Seven Money Resolutions for 2011:
#5 — Continue the Good Money Practices Followed In 2010

by Vinaya HS on December 29, 2010

in Finance

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Resolution #5:
I will continue the good money practices that I followed in 2010.

I practiced a few disciplined money management techniques over the course of 2010 and I found these techniques to be incredibly useful in helping me manage my personal finances. I will carry these good practices into 2011 refining further where possible.

I describe these techniques — five in all — below.

  • Technique #1 — Saving well in advance for your annual expenses through what I call the “Annual Expenses EMI” technique.

Regular readers of this blog know that I strongly advocate first listing all of your annual expenses and then creating an annual expenses chart, the output of which is an amount of money, that we’ll call M. Simply treat M as another EMI that you need to pay each month. Do this and the next time that car insurance is up for renewal you can cut a check without blinking an eyelid. Trust me on this one — this method simply works.

  • Technique #2 — Breaking-up planned expenditures into monthly saving targets and setting this money aside each month from my salary.

More often that not, you will have a fair idea of your expenditures (planned purchases, service bills, etc.) over the next six months. Rather than incurring a big outgo in one month, make an approximate estimate for these expenses and start saving for them each month (you could set this up as a short-term goal). I’m doing this right now for repairs that need to be done on the Swift. I’ve estimated that these repairs will cost me Rs 30,000 (new wheels, body damage repairs) and I’m setting aside Rs 5,000 each month from my salary.

  • Technique #3 — Online bill pay where possible failing which making advance utility payments.

I’ve already written in detail about this before. Luckily, Bangalore One centers accept cash that’s more than what’s due on the bill. Works to my advantage.

  • Technique #4 — Each month:


minus Annual Expenses EMI

minus Budgeted Expenses

minus Savings for Short-term Goals

minus Investments for Medium- to Long-term Goals

minus Non-budgeted Expenses

= My Free Cash Flow

for that month.

This personal finance equation now forms the bedrock of my personal finances. I use my free cash flow either as “fun money” — which means I’m free to use it as I wish to — or I channel it back as an additional investment into my financial independence portfolio. More often, it’s the latter.

  • Technique #5 — Tracking my personal finances using a simple spreadsheet model.

I’ve setup a spreadsheet with the following tabs:

  1. Cash Flow, where I track my cash flow using my personal finance equation.
  2. Primary Savings Account, where I track my single source of financial truth.
  3. Short-term Goals, where I detail goals less than a year away.
  4. Medium-term Goals, where I detail goals less then three years away.
  5. Long-term Goals, where I detail my financial independence portfolio.
  6. Goals/Net Worth Tracker, where I track my goals and compute my Net Worth.
  7. Performance Dashboard, where I track my progress.

I update this sheet on a weekly basis and have kept it purposefully simple. In 2011, I plan to add just one more sheet to track D’s finances.

I’d love to hear your thoughts. Would any of these techniques be useful for you?

Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.

{ 6 comments… read them below or add one }

pattu December 29, 2010 at 7:48 AM

Nice post again. If I know that I need to make a big purchase at a a specified time every month or if a purchase is a few months away I open a recurring deposit acc. in which I can invest like a SIP. It earns at present 8-8.75% compounded quarterly depending on the bank,. This way I dont use this for any other purpose. I have present 6 RDs running and maturing at different times of the year coinciding with my various annual purchases.

Most young bloggers and CFPs dont advocate this possibly because they dont know much about it. This is a terrific short-term debt option and is better than a debt fund.

Vinaya HS December 30, 2010 at 7:38 AM


That’s a great approach. I see two advantages.

#1 — With a separate RD for each short-term goal, you are forced into making contributions each month for each short-term goal — a great way to ensure discipline.

#2 — With a separate RD for each short-term goal, as opposed to a cumulative pool in your savings account, you don’t get tempted to use your funds for other immediate/urgent expenses.

#1 and #2 ensure that you really think through your expenses.

Brilliant concept. I like this very much.

pattu December 30, 2010 at 3:12 PM

Yes exactly. I learnt this from my mother. The fixed deposit generation has a lot to teach us!

Boomboom January 4, 2011 at 1:52 PM

Great tip pattu. I follow this to the tee. Right now I have around 8 RDs running between me and my wife. Especially for annual premium payments and stuff. Once a RD matures I open it again next month for the following year.

Vinaya H S January 4, 2011 at 2:26 PM


Could you please share your strategy in detail? Do you open an RD for each premium payment? And how do you manage these RDs? Online with automatic transfers from your savings account?

T S Ashok December 15, 2011 at 1:40 PM

Great Article and All the Readers of this Blog are so lucky..God bless you that many people are getting potential advises at free of cost..

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