Let’s Talk Money! — Book Summary
You’ve worked hard for it, now make it work for you.
Foreward
For quite some time I have been struggling to keep up with my cash flow with ever-changing life (expenses, savings, investments, EMIs, etc…)
Then, I stumbled upon this book “Let’s talk money” by Monika Halan. It has definitely made me realize how under-prepared we are in life. I would recommend everyone to read this book. It is a very simple short read, yet has many thought-provoking questions and ideas!
For those who are busy and cannot read the book, this blog is just a sneak peek of the book and my key takeaways.
Cash-flow
One should always start from the very root and then build a system using this as a lifeline.
Cash-flow for most of us is the salaries we get, maybe few of us have other streams of revenue.
Most of us can agree to this — Money comes in and goes out without you having much clue about where it’s being spent!
Also, It is painstaking to keep track of every rupee being spent. I have tried a few expense tracking apps but didn’t help me much.
The book recommends having a three-account system:
- Income Account — Salary comes in.
- Spending Account — Average monthly expenses.
- Invest-It Account — Invest for future goals.
As soon as you get your salary, within 30 minutes move it out of your income fund into respective bank accounts! (Well, not exactly 30 mins 😉 maybe within a day)
This allows you to categorize the cash flow and let you do guilt-free spending while taking care of your future goals!
Core Foundation
Health Insurance and Life insurance is something which is very very crucial, some of us have it, some of us don’t.
I don’t have to explain how important this is, so take your time to find a good policy and enroll.
The book shares quite a few shocking real-life incidents which might make u feel scared, but will certainly push you to get the insurance done!
There are quite a few metrics which the book talks about while filtering such policies. I don’t want to give any spoilers 😉
Hint: “Mint SecureNow”
Many of us are offered Health & Life Insurance at the workplace, but Monika advises in the book to get your own policy because you never know when you will switch jobs or when company stops loving you back 😉
Rainy Day
The book also recommends having a rainy day fund for unexpected situations like recession, losing a job, maternity, health issues, etc.
The recommendation is that you have at least 6–12 months of monthly expenses saved up as an “Emergency” fund.
You can have it either in
- Flexi-Fixed-Deposit
- Liquid Fund (Debt Mutual Fund)
Both give decent returns of about 6–9% and are safe investment instruments with minimal risks.
Creating Wealth
Once you are done with the Core Foundation (medical and life insurance) and Rainy Day Fund, you can start building wealth based on your goals.
Monika makes an argument across different asset-classes like Gold, Real Estate, Debt Funds, and Equity Funds, of all Equity is undoubtedly the most rewarding financial instrument on the planet!
Well, there are about 5000 stocks and hundreds of Mutual Funds available. It is definitely not an easy task to find the right one. The book tells you to consult a financial advisor for a more clearer roadmap.
You can think of each of these financial instruments as a vehicle i.e., Cycle, Bike, Car, Truck, Bus, Train, Plan, etc…
Each one will take you from Place A to Place B.
But not everything is not suited for every situation!
You won’t take a plane for a supermarket!
You won’t cycle from Bangalore to California!
Similar to this, there are different financial instruments for different purposes and it is important to spend time and understand them or seek help from a financial advisor.
The book also suggests a general guideline, which may work for most people!
Construct a portfolio having three buckets of mutual funds:
- Almost There
- In Some Time
- Far Away
The argument Monika uses in the book is that each financial instrument has an expiry date (not exactly, but sort of). She argues that different funds perform well for a different time duration.
“Almost There”
This bucket is for goals with a timeline of 0–2 years.
Types of mutual funds which are best suited:
- Liquid Funds
- Ultra-short Term Funds
“In Some Time”
This bucket is for goals with a timeline of 2–5 years.
Types of mutual funds which are best suited:
- Dynamic Asset Allocation/Balanced/Hybrid Funds (both aggressive and conservative type depending on your risk profiles)
“Far Away”
This bucket is for goals with a timeline of 5+ years. For goals like retirement, kids education, kids marriage, etc.
Types of mutual funds which are best suited:
- Index Funds (for Passive Strategy)
- Multi-Cap Funds (for Actively Strategy)
- ELSS Funds (for Tax-Saving)
Time Just Flies
With time you have to Rebalance your buckets, example goals like retirement will move from “Far Away” bucket to “In Some Time” bucket and so on…
Thanks For Reading
Of course, it is not possible to cover all topics from the book in a single post, I tried my best 😊. Book is much more exhaustive and covers many more topics.
Hope this post helped you in some way…
If interested to learn more we can chat over it some time, ping me on FB or Twitter or in the comment section!😊
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