Hello ! For a 24 years old person with zero savings who would start receiving a regular monthly income in sometime, how should financial planning be done for a beginner/fresher?? What are the best ways of savings, of stable investment (in about a year, not shares or trading)? and how to segregate essential expenses from luxury? What needs to be kept in mind while spending?
To be noted: personal and professional grooming needs to be started only after income flows in. So that would be a standard expense for some time. Thanks.
Expert Advice –
Your query is really exhaustive, to be answered at one go, in a column like this. However, I will try and put in some general guidelines, as the nature of your employment, remuneration and your family backgrounds are not known to me.
You will appreciate, Financial Planning can only be done after all these unknowns are taken into account, due to the fact that, they will determine your essential monthly cash flow both for your standing expenses as well as how much could be laid out for unplanned or frivolous expenses.
I have listed the chronological order in which you may start investing, being a fresher.
1. Health Insurance
2. Term Insurance (Life)
3. Personal Accident Insurance
The above three investments are to be started at the early age, so that you save both on the premium payable amounts, as well as, non claim bonus accumulation. In an eventuality, the insurance will pay for the unforeseen expenses. Hence, it is money saved is money earned !!
These three may appear to be EXPENSES but in long term perspective, they are the best saviours. Once done with the onetime annual payments with the above mentioned, without fail start investing in Equity Linked Savings Schemes (Mutual Funds), they serve a dual purpose of saving taxes and accumulating and creating wealth over an extended period of time.
Then if your income permits, start an SIP (systematic Investment plan) to start accumulating bit by bit. In this mode, it is not very relevant, how much you save per month, but it is very important to understand, how long you continue!! The longer, the better it gets. So always start early.
I think the above road map is adequate, without complicating any issue. Also all said and done, you may allocate at least 30 % of your monthly earnings, to make a sound beginning. With 2/3 of your income for other expenses. As mentioned earlier, Financial Planning is an ongoing process, planned and executed with definite GOALS in mind not just money to spend, so it needs to be tweaked from time to time after considerate reviews.
All the Best for your future!
- Dutt Sharma
Also Read: Here Is How You Can Start Saving Right After Your First Job
Got First Job? Now Plan Your Money In 7 Simple Steps