Start saving early to financially secure your future

When a youngster starts earning, his or her first instinct is to spend it all on buying favorite things. But after the initial couple of months, they make it a habit to save a portion of the salary. They may wonder whether it is right to start saving just as one started working, but as eleders say it would serve them well in the future, even if they don’t grasp the importance now.

In the era of inflation, every dream comes with a hefty price tag. Like 5 lakh rupees for a car, 50 lakh for a house, and crores for retiremen. To fulfil these goals, either one needs high earnings or a strategic plan. It’s not easy to earn significantly for an average salaried person. That’s why, along with job, one should make a financial plan so that money doesn’t fall short to fulfil ones dreams.

Financial plan: 

After finishing studies, most youngsters starting their first job tend to spend their initial earnings on activies such as  leisure, buying gadgets, eating out, and sometimes paying off education loans. For such individuals, after a few months of working, spending salary at their own discretion is fine but afterwards, one should start financial planning also. Even when making initial unnecessary expenditures, spend only the money you have in hand. Avoid spending through EMI or credit cards, as it can eat into your future income.

After you you buy gadgets, clothes, and other things, your next step should be financial planning, so that financial goals can be achieved. Financial goals mean in how much time, and how much money you need to achieve those goals. For this, you’ll need to save. Hence, from the beginning of your career, you should save a portion of your salary and then invest.

Begin investing:
If the saving portion of your salary is low, it’s necessary that you track and reduce expenses. It’s not necessary to have a large amount to start savings. It’s essential to save a bit, for example, if you invest in a ₹1,000 rupees per month SIP in an equity mutual fund, you can accumulate ₹35 lakh in 30 years with an estimated return of 12%. This is the power of investment. Now, let’s get back to financial goals.

For young individuals starting a new career, their first goal should be self-education or  career upgrade. This will help you garner funds for higher studies. Which will in turn help you earn more. You can use that money in achieving the rest of your financial goals.

Set financial goals:
Other financial goals could be buying a car or a house, meeting wedding expenses, children’s education. and accumulating funds for retirement. So you should divide your goals into three parts – short, medium, and long-term. Decide how many years it will take to achieve these goals. Figure out how much money you’ll need. This will help you determine how much money you should invest? Figure out how much money you need to achieve your financial goals.

There’s no exact definition for short-term, medium-term, and long-term. Typically, investments held for 6 months to 3 years are considered short-term, 3 to 5 years are considered medium-term, and investments held for over 5 years are considered long-term investments.

Insurance is must:
Insurance should be a part of your financial planning. Insurance provides financial security for you and your family. It will help them face financial troubles in case you’re not around. In such a scenario, you should definitely opt for life insurance. You wont get any return in life insurance, but you do get a significant insurance cover for a small premium. In order to reduce future medical expenses, it’s advisable to also take health insurance policy also.

Emergency fund:
Difficult times don’t come with a warning. Therefore, before starting investments, make sure to create an emergency fund. Keep an amount equivalent to at least 6 months of expenses. There are two benefits of this: first, this money will come in handy during challenging times. Second, it won’t affect your financial goals if you need to use the funds in case of an emergency.

You can start saving for retirement from now on. Begin investing a bit and with the increase in your salary, you can build a good amount by increasing your investments too. When investing, remember not to invest any amount just randomly, invest according to your requirements and financial goals.”