Let’s Talk Money (Summary of the book)

It was time, that I got back to writing summaries of the books that I was spending time reading. I lost touch for close to a year as I got involved in some other stuff at a personal level, and wanted to sort it out. But now that it is sorted, I am back with the summary of the book mentioned in the title.

If you want to give it a shot at reading it, you can buy it from here. No time to read it entirely? No issues, this summary can help you. I have read the book, I will jot down some useful points and learnings from the book.

So, let's start!

As the title speaks, it’s going to be about money!
The book talks about managing it, it talks about personal finance, retirement, avenues to invest your money in, and so on. In-depth!

→ First things first:

We all make money from doing a lot of things, most of us have a job, some of us have a business, some of us have both (side hustles). We all mint money by trading our time and knowledge. We all work hard for it, now it's time for it to work for us.

To facilitate this, we can Have a three account system:
1. One that gets all the incoming money (salary, profits/dividends from a business). It gets deposited every month or whatever cycle you follow.

2. One account in a different bank, where we push a part of the amount from Account 1 for investing purposes. We can set up auto-pay using the latest banking systems for this purpose. As soon asAccount 1 is credited, we can transfer a percent of it (as per our usage and needs) to Account 2.

3. Account 3 for Spend it purposes. This means a part of your income goes to managing your month-to-month expenses.

The author believes that, by doing this, we would know for sure, where we end up spending our money.

A basic version from the author’s eyes about the percentage distribution is as follows:

1. 45–50% can be spent as living expenses. The day-to-day expenses.
2. 25–30% can be spent on the EMIs of loans that you may have. This needs some work though, to plan loans well. Number crunching to rescue!
3. Savings should constitute about 15–20% of your take-home income.

Again, these are just rough numbers, this can vary from person-to-person.

→ Emergencies!! — It needs a fund.

The author says we should have at least 3–6 months of our expenses in liquid cash which can be withdrawn easily when need be. Other avenues to put that liquid cash other than a bank account can be some ultra-short term mutual fund where it gives a better return than the interest of a savings bank account.

The 3–6 months' time is just a rule of thumb and actual numbers can vary depending on the person’s situation, is the person married, has any dependants, has any debt where the EMIs are paid for. It varies for me too.

→ Build your protection cover

The author talks about the importance of having a life-cover (in case of your untimely death) and health cover (expenses incurred for any type of hospitalizations).

She says the life-cover should be enough to cover your family in case of untimely death due to whatever reasons. The life cover can take care of your pending and ongoing loans, if any, it can take care of your family’s expenses till your partner/spouse finds a job to take care of further expenses. Or the life cover can be used to invest and generate a passive income for your family.

The early, the better, since the premium that you pay for a life-cover, is cheaper when you are young.

For example, I have a life-cover of 1 Cr, for which I pay INR 792/- as a premium towards it, every month. I am 24 years old as of writing this blog in 2020. The point of having it early is that as years go by, you won’t even feel the deduction of this premium. Right? The premium is going to be the same until I am 60 years of age. I won’t even notice this charge on my credit card after a few years.

The next cover is the health cover, if something happens to you, you would want to get to the hospital and fix yourself rather than die. Right? Right!

So health insurance is of paramount importance which can take care of hospital bills when the need arises. The early bird logic applies here but not very well as life-cover. Let me explain!

Hospital bills rise as inflation rises and so does your cover amount and the premium. But unlike life-cover, I pay here a premium, yearly to keep the policy. A cover of INR10–15L should be fine and should help to cover hospital costs. The cover amount varies as per one’s need. The cover amount goes up to 1 Cr.

For example, I have a cover of 12.5L for which I pay a premium of INR 11,575/- per year. There are other benefits of not making any claims which vary from policy to policy.

The author talks about points to notice while buying a policy which I would strongly suggest you read from the book as it gets out of the scope of this summary. But having a policy is a must, otherwise, hospital expenses can burn down your investments and savings!

I would though mention one point about buying policies in which a lot of people end up making mistakes.
Never, ever, buy a LIC, Unit Linked Insurance Plans (ULIP), or something that guarantees money back after a few years.
Always, always, please, keep investments and insurances as separate products. 🙏

Why? you may ask? — Because ULIPs and LIC only make money to agents and the company, it neither offers good returns nor it offers good cover. It just eats your money and the company shares peanuts in the name of money back. My dad has been a victim of this, due to no idea of working out numbers. Lack of financial knowledge and listening to good words from agents, he ended up losing the value of the premium he paid for 20 years. When I showed him the entire calculation, about how the market would have done with the same amount he paid as premium, he was shocked to see the returns. He called up his agent and surrendered all policies to stop paying pending premiums. So, please!

You can see the protection cover section is bigger in length than others mentioned before because when these covers are in place, we can risk our other income parts for investments without having to worry about emergencies of any kind!

Investments

This is what the author talks about next. How to employ your money and make it work hard for you! She talks about Equity, Mutual Funds, Debt investments, Bank FDs, Real Estate, Gold.

She talks about demystifying the jargon of the financial world and how to go about planning your retirement fund. An in-depth talk about types of Mutual funds, type of debts, why real estate and gold are not as attractive as it was before. She mentions these concepts in form of her experiences and short stories. Along with this, she mentioned calculations of the ULIPs, LIC products that eat away your money and to avoid them for good. 🙏

So, that's about it folks!
I hope it was worth your time.

Cheers and a special shout out to Rohini Girase for helping me proofread this blog before publishing!

My next read is the last lecture. Once it arrives, I will be reading it and pining down and write a similar summary for you lovely folks!

Peace! ☮️