“Life is really simple, but we insist on making it complicated.” – Confucius

This is true with Personal Finance too!  People make it complicated. Mostly this has to do with basic human behaviour and psychology:
Overthinking – which is basically thinking minus the action; Everything there is, was first a thought. So thinking is good. However, if there is no action on our thoughts, there is no output. We just keep overthinking, do nothing and complicate simple things, all in our minds.

Complexity bias – our tendency to look at something that is easy to understand, or look at it when we are in a state of confusion, and view it as having many aspects that are difficult to understand. When faced with two competing options, we are likely to choose the more complex one.

Myth of Quality – That anything complex is well thought out by intelligent people & therefore better! This is exploited by smart people in deliberately converting simple concepts into complex structures that are hard to comprehend and therefore create a myth of superiority.

Simple does not mean Easy – it just means having a clear view after cutting away the insignificant things, distractions or pointless problems which are just energy wasters.

In personal finance, people look to invest their hard-earned money in multiple options including complex ones like AIF, Portfolio Management Scheme (PMS), F & O, Commodities, Forex and so on without proper understanding. In other words – FOMO – Fear of Missing Out! In the process, they end up burning their fingers badly.   What they really need to do is to understand some simple governing principles of Personal Finance that can make all the difference.

Regular or systematic investments in the simple basic instruments like PF, PPF, FDs, RDs, MFs etc over a long period of time are much more critical than generating the “highest returns” possible.

The power of Compounding – returns generate more returns thereby building required corpus. Again, the amount invested, and time are crucial – not the highest returns.

Keep it Simple

Open a Public Provident Fund (PPF) account at the start of your career and invest any amount between 500 -1.5 Lakhs per year in it. Keep extending the PPF after 15 years and even beyond retirement.  This is the only investment which offers tax free withdrawal, which you can continue to hold till you live.

Start Systematic Investment Plan (SIPs) in couple of equity mutual funds for the long-term goals. Review the fund performance yearly and increase the investments as your income increases.

You can consider Recurring Deposit (RD), Fixed Deposits, Debt Mutual Funds etc for the short-term goals.

Backup plan

You need Term Insurance as a backup plan – This will come to the support of the family in case of unfortunate and untimely death of the earning member/s of the family. Here also there are complex options like term policy with return of premium, limited premium payment options, term insurance till age 100 etc which are not good for you.  Purchase online term policy as per the expense replacement method of calculation.

You also need a family floater health insurance policy beyond your corporate health insurance. This is the only way to ensure health cover beyond retirement till you live. Opt for a combination of base policy & super Top up policy to reduce the premium outgo.

Personal accident policy & critical illness policies can offer additional layer of protection.

You can also purchase insurance for your property including the contents.

Beyond this, avoid all forms of insurances including ULIPs, which are not good. Don’t purchase endowment, money back, child policy, pension policy etc.  They are not flexible and offer poor returns.

 Simplify further

Ensure that you are making proper nomination in all investments and insurances. Nominate the right person to avoid confusion later.  If you have multiple real estate assets, it is better to go for a will to ensure smooth transition in your absence.

Involve your spouse and grown-up children in the personal financial discussion in the family.

Just keep 1-2 bank accounts only – one with SBI and another with a leading private sector bank. Avoid too many bank accounts.

File the income tax returns every year much before the due date of filing the returns. It is better to use the services of a local Chartered Accountant for this to avoid any mistakes. It will not cost you more than 2000-3000 and it is worth.

Proper asset allocation and review of portfolio once in a year is very important.  There should be a mix of equity & debt in your portfolio. Allocation to equity must be gradually reduced as you near the goals through rebalancing.

If you cannot do it yourself, get professional support of a SEBI registered Fee Only Financial Planner.  You can get details of such planners from

As Albert Einstein said “Any intelligent fool can make things bigger and more complex- It takes a touch of genius and a lot of courage to move in the opposite direction




  1. Poornimaa Nagesswaren

    Simple planning and action with clarity takes an investor to reach their financial goals. Nice blog Melvin sir.

  2. Really appreciate. Your messages and guidance are really worth to those who understand the concepts & interested to WIN or eager to achieve their GOALS.
    Thanks for your support

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