Running an online portal, they have a lot of information on the visitors to the site, which helps in putting down a structured template.
The Bee, The Beetle and the Money Bug: Adhil Shetty, AR Hemant, Rupa Publications
When it comes to saving and investing, one normally becomes serious only at later stages in life. And when one gets down to doing so, there could be a muddle when one reads about what to do while perusing columns by experts in the media. There is a plethora of advice given in bits that can confuse rather than help in taking decisions. This is where Adhil Shetty’s book, The Bee, the Beetle and the Money Bug, is useful, as it tells you all in a simplified and logical manner.
This book is a step-by-step account on how one should plan our financial lives, and the direction given is quite rudimentary and straight forward. Shetty is the founder of BankBazaar and hence has knowledge and experience in this field. Hemant is the head of communications in BankBazaar. Running an online portal, they have a lot of information on the visitors to the site, which helps in putting down a structured template.
They work on the basis of the ‘5S pyramid’. The pyramid structure has five elements and while they do suggest that we start from the bottom, one can start from anywhere and probably also follow a couple of steps at a time. It all depends on one’s inclination and ability. The idea is to have a blend of savings and investments that allow one to live a comfortable life with enough to fall back on either when one stops working or is laid off from work, which is quite common these days.
The five elements are clubbed under the following—save, secure, savour, strengthen and serenity. As can be seen, it makes a lot of sense to start from the first step and then move upwards purely from the point of view of affordability. While they are targeting the younger crowd, this approach would be useful for anyone who has not planned their finances. Hence, it is never too late to start.
The first step relates to savings where one can choose various options. Logically, when one looks at safety the first thing that comes to mind are fixed deposits and liquid mutual funds. These are useful in both building a corpus as well as having access to liquidity in times of a temporary crisis.
The second step is what they call the need to be secure. Here they talk of both physical as well as financial security. The financial security comes from insurance and they provide tips about what kind and quantum of insurance one must take. This holds for both life and health. Normally one gets covered by the company in which one works for health insurance and ideally should be used before dipping into one’s own insurance policy. This is to ensure that one keeps getting the bonuses coming which can be lost in case one uses the policy. Life insurance is also advocated not just from the point of view of death, which is the main aim of such covers, but also to provide for long-term contingency which can be education or marriage of children. Here they also club in vehicles, which is what one normally aspires for at an early stage in career.
The third step, which is called ‘savour’, is more to do with living a good life. Here they talk of getting into debt but in a measured way. Credit cards and loans are what they allude to. But there are warnings given along the way so that one does not get reckless. Should one have a single credit card or multiple cards? How much debt can one take in the form of a loan relative to earnings? These are the questions where they provide answers. They also point to the fine print in credit card usage as the interest rates charged are very high.
At the fourth stage they talk of strengthening the portfolio which goes back to asset creation. Houses have an advantage in terms of always appreciating unlike vehicles which depreciate over time. This will also take one closer to feeling more secure once there is a place to stay. Here they also talk of how to do cogent tax planning as one needs to know about all the laws so as to maximise net income. However, now with the new tax regime virtually dominating the structure, these avenues may be less attractive. There is some discussion on relative returns on various alternatives. Systematic withdrawal schemes hence also become useful at this stage in life just like the systematic investment schemes (SIPs) when one was in the middle of the career.
The last block for them is what they call serenity where one moves towards being debt free by the time one retires. This makes imminent sense as one cannot service debt when one does not have a stream of income. Here they talk of the value of pension schemes which one would have taken while in service. And as we come to this final stage of life there is also the need for having a will to ensure that things are smooth for the next generation.
These steps are well articulated and the tips provided are meaningful. BankBazaar has maximum visits from the youth in the age group of 22-35 years, but this playbook will hold for anyone who has not yet considered the future from the point of view of financial planning. This guide book will definitely be useful to anyone who is wondering how to go about this process.
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