Even before your salary gets credited to your account, you have a long to-do list ready when you start earning. After all, it’s your money, and you will spend as you please. But at the same time, it is very important to save and invest your saving to reap the benefit in future years of life.
Here are 5 must-do for better financial planning when you start out in life and career.
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Early start – The earlier you start better, you will be. The twenties are the foundation year of just not your independent life but also for your financial plans. If you don’t get started with your financial plan in your twenties, then the chances are that your thirties will be spent rectifying what you didn’t do in twenties. All of us know what happens when a train is delayed at its starting point; it will reach late to its destination.
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Power of Compounding- An early start is also important to get you the benefit of compounding. Compounding is the process where your principal earns interest and then next interest is paid on the principal and the earned interest. Thus you earn interest on interest and this cycle goes on. If you start early, you will have more years in hand and thus earning you interest for more years.
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Insurance- Do not buy insurance as an investment product. Insurance is for protection and does not earn any return. There are many insurance products which promise you a return but be watchful of what you buy. Insurance should be treated like a safety net that you buy for your family or financial dependents if you meet an untimely death. If you have financial dependents, then term insurance is the only and a must-have cover. Insurance is also taken for saving tax. But this is also a wrong attitude. Don’t buy insurance for saving tax but buy it for handling the unforeseen situation.
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Start Investments – Don’t let your money lie in your bank account. Invest your saving in a product that will give you return on your investments. There are many financial assets in the market wherein you don’t hold a physical asset like land or gold but rather hold them in digital forms like equity mutual funds and gold ETFs. A fixed monthly contribution towards these financial assets can build a good corpus for an individual over the years.
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Track your investments– Always track the performance of your investment. Don’t invest and forget but keep an eye on their performance and return. If you feel the certain investment is not doing well don’t be afraid of switching your investment avenue. Do not abandon your investment but look after them and nurture them.
Hope these five habits will help you in starting a solid financial plan as early as possible.
