Published - Thu, 29 Dec 2022
You begin working in your early twenties. Your pay is often entry-level. For the first time in your life, you have a sense of financial freedom, and your ambitions are out of this world! Most of us have the tendency to spend our first several years' salary on items and trips. That's fantastic, in my opinion.
It is extremely possible that what you save in your first year of employment will be a fraction of what you can save in your 30s. However, early savings practices will serve you well as you become older and your income rises.
Above all, do not underestimate the power of compounding. When you are 20 years old, Rs 1 lakh invested at 10% rises to Rs 45 lakh when you are 60. If you invest the same money at 30, it will only rise to Rs. 17 lakh.
As a result, it is wise to appreciate your money while you are still in your twenties. However, your parents are correct when they advise you to begin saving.
Here are some fundamental guidelines to get you started.
When calculating your costs, imagine that only 80-90 percent of your paycheck is accessible. You were probably a student until recently, so you understand what it's like to live on a budget.
Frontloading your investments, such as by arranging your systematic investment plan (SIP) for the first of the month, investing in your Public Provident Fund (PPF) in April rather than next March, is the best method to ensure you save and invest enough.
The most essential thing to remember is to never leave money in your savings account. Apart from what you require immediately, begin investing the remainder. The concept of money staying in a savings account being "secure" is erroneous.
Your money is losing value versus other assets on a daily basis; for example, in 2021, the rupee lost value against stocks, commodities, and other assets due to inflation. As a result, it is critical that you consider saving and investing as part of the same process.
You will make errors in your saving, investing, and spending. You may invest in something because everyone else is, spend more than you intended, or get lax and fail to start that SIP. It's fine.
It is critical to learn from mistakes and adjust the course. It is never too late or too early to begin saving and investing. "The finest time to plant a tree is now," as the Chinese saying says.
Do you want to go to Europe next year? Perhaps purchase the next iPhone? Make a separate fund for these large outlays. Using large goal posts to delay pleasure is an excellent method to develop savings habits.
One of our education system's major flaws is that it does not teach personal finance in school. As a result, read a few books or watch some YouTube videos about finance, the stock market, and asset allocation; or you can also come check out our articles. This educational investment will provide you with the fundamentals you need to get started on your saving and investing journey.
Increase your provident fund contribution, start a Nifty SIP, and purchase term life and health insurance.
Keep in mind that saving is tedious. It's similar to taking care of your health; you have to put in the effort every day.
As you begin your career and personal finance journeys, cultivate healthy habits from the start and see them grow.
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