If you start saving from a young age, then later this savings turns into a huge amount. Message for the readers: No two people can ever have the same financial plan.
Our income, expenses, goals, ambitions and financial responsibilities vary. But, the initial principles of financial planning are almost the same according to your age. These broad principles will be explained in the new series of Money Control Personal Finance, ‘Life Stage Financial Planning’.
We will tell you about these principles in this series according to whether you are at any stage of 20th, 30th or 60th age.
Today’s story is about how people present at the 20th stage of age can start their investment or how to get return on investment. Some of the right decisions taken in the 20s of age prove to be very helpful in securing you financially in the life ahead.
The first salary is always special. If you are in your 20s of age, then a purse full of money and freedom to spend on your own will give you immense comfort. Definitely you spend, but this is also the time when you should start saving. Here we are telling you how young people in their 20s of age should start collecting money.
Check your expenses
When we get our first job, the initial salary is usually less. If you have to go to another city and do a job, then life is probably not that easy. Fares are also higher in big cities. Eating and drinking expenses cannot be avoided.
Also, if you had taken an education loan, then it becomes necessary for you to repay this loan as soon as your first job takes place.
Weekends go to partying with friends, walking, watching movies and eating out. In such a situation, there is very little money left in your pocket at the end of the month.
Experts recommend strictly keeping expenses under control. Vishal Dhawan, Certified Financial Planner and Founder CEO of Plan Ahead Wealth Advisors, recommends creating two items for this.
The first item incurs expenses that you cannot bypass. For example, it includes items such as repayment of education loan, grocery expenses and rent.
The second item costs your choice. This includes entertainment, movie streaming and subscription related expenses.
Dhawan says, “Learn to live within your means. If you are compelled to live in a rented house in front of you, then stay in a place where the fare is a little cheaper, even if you have to travel a bit for this. ”
Vishal believes that one of the ways in which expenses can be kept under control is that every month you transfer a certain amount, assuming about 30% of your earnings, to another bank account. He says, “Do not touch this bank account. This amount should not be for your expenses. ”
Can i invest
In the 20s of our age, many of us feel that it is not easy to set aside money for investment.
Priya Sundar, director, PeakAlpha Investment Services, says, “It’s an illusion. To those who say that we do not have money to invest, we just say that they should save Rs 1,000 every month. ”
With Rs 1,000 you can start a Systematic Investment Plan (SIP). SIPs are plans in which you invest a fixed amount every month.
You can also invest in small savings schemes like postal time deposits. Apart from this, you can also buy a National Savings Certificate (NSC) for as little as Rs 1,000.
Kiran Telang, investment advisor registered with SEBI, says, “At this age, it is not easy to set aside money to invest every month. But after a few years, when you see your money growing, you are happy. ”
If you start investing at the age of 23 and save Rs 1,000 every month, at the age of 60, you will have around Rs 83 lakh. But, if you delay this investment and start investing from the age of 30, you will be able to collect only 35 lakh capital.
Now let’s think one step ahead. Your first salary may be less. But, if you make good progress in the coming years, then your salary will also increase significantly. Financial planners say that at least once a year you should either top up your SIP or increase it.
If you start SIP with just Rs 1,000 from the age of 23 and increase your installment by only Rs 100 every year, when you reach the age of 60, then you will have Rs 1.38 crore. In this calculation, it is assumed that your equity fund will grow at a rate of 12% every year.
Most companies provide health insurance to their employees. It is possible that you too get insurance in your first job. But it is not enough. Get your own health insurance plan. Vishal says, “Medical costs are increasing faster than other expenses. Everyone needs a health insurance. ” With the outbreak of the corona virus epidemic this year, most people have lost their jobs.
If you leave your job, then the insurance from the company also ends. For this reason, you should take your health insurance. It will always be helpful. Also, if you are in your 20s of age then the health insurance premiums are the lowest because at this age you are usually healthy. Usually, most insurance companies do not ask for medical checkups at this age.
How many credit cards should I have?
When the first job takes place and a salary account is opened in the bank, banks often encourage people to get a credit card. With the freedom to pay minimum arrears every month and spend fiercely, you can get into a debt trap. Kiran says that in your 20s you should have only one credit card. She says, “A credit card is not a means by which you can spend without any limit on your own choice. It should only be used as a convenience in lieu of not having cash in your pocket. ”
Make sure that you keep paying your entire monthly bill on time. Do not roll over your credit card debt. It is the most expensive of any type of debt. Credit card companies charge interest as large as 40% per annum on the outstanding balance.