Are you going to join a company where you have been placed during the placement session? I know that you are excited to start your professional career after the exciting journey of the student life. This is a new life where you can have money in your pocket with no obligations or very minimum obligations. You have spent the college life with small pocket money and from that time, you would think of this day. When the enjoyment is required the savings for future needs are also important. Money is one of the important matters to meet your personal aspirations. Financial planning is important to achieve those aspirations and have a better financial future. Personally, I was not serious about my finances during the starting of my career. I was in spending mood when I started income. The tough life lessons have compelled me to learn about my finances. With this article I want to guide what I have missed in my finances.
You can have the following steps towards better financial future.
- Contingency Amount:
Contingency amount is the money which will take care of you in case of joblessness or there is any medical emergency. Nobody’s job is secured in this job market. It may happen that one fine day you are fired from your company and you are ended with no job. To spend this bad situation, you need to have money in your hand. Try to save at least 3 months expenses in your savings bank account. The money should be easily accessible to you in case of requirement. Hence, don’t put this money into such an account it does not get liquidated easily.
If you have dependents in your home, you need to have a term insurance for yourself. This is a life insurance and it will take care of your family members when you are not around with them. Typically a term insurance with coverage of 10 times of your annual income serves the purpose. Term insurance does not give you a return over the maturity and it comes with a very small premium. A 1 cr policy will cost you as minimum as RS 6000 per year. I feel most of these age groups do not have any dependents and they should not consider term insurance as an option. In this regard, I want to remind you not to fall in the trap of Life insurance as an investment. It will give you very less return. Moreover, don’t mix the insurance with investment. If you do not need the insurance don’t buy it.
This is the most neglected thing on financial planning. Nobody actually cares about the requirement of health insurance at this age. Moreover, a small amount of health insurance which covers employee only push you to not to think more on this. A sudden hospitalization may eat all your savings which you are able to do after so many days. Always, buy a health insurance for yourself. If your parents are old, buy a separate health insurance for them. Including your old aged parents in a family floater will cost you more prices. This health insurance will also serve you in the period between when you will leave the company. That’s why a health insurance benefit from an employer will not stop to plunge into a new and better opportunity.
- Start Early:
After all the insurance needs, take care of your investments. Try to invest from the first income of your life. If you start early, the achievement of your financial goal will be easier. Though it is difficult to think of long duration goals such as retirement at such a young age of 25-28 years. But the early investments will compounded and you will reach your goal with less amount of monthly savings. The compounded return with disciplined investing requires less effort with minimum savings. Read the article out power of compounding by which you will know how it can do magic for you.
- Invest in Equity:
The most important in financial planning is investing and investing in proper assets which will give you a good return. Return on investment should be more than the inflation. If you want to grow your money, equity is the best route to invest which will grow your money. You can invest in equity in two ways. One is trading the stocks directly and another is through mutual fund route. For stock trading, you need to study the market and follow it regularly. This is difficult for you with a new job. Instead of that, you can rely a professional who can help you to manage your money in an equity mutual fund. Those persons are called fund managers. Start a Systematic Investment Plan (SIP) with an equity mutual fund for regular investment. Give an ECS mandate to bank and ensure the automatic transfer of amount to mutual fund folio. Stay invested for a long term and reviews your portfolio at least once in a year. Do necessary changes if it does not give you the return satisfactorily.
You follow these five steps after you start your income. This will surely help you achieve a better financial future with proper balance. And yes always remember of investing early. This is the keyword for you. Invest from tomorrow means you have missed one day to achieve your goal.
Disclaimer: The opinions expressed in this blog are the author’s own and do not reflect the views of Paisabazaar.com. Paisabazaar.com does not assume any responsibility or liability for the same.