We all promise to lose weight, spend more time with the kids and manage our money at the start of each year, don’t we?  Well, we'll leave you to sort out the waist and family matters, but we can definitely help streamline your money.

This is a 10 minute guide to put the building blocks of a very do-able personal financial plan just for you; 7 products that are simple to understand, easy to invest and low in cost.

Before we go into the most basic 7 investments checklist, let us get to the bottom of investing in a sector whose fortunes are closely knit with the central bank’s decision of changing interest rates.

And also with the fortunes of the economy, we're talking about the banking sector. For the past few weeks we've had questions coming in from viewers asking whether their banks were safe. We've also witnessed a steep decline in bank stocks with bankex sliding over 50 per cent in 2008. Then to add to it, it gets pretty confusing to see banking stocks rally every time RBI announces a rate cut. So, what really drives the performance of this sector and how do you really take a call on bank stocks? That's the big question we'll answer today.

BIG QUESTION

How do you value your bank stock?

Why banking?

It’s been in the news last week on the markets. While the short term looks volatile for banking stocks, what is the investing mantra for banking in 2009?

Whose point of view?

Not the depositor, because banks are safe. No large private sector bank will be allowed to fail and even the smaller ones will be bought out in case of trouble.

For the investor

# Investors in banking stocks make money if banks make money

# Banks will make money if their income is more than costs

# Income from interest earned on making loans - corporate and retail

# Costs are the deposit interest to you and operational costs

# The problem in banking today is of bad loans, specially the exposure to the real estate sector which has frozen as of now. Also fears that some banks having made irrational loans in their retail book - that ghost will come home to roost in 2009.

# However, on the flip side, banks that have strong treasury desks will do exceedingly well and make a killing as interest rates fall.

So the basic parameter to judge a bank is its bad debt or non performing assets. Loans on which no principle or interest has been paid for at least 90 days are classified as NPAs. When an economy slows down companies sell less and make less money. When that happens they are unable to service the debt. Also, economic slowdown means layoffs and people like you and me defaulting on home loans and even credit cards . That's why analysts worry about banks when the economy slows down. Let’s take a quick look at the broad signals we're currently getting for the sector.

The economic growth has slowed down from almost 9 per cent it averaged in the last 3 years to 7.6 per cent in the September '08 quarter and is predicted to slow down further.

Manufacturing output actually shrank over 1 per cent  for the month of October 2008, taking IIP growth to negative for the first time in 15 years.

Bank asset quality is already showing signs of stress. For the quarter ending 30 September 2008, gross bad debt of top10 banks rose by 7 per cent as customers started defaulting.

Year on year non-performing assets of these banks shot up by 14.5 per cent.

Reflecting these fears is the Bankex - the index for banking stocks.

It is already down by about 56 per cent from its peak; this is almost in tandem with the fall in the sensex. Sensex has lost about 54 per cent in a year.

So have a lot of these concerns already seem to be built in? Should you be investing in bank stocks? Yes, if you can spot a bank with consistent track record of at least 12 quarters or 3 years of consistent growth in net sales and net profits and no alarming increase or surge in NPAs or non performing assets. We believe the sector could offer good long term bets.

A while ago we culled out two stocks which met these parameters - HDFC Bank and Bank of India. Watch out for this quarter’s numbers, especially the NPAs. If the bank shows no increase in them it perhaps has good asset quality and could be a good long term bet for you. 

DISCLAIMER: Both of us are not invested in these stocks.

Now that analysis was for active investors - those of you who are involved enough to study and invest. Now, what about some no brainer investments for 2009? Just a basic list for many of us on life's treadmill with little time to actively manage our money. This is not to say that you don't need to look beyond these products or that this is the best strategy. This is the best strategy for those who don't want to work with a financial planner or have the time to do it themselves. So here are the lowest cost, simplest plain vanilla product for busy, lazy or even financially challenged people.

First up; the first product you need is a bank deposit - this is like a financial birth certificate. Once you have a bank account you exist financially! You need just TWO bank accounts.

Must Have 2009: Just 2 bank deposits

Why two?

# More than 2 makes managing accounts difficult

# Risk of going under the minimum amount and paying fines

# One account is risky in case of emergency

# Use a PSU and pvt/fr bank combo

# PSU banks give better deals on loans

# Pvt/fr banks give better services like online, doorstep and mobile banking

Must Have 2009: Employers' Provident Fund or EPF

Why EPF?

1. Zero risk way to build a corpus at 8.5 per cent a year tax free

2. Little pain since money deducted before it comes to you

3. Check that you are at 12 per cent of your basic with your accountant

(Rs 1.5 crore in 30 years if your present basic salary is Rs 15,000 and grows at 10 per cent per annum.)

Must Have 2009: Public Provident Fund or PPF

Why:

# Zero risk way to get 8 per annum tax free; that's Rs 19 lakh in 15 years.

# No cost to investing

# Easy to access through post office, SBI and SBI associates

Must Have 2009: Life Insurance - Term Plan

The least cost, least bother, maximum bang for the buck policy is a pure term insurance policy. This is like a car insurance, your family will only get the money if you die, but in case of no accident, nothing comes back. Look at it as a small cost that protects your family against a big loss. Cheapest covers from Aegeon Religare and Kotak currently, but do call 3 to 4 companies or log on to their websites to get a quote. You can also visit websites like

# insurancemall.com

# policybazaar.com

# apnainsurance.com

# clicktoinsure.com

# getmeinsure.com

Fifth product: A basic medical insurance cover

A simple family floater is a must-have from a general insurance company. Insure for at least Rs 5 lakh for a family of 4. Try and work with an agent who is resourceful in terms of his ability to get claims. The PSU general insurers are good, so are policies from Aegoen Religare, Apollo DKV and Iffco Tokio.

Sixth product: An adequate equity exposure

Can begin with Nifty BeEs - why?

# Over the long term stock markets go up

# The average return of the Sensex in the last 27 years is 17 per cent per annum

# Managed funds have fund manager risk

# Index investing is the lowest risk way of getting the average return

# Nifty BeES is the lowest cost, lowest tracking error product in the market