Morning (Monday, 10th April) I was doing a ‘how to get rich’…here is the part 2.

Lets see how to take care of your money.

4. Take enough, appropriate, and correct amount of insurance: People do not understand the difference between a wealth creating asset (shares, mutual funds) and a risk reduction tool (derivatives, and insurance). So when I tell them take ‘Pure Term’ insurance till your age of 55, they listen to me partially. They take a ‘return of premium term plan’ till the age of 75. They take medical insurance from companies that we have not heard of and they buy a lot lot more term insurance than they need. Be careful about these things. If you do not understand hire a professional and ask. I hate myself for giving advise to people who do not hear, listen or understand. So do not ask me for free advice. Go and learn. Insure well against disaster  – Life, Disability, Health, Liability, Mistakes (If you are a professional, indemnity). Also take care of your health – that is called self insurance! At an older age – say 70 years of age – consider a single premium immediate annuity to insure against outliving your money and for your medical care during the autumn of your life. Do not mix insurance and investments. No ulips, no endowment plans, no return of premium term plans, no expensive insurance because ‘it is from a company with a good settlement ratio’ – if you do not understand go to a professional whom you trust, and do fee based consulting. Good and sensible investing is boring – and getting rich/wealthy is a boring journey that you must do alone.  Hire professionals to teach you, not just to “do it for you.” Learn do not just say “oh you are here to take care of me” – especially if you have no clue when you will die or when the advisor will die. You may outlive your adviser by 20 years. I surely will die before most of my readers and clients – hey these are kids in their 20s!! This includes accountant, lawyers, blogger, financial planners, dieticians, gym trainers, running coaches, real estate professionals, etc. Be sure to bounce the advice you’ve received off someone you trust. Also when you choose and adviser learn to trust. However Trust but Verify. Be careful some non professionals who may have any hobby could give you irressponsible, and free advice, be careful. If you do not who is paying the bill for a dinner, rest assured it is you. You can of course be a DIY investor, file your returns, etc. but that is a choice that you have to make.

5. Do not lose money: Giving loans to friends, relatives, siblings, progeny …is easy. Getting it back is tough. I have done many posts on this, so will not say anything here. Be careful. Have enough money in money market mutual fund..and some money in savings accounts. This will ensure that you do not dip into your good investments for an emergency.