You’ve just started your career: First 3 things you should be doing with your money!

With annual growth of around 7-8%, India is creating lots of employment opportunities for first time dynamic and skillful young generation. However, it is proposed that India should create more than 1 million jobs every month.

With more employment and young people coming to work with decent salaries increase money flow. However, around 90% of employed youth saves significantly less. This is mainly due to lack of awareness.

For engagement in this article, we have asked Mr. Singh to contribute,

Mr. Singh has started his career in IT company in Mumbai, with a salary of Rs. 70,000 per month. Mr. Singh is 26 years old and he is single!

With my conversation to Mr. Singh, he asked me to mention Top 3 things he should be doing with his money.

Number 1 Thing: Identify the Goals

Even before Mr. Singh starts saving, he should have clear financial goals. Now, goals can vary from person to person depends on a person’s priority towards life. Without a goal, a person might not align toward regular savings. So, above all, I would prefer Mr. Singh to set up financial goals. Generally, financial goals can be Retirement at age 60, foreign vacation every once in 2 years, etc. However, one should also be clear on goals like kids’ education, Home down payment, emergency funds, etc, even before Mr. Singh marriage and kids he should start recurring saving towards these goals. Because with the help of very minimum saving every month he can achieve goals efficiently. 

After identifying goals, Mr. Singh needs to prioritize the goals. This will make 50% job is done.

Of course, goals keep on changing on the way, this also needs revision in between. For example, we are planning for Kid’s education portfolio around 2 crores after 30 years, but It may be possible kid wants to pursue sports. So, like this, there are always changes in goals, and priorities also keep on changing.

Number 2 Thing: Allocate money to the Goals

After completing prioritizing the goals, it’s time to allocation funds towards particular goals. Basically, there are two ways to start investing in particular goals a) Recurring investment (monthly/quarterly) b) Lumpsum investment.

Mutual Funds are the best products to allocate money. Because, in mutual funds, there are open-ended funds which can be liquidated anytime, can be modified according to needs, can be track performance on daily bases, etc.

Mr. Singh has just started this career, so I would suggest him to start SIP [Systematic Investment Plan]. Mr. Singh can allocate different mutual funds SIPs to different goals. For example, Mr. Singh is planning to save Rs. 15,000 every month.  Now, out of Rs. 15,000, Rs. 2000 can be allocated to Long Term goals, Rs. 5,000 and Rs. 3,000 can be allocated to different goals according to priority. Now, left Rs. 5,000 can be allocated to emergency funds.  Once, emergency fund reaches a certain limit, an extra amount of money can be diverted to another less prioritized goal. [Allocations of funds depends on the client’s risk level and goals priorities]. Now, to execute the financial planning and to finalize funds allocation we request Mr. Sing to take a look at Number 3 Thing.

Number 3 Thing: Hire Professional Financial planner: 

Hiring a professional financial planner is very important. If you have the right knowledge and understand financial products and its flavors, and mainly if you think you have time to track financial plan and modify goals according to needs, then there is no need to hire professional help.

You have to ask this question to yourself. If the answer is ‘NO’, then you should prefer professional advice by paying minor fees. You’ll get free advice also, but quality comes with value, not price.

Money management is not luxury, it’s an essential tool for efficient.