Personal finance in India has unique aspects. From tax-saving instruments like ELSS to the importance of health insurance, here's a complete beginner's guide.
The 5 Pillars of Personal Finance
- Track: Know where your money goes
- Save: Build an emergency fund
- Protect: Get adequate insurance
- Invest: Grow your wealth
- Tax: Optimize legally
Pillar 1: Track Your Expenses
Before anything else, know your spending:
- Download an expense tracker (like Pocket Clear)
- Log every expense for 1-2 months
- Identify where money goes
- Find areas to cut
Pillar 2: Build an Emergency Fund
Target: 6 months of expenses
- Keep in a separate savings account
- High-yield savings or liquid funds
- Don't invest this money in stocks
Pillar 3: Get Insurance
Health Insurance (Critical)
- Get at least ₹5-10 lakh coverage
- Company insurance is not enough
- Get it while young (lower premiums)
Term Life Insurance
- If you have dependents
- 10-15x annual income coverage
- Pure term, not LIC endowment plans
Pillar 4: Start Investing
For Beginners: Start with SIPs
- Nifty 50 Index Fund: Simple, diversified
- ELSS for tax saving: 80C benefit + equity exposure
- Start small: Even ₹500/month
Investment Priority Order
- EPF (if employed)
- PPF (for debt allocation)
- Index Funds (for equity)
- NPS (if you want extra tax benefit)
Pillar 5: Tax Optimization
Section 80C (₹1.5 lakh limit)
- EPF contribution
- PPF
- ELSS mutual funds
- Life insurance premium
Section 80D (Health Insurance)
- Self & family: ₹25,000
- Parents: Additional ₹25,000-50,000
Common Indian Finance Mistakes
- ❌ Buying LIC endowment plans (low returns)
- ❌ No health insurance beyond company coverage
- ❌ Keeping too much in savings account (low interest)
- ❌ Not tracking expenses
- ❌ Starting to invest "later"
Your First Month Action Plan
- Download Pocket Clear, start tracking
- Open a separate savings account for emergency fund
- Research health insurance options
- Open a demat account if you don't have one
Start with Step 1: Track
Free expense tracker with full ₹ INR support.