

The point I want to make is that these experts may not necessarily have a holistic view of all the financial products available and tend to stick to their own domain expertise. That’s what my experience tells me.

Columnists: I often see a lot of crap being written on the esteemed national dailies in the garb of personal finance advice. Often these are written by journos, who don’t really understand the financial markets. They write the piece citing interviews by the experts. There’s hardly any independent analysis apart from joining together a string of quotes from the experts.

Bloggers: Not all Bloggers are successful, experienced guys and who are an authority on the subject. Some of these guys are posting their thoughts on how they are managing their own money and some are giving tips while learning. To be partial, (I’m a blogger too ) this source would be the most credible as these guys are posting live and real questions.

But the downside of reading up on Bloggers is that the question they answer may not be Your Question. Everone’s financial situation is unique and so are the questions (as well as the answers!).

Conclusion: What I’m trying to say is that personal finance articles can just give you a sense of direction and nothing more. It’s YOU, who have to perform your own due diligence and have an eye on what’s good for you and what isn’t.

Use these personal finance articles for motivating yourself, and to help you discover money ideas that you may have not considered. Trust your common sense when it comes to money, because no one knows your unique situation better than yourself.

PS: All these thoughts have guided me to conceptualize the “RupeeManager”, which is a software for your money management. The idea is to have an easy to use tool that helps you with measurement, management and making your money work for you.

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Three Principles of Personal Finance Management

Posted on August 4, 2009 by Ranjan

Talking about Personal Finance is a constant struggle for me. I don’t want to sound like a preachy expert. I don’t want to be appearing to impress by using jargons and numbers. And I wouldn’t like to spoon feed people.

But I do want to share what I know and hope that people take care of their own personal finances.

I do not know if I am failing or succeeding. And I don’t care. It’s the journey that interests me.

Along this journey of talking about personal finance, I have realized that it’s better to show rather than just tell. Also, more than any theory, there is a need for a tool in our hands that can help us manage our money.

That tool should be easy to use and give us necessary data/metrics so that we can improve our money management further.

That brings me to the three guiding principles that have helped me conceptualize the software. (Check out RupeeManager, being launched in September, 2009)

The three principles of money management are (I call it the Three M Principle…..mmm):

1. Measure: (Know Yourself)

2. Manage: (Know how your money is doing)

3. Make Your Rupee Work: (And not just You working for Money!)

1. Measure: It’s common knowledge that whenever you need to manage something, you need to measure it first. I was talking to my sister the other day and she told me she knew how to handle her money. (She was polite and didn’t tell me that she doesn’t need a blog to tell her how! And she’s right). She said, “just spend less than what you earn, and everything is fine”.

“Brilliant”, I said. But, to my questions about the numbers that proved that she was on track, she drew a blank. If she had numbers on what percentage of the earnings go into what categories of expenses, we might have had a discussion on how to improve upon that. If she had figured out her risk profile/appetite, we could had a discussion on whether her investments match that or not.

In other words, if we had a way to measure income, expenses, portfolio, risk profile, etc, we could have a discussion on how to improve them. No records, no improvements. Or perhaps, ignorance is bliss!

The RupeeManager is primarily aimed at helping you measure your rupee. Once you are aware, other things follow.

2. Manage: Now that you have numbers ready, the improvements follow naturally. For example, you see that your percentage spend on “eating out” is 2-3 times the monthly grocery bill or it forms 25+% of your expenses.

It’s perfectly okay if “eating out” is high on your agenda. But if the figures scream at you, you would think twice before rushing out for another “eat out”.

Also, you will get an idea how to balance your portfolio according to your risk profile. You will match the portfolio with your risk appetite and see if you can take more risk or go more conservative. In other words, you get to decide your asset allocation strategy.

3. Make your Money Work: Other than tracking your earnings and your expenses, it is important to see if your money is working for your future.

We are adding a feature where you can customize your spending plan between fixed expenses, discretionary expenses, short term savings and long term investments. It’s like assigning goals for your money. (Sehwag, go and batter them into pulp. Dravid, stick around till the end. Dhoni, Yuvraj, finish it off. Etc, etc. )

The software that we are building will be based on these three principles of money management. So that’s what “RupeeManager” will be all about.

Do you have any suggestions? We’re listening.

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Personal Finance Management: Tracking your Rupee

Posted on July 29, 2009 by Ranjan

Personal finance advice is often a very heavy thing. To make it simple, Haiku is an interesting way. Haiku is a form of Japanese poetry, consisting of 17 moras, in three metrical phrases of 5, 7, and 5 moras respectively.

I saw a few at Mint’s blog. Here’s two, which tells you the importance of tracking your rupee. That’s what our Rupee Manager is all about.

The mantra is: If you want to manage your money, start with measuring and tracking it first.

Record Keeping

Check your Balance

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Have you got your Financial Health Check done?

Posted on July 14, 2009 by Ranjan

Every problem has a solution. Easy. But diagnosing the real problem is a big problem.

This hit me big time when a relative we lost last month, complained of sore stomach a few months back. Taking it to be a mild acidity thing, the real problem got ignored. And by the time the Doctors got to the real diagnosis, it was too late.

I know it’s a bit scary and what’s that to do with this space where I talk about improving my financial IQ?

The post title is self explanatory. I’ll tell you a few more details.

We are building a “Rupee Manager“, where apart from helping you track your income, expenses, investments,etc, we are also planning a few steps to help you do your own “Financial Health Check (FHC)”. This would be the snapshot view and a more detailed version of your FHC can be done in the “Rupee Management Workshop” that we are planning.

All you have to do is answer a few simple questions and the health check does the rest, providing you with instant feedback.

Now, asking the relevant questions is an issue that I am working on right now. And giving the appropriate answers for a snapshot FHC is the challenge.

I write this post to share with you the relevant questions that I can think of right now. Would you want to add your own questions? Here they are:
Step 1
Personal and family details

Name
Sex
Age
Occupation:
Spouse name
Spouse age
Other dependents
No. of Parents dependent
No. of children
Sons
Daughters

Step 2
Questions to identify your risk profile

Step 3

Finance Overview

Gross Annual Income
Approximate Net Income every month
Approximate expenses every month
Monthly investments

Step 4

Questions to identify your financial IQ:
Are you aware of asset allocation principles?
Are you aware of your assets and liabilities?
What does your liability costs?
Are you aware of your human life value or the amount you should take an insurance cover for yourself?
Have you ever tried to do a personal budget exercise?

What more questions should be there? More importantly what answers should your FHC provide you with?

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Personal Finance Tracker

Posted on March 8, 2009 by Ranjan

Technology excites me with the way it helps us to do something in a better way. Technology fascinates me when it solves problems, big or small.

So, perhaps, this fascination has helped me build the following tracker application. I do not have any technical qualifications and it’s difficult to teach an old dog new tricks. But as they say learning never stops and if you’re keyed on to something, you figure out how to handle it.

Zoho Creator has featured the application on their marketplace and that has given me the courage to write it on my own blog. And also the 400+ downloads along with encouraging comments about the clean and simple interface.

To manage anything, it is recommended that you measure it first. So when we talk about personal finance, the “Do’s” & “Don’ts” do not really register with most of us. The key is to “Get started” on managing your money.

So if you and I are serious about personal finance, there should be a way to track what is happening to this important resource.

Personal Finance Tracker is an easy and simple way to track your personal finance. You can measure and track your income and expenses, create your portfolio of your Investments, create alerts/reminders and go to your choicest financial calculators.

Personal Finance Tracker on Zoho Creator

You can also see pictorial representations of your budget, investments and expenses. You can filter them for what you need to analyse.

Expense Chart

You can further filter the chart on the basis of the category of expense, whom spent for, payment method, etc.

Similarly for the income chart, you can filter it out on the basis of various sources of income. You can see a pie chart for your budget categories as well as your expenses.

There’s calendar view of your alerts and reminders too.

Personal Finance Tracker: Calendar for Alerts

You can filter the calendar on the high, medium or low criticality of the alerts and the months of the alerts too.

And btw, if you think that only a techie/programmer can build all this, let me confirm that it’s been done by me alone. But it wouldn’t have been possible without the amazing Zoho Creator. It’s really friendly and intuitive and you can build a complete web application even when you are not a techie. Even techies can use the interface to build more complex applications, I’m sure.

Do try out the Free install of Personal Finance Tracker at Zoho’s Marketplace . Let me know what you think

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