When someone starts his/her first job after completing education, a feeling of financial freedom comes naturally. The first salary gives a sense of achievement in life. This financial freedom sometimes makes us think that we are free to make all the expenses of our choice. Although it is not wrong to fulfil your dreams, it is also important to have economic responsibility along with financial sustainability. To fulfil your dreams, just getting a job is not enough. One needs proper financial planning is also necessary to live a balanced life. Here are some tips, which can help you in planning your financial affairs.
Develop a habit of saving
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Irrespective of age, one should always save and make it a habit. In addition to short-term needs such as shopping for clothes or gadgets, it is also important to focus on the mid-term and long-term goals. Therefore, first of all, you can save from your salary. The ideal savings rate should be at least 30% of the salary. To save according to your salary, make a list of your expenses and see where you can reduce your extravagance and put that money in savings.
It’s never too early to start an investment
The sooner you start investing or saving in life, the more benefit you will reap later. If you invest late, you will either fall behind the target or you will have to invest more money to reach your goal. The ability to save at the beginning of a career is the highest. This is the reason why most financial planners recommend investment as soon as possible. You don’t need to save or invest a large amount. You can also start with a small amount.
Choose investment plan wisely
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To start investing, first, decide what purpose you are investing for. You can save for anything like home, car, education, marriage. Accordingly, decide the duration of your investment. After this, it is necessary to think about your portfolio to invest in. In this, you can choose a diversified portfolio like FD, shares, mutual funds, real estate, gold and debt instruments. Choose options based on whether your investment goals are short term or long term.
Do not try to fulfil all your wants at once
Chase your dreams one by one. Make a list of your financial goals and ensure the time period within which you want to meet these goals. After this, add a little money for each goal. Complete the goal for which enough money is added. Do not buy everything on instalments or credit cards, otherwise, you can get caught in a debt trap.
Plan your future commensurately
While doing financial planning a person should also keep an estimate of future income. Do not assume that salary will be thick in future. Looking at the current salary, calculate the correct salary for the future by accounting. At the beginning of the career, the increment rate is high but as you progress in your career, the increment rate may decrease. If the salary becomes very good in future, then it will be the icing on the cake. Estimate a good salary for the future and estimate big future expenses and do not think of spending excessively. Not having restrained over expenses can cause great difficulties.
Clear all your debts
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Before planning thegoals, one should clear all the debts.If you had taken an education, then include its instalments in your expenses and accordingly make a balance in expenses and savings. Also, remember that deduction can be made in ITR on education loan under section 80E of the Income Tax Act.
Make a contingency provision
A fund should be set aside for a sudden emergency such as a medical emergency, job loss, etc. Funds should be deposited in this fund regularly, without procrastination. An ideal emergency fund should have enough money to cover at least 6 months of your expenses.
Plan your retirement too
It is also important for the employed person to focus on securing retirement. For retirement too, one should try to start investing as soon as possible so that there is enough money to raise a good fund at superannuation. For this, options like PPF, NPS can be taken. If you are thinking of studying abroad and settling down after working for some time, then avoid investing in long term financial options like PPF, NPS. This product is beneficial only if you want to come back to India after finishing your studies.