Financelogic

The dictionary definition of finance is “management of large amounts of money”. In practice, financial management is part of every individual’s day to day life. All of us do not have large sums of money but we still manage our finances every day. What do we really mean when we say “Managing our finances”? Does it mean earning large sums of money? No, not really. How we spend and invest our money so that we have enough to meet our expenses when we retire, is true management of finance. How do we begin? What do we need? Lets commence with something as simple as: a. Permanent Account Number (“PAN”) b. Bank Account Permanent Account Number Permanent Account Number or PAN as we call it in India, is the 10 digit number allotted by the Income Tax Department of India. It is used as a universal identification for all our financial transactions. It is a mandatory document for anything and everything related to spending and investing money by Indian citizens. Some examples of: a. Opening a bank account b. Purchase or sale of vehicle c. Application for credit card d. To be provided to employer when working e. Investing in excess of INR 50,000 f. Purchase of Insurance g. Expenditure in excess of INR 50,000 in one bill mostly The list goes on and on. Hence it is extremely important that we begin our financial journey with procurement of a Permanent Account Number. Bank Account When we start earning money, the question is where to receive it and how to store it? The answer is in your bank account. A bank account in-turn facilitates numerous others avenues for managing your money, such as: a. Locker facilities b. Fixed Deposits c. Insurance Schemes d. Investments in shares and mutual funds We need a PAN in order to open a bank account, hence the first step is to get a PAN and then open a bank account. Many may think – how to choose a bank and which account to open? Well, the following things can be considered prior to opening a bank account: a. Location of the branch – open a bank account which is nearest to your residence for ease of access and operation b. Operating hours – Some banks offer extended operating hours. If you are a salaried person and cannot go to the bank during regular banking hours, then choose a bank with extended operating hours. c. Open a savings bank account as it will give you some interest on the average balance in it. d. Online banking facility – online is the way to go in future. Hence open a bank account which offers online banking facility and makes it easier for you to transact in future. e. Nationalised or good reputation private banks – Choose a nationalised bank or a private bank with a very good reputation. Don’t be lured by high interest rates. Go for a bank which is stable. Once you have done the above two, you are ready to commence your journey in the world of finance. We will cover one topic at a time in our subsequent blogs.