Financial Discipline for all.

Principle 20. Know your net worth


Net worth is simply, your assets (less) liabilities.

Assets – you own them. You can sell them anytime and take cash.

Liabilities – you owe them. Money flows out until these are settled.


Look around. You have lot of assets with you. Some of them are very large assets like land and others are personal ones like a gold coin or a ring.

The assets you have can be classified into moveable assets and immovable assets. Immovable assets are those which cannot be ‘moved’ from where it is exists – for example the villa or the apartment you own.


Principle 19. Insurance is a must.


One interesting fact about insurance in India is that it’s never bought for the right reasons. In fact it’s wrong to say that it’s bought; it’s actually ‘sold’ by advisors with much strain and effort. Some consider it as an investment; others buy insurance to reduce their tax burden (because of certain tax benefits that’s offered by the Indian income tax Act) some people buy a piece of insurance just to get rid of that advisor who keeps appearing politely every morning at their door step ‘n some buy it because it’s difficult to say ‘no’ to that known guy who could be you relative/banker/friend/ acquaintance.

Indians are a bit reluctant to buy insurance. We haven’t searched for the reasons. The reality is that insurance is a must for everyone – simply because it provides security and safety. It doesn’t come free; you have to pay for being safe.  The amount you pay is called premium.

Insurance can only compensate for the financial loss that occurs due to death of an earning member or serious health issues that requires huge money out flow or loss /theft/damage of expensive assets. Some insurance companies sell policies like ‘child policy’, ‘marriage endowment policy’ etc. These are nothing but life insurance polices in different name and form.


Principle 18. Safeguard your documents.

How many of us are systematic in document filing and protection? Everyone should identify and protect key documents in such a way that it’s easy to retrieve it when needed without any confusion. For that, first you need to classify your documents and keep it in separate files at one place. You need to have a space in your shelf to keep all these – at the same time make sure it not within easy reach of children.

Now, let’s have a check at what are those important documents.

  1. Financial documents like bank records, loan records, investments.
  2. Documents of assets you bought like warranty cards.
  3. Documents related to your health & education
  4. Personal documents.
  5. A summary of all these in written form- in a diary.


  • BANK RECORDS: It’s important to take a print out of your quarterly bank statement and go through it. Banks are no fool proof systems – errors are possible at anytime from the bank’s side.
  • Keep an eye on the charges debited. Some bank accounts carry a lot of charges compared to others. It’s also important to check whether the automated debits and credits are being regularly done by your banker.


Principle 17. Pay your taxes.

Income tax is never an easy subject to understand, especially in India. It’s important to pay your tax bill after properly planning it and pay what’s due to the government. That’s our responsibility. It’s not only about being responsible. Having a tax clearance has lot of advantages. Here’s a list of points that came into my mind in no particular order:

Standard income proof:

The income tax return is considered as a valid income proof not only in India but also globally. If you are looking for higher education or employment overseas, your present tax status may add more credibility to your application.

Fast loans

These days, if you are not paying income tax, it would be difficult to get a loan sanctioned in your name.  But if you have all the tax papers, it immediately creates an impression that you are a responsible citizen and that you’ll not make default in repayments.

PAN Power

The PAN or permanent account number card is a valid proof for your signature and date of birth. This card is required for all monetary transactions above a certain limit. It’s also required to buy a car, to open bank accounts, to subscribe to mutual funds and to invest in stocks.

Excess refunds.

Bank and financial institutions are required to collect tax at source. By promptly planning and filing your return, you may get tax credits.

Avoid enquiries /penalties and fines.

Income tax law imposes severe penalties and fines for those who are not proper in disclosing and filing tax.


The income tax Act contains various provisions that may help you to reduce you tax bill. It may not be possible for everyone to understand the language of law and hence, it’s prudent to consult a tax practitioner who will guide you on the matter. By properly planning your tax, you can reduce your tax liability to the minimum. By planning we mean an early planning of tax – not at the fag end of the deadline. Tax planning is done by legitimately using tax exemptions, rebates, reliefs and deductions to your advantage. To utilize the provisions of deductions, you may be required to invest money in certain instruments like tax saver bonds or life insurance premiums or may be required to donate to eligible schemes of the government. All this cannot be done just before the deadline. There is a time limit for making such investments and payments. Following steps should give a brief idea about how to plan your tax:

  • First list down all your sources of income. Possible sources can be – employment, business, profession, gains from selling assets like land or shares, winnings from speculation, interest, dividends, rent, commissions and brokerage.
  • Estimate the total income for the year from each source.
  • Add up everything and you get your expected total income.
  • If you have incurred loss from any source, make sure that you’ve deducted it from the total. You need to pay tax only for the net amount.
  • Calculate the probable tax liability.
  • See if you can make any investments or donations that are allowed as deductions. Such investments would reduce your tax liability. Keep minimizing your projected tax by utilizing all those provisions. You may require the services of a tax consultant for this.
  • Keep your tax bill at the minimum. If you’ve done that, you’ve planned your tax bill very well.

That’s principle number seventeen! Be regular on tax payments. Plan and pay your tax. You need to pay your taxes so that you can be proud that you did  your bit for the development and prosperity of your country.