Most of us Indians – especially salaried middle class – do try to save before spending. But it does not automatically translate to investing, growing wealth and achieving financial independence. The investing typically gets limited to Fixed Deposits, Provident Fund and random Mutual Fund SIPs.
According to various reports, only one-fifth of Indians are financially literate, much much lower than in the developed countries. While this statistic is interesting, being a salaried middle class for over three decades, I know for sure that most of us (including the ones who are educated and earning for decades) do not spend time on managing our personal finances. Most often we take the easiest choices – like opening an savings account or investing in a mutual fund SIP because the company had put a stall in our office or apartment complex – just for the convenience!
We have to first acknowledge that there are numerous options and easy access to saving and investing – and the key is choosing the right ones based on our own risk appetite and personal situation. Thanks to the digital services, we can make our investments sitting at home (or office) using mobile phones – and that covers the “convenience factor”.
All we need is “awareness” and willingness to spend a small fraction of the time we spend in earning money in focusing on our personal finance.
I am creating this series on Personal Finance covering the details of various options – Saving account to Share trading – along with the tax implications, pitfalls to avoid and best practices to follow based on my experience. My objective to empower you with the right information and be a helpful guide in your personal finance journey – in whatever stage of life you currently are.
In this series, I plan to cover the financial instruments – savings account, fixed deposit, provident fund, government securities, T-bills, bonds, mutual funds, shares, discount invoicing and much more. I also plan to touch upon aspects like inflation, power of compounding, credit scores, income tax, capital gains tax and also various thumb rules of investing.
Introducing some of the terms you need to know:
- PAN is the abbreviation of Permanent Account number, a unique 10-digit alphanumeric number assigned to individuals by the Income Tax Department.
- e-KYC is “Electronic Know Your Customer” – the verification of identity and address is done through Aadhaar authentication. It makes it easier for us to avail services from multiple banks and financial institutions without elaborate paper work.
- KYC Registration Agency – KRA – is an agency that maintain KYC records of the investors centrally, CAMS, CDSL Ventures (CVL), NSDL Database Management (NDML), Karvy, and Dotex are the five authorized KRAs. You can go to any of their websites to get your eKYC done.
- SIP, Systematic Investment Plan, is a method where we can invest a fixed amount (minimum value of Rs. 100/-) at regular intervals (weekly, bi-weekly, monthly etc.) in a mutual fund scheme.
If you have just turned 18, I suggest you do the following:
- Make sure that your Aadhaar biometrics and other data is up-to-date.
- Get your income-tax PAN (can be applied online) and that is linked to Aadhaar.
- Get your eKYC done – you can do it through the website of any of the five KRAs mentioned above.
- Open up your savings account – check out my next article on savings account before choosing the bank. Make sure to set the UPI and online banking.
- Now you are all set to venture on your personal finance journey!
- To start with, you can open a Public Provident Fund (PPF) account through your online banking, start your Mutual fund SIP investment with a monthly amount of say Rs. 500/- (it can be as low as Rs. 100/-).
Will cover more in the next set of articles. Do raise questions, if any, and I will try to do the research and answer it in a article.
Believe me, it is going to be an exciting journey and taking control of your finances will be a “fruitful” experience – in more ways than one!
#PersonalFinance #SavingsAccount #Investment #eKYC #SIP
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