Employees in the IT sector: Take charge of your financial life

Mr Krishnan aged 28 years is a software engineer and is employed in an  IT Company at Bangalore for the last four years. He got married two years back and is blessed with a daughter who is six months old. He faces financial difficulties. Mr Krishnan is not alone in this situation and there are many like him in other IT Companies who faces difficulties in managing their personal finance.

What has gone wrong?

He like many of his friends used to get weekly compensation and got no guidance what to do with the good amount of money. Saturdays and Sundays being weekly holidays provided enough time to spend the amount along with the collegues.The attraction was the local premium bar located in the street corner.The weekly net compensation gets emptied out in two days. Wonderful times!

 He had a dream of owning a flat. It hardly  took two months to complete the process with the builder and arranging the Bank loan.The equated monthly installments(EMI) is  more than 65% of the monthly take home pay. The situation was alright as long as he was a bachelor but the financial problems started surfacing after the marriage.

The monthly household expenses increased after arrival of the newly born baby.It was difficult to ignore collegues’ invitation for weekends parties.He started using credit card for meeting the expenses but could not pay them even after the stipulated time.When he approached for personal loan from the Bank, he was denied the loan because he is a defaulter already.

What should you do in this situation?

  1. Budget your expenses: The popular saying goes ”If you fail to plan, you plan to fail”
  2. Plan to save first and then spend: Warren Buffet says ”Spend what is left after saving and not save what is left after spending”
  3. Channel the savings into investments: Keep in mind liquidity, safety and returns.
  4. Analyse and compare financial products
  5.  Loan repayments not to exceed 60% of take home pay
  6. Avoid rolling over credit card dues and know your credit score
  7. Do not combine investments with Insurance while buying insurance products
  8. Life Insurance sum assured should be not less than 10% of the annual premium
  9. Know your income tax liability and tax saving avenues
  10. Protect your created wealth by diversification through asset allocation

Finally, if you can not do these due to lack of expertise or time on your part, do not hesitate to take the help of a professional and more particularly a Fee only Certified Financial Planner who are  also  SEBI registered Investment Advisers. Agents and Advisers who sell products may not be unbiased in their recommendations since they get commission from products they sale and those may be suitable for you.The professional fee only planners may charge a fee but they will create much more value for you through their genuine advice.

Last modified on Wednesday, 06 August 2014 18:09

Prakash Praharaj

Shri Prakash Praharaj has a passion for excellence. He has been awarded two gold medals for securing top positions both in Graduation and Post Graduation in Commerce. He is an MBA with specialization in Finance and marketing. He has been awarded Diploma in Treasury, Investment and Risk Management besides CAIIB from the Indian Institute of Bankers. He is a Certified Financial Planner from the Financial Planning standards Board, India (FPSB), affiliated to FPSB, Denver, USA and Certified Personal Financial Adviser from NISM. He is also a SEBI registered Investment Adviser vide Reg. no. INA 000000045 dated 2nd August 2013.His book "Your Every day guide to Personal Finance and Insurance" has been published by CNBC TV 18 in August 2015.

5 comments

  • Sujata Aniruddha Sapkal

    posted by Sujata Aniruddha Sapkal

    Monday, 06 July 2015 09:27

    Golden rule for saving - spend after u have saved enough to meet your immediate and long term financial requirements.

    It is always better to sought a help of an expert who can evaluate your finances independently and recommend what is in your best interest.

    Report
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    Saturday, 20 December 2014 04:39

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    posted by coaching

    Friday, 03 October 2014 22:23

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  • mina

    posted by mina

    Monday, 25 August 2014 06:16

    Good and useful article

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  • Durga

    posted by Durga

    Monday, 25 August 2014 06:15

    Good information

    Report

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