The start of a career is incredibly motivating. For the first time, your hard-earned money appears in your wallet, and an entirely different world emerges outside the office. It was always there, but now you’ll have a new perspective on the world around you. Spend it as you like. That isn’t a problem at all. You put in the effort so that you can live life to the fullest. Keep in mind, however, that every career has its ups and downs.
It’s possible that the source of income will stop for a while, or that there will be a sudden need for large sums of money. Financial planning is the process of preparing for such events, which begins with saving. This does not imply that you should curb your excitement and refrain from spending; rather, you should set aside a modest portion of your earnings as the first step toward financial planning. Keep in mind that starting your financial planning early in your profession will allow you to invest for a long period.
Sanjeev Bajaj, Joint Chairman and MD of Bajaj Capital, explains how compounding allows you to build more capital with less money.
1- To begin, make a wish list.
First and foremost, decide what you want to do with your life. What amount of money will be required for each aim, what are the dangers, and how will they be addressed? Make an Excel spreadsheet using them.
2- Create
Make a budget for your family. Make a budget for your family. Carry out this task in a straightforward manner. Estimate your monthly spending versus your monthly income to see if you’ll need to make any large purchases in the following months.
3- Keep cash on hand in case of an emergency.
Before investing, save and build an emergency fund. The goal is to ensure that there is no financial hardship in the event of a job loss or a medical emergency for a period of time. This money should cover at least six months’ worth of spending.
4-Risk Assessment and Management
You and your entire family should have proper health insurance coverage. If your company’s group health insurance falls short, you’ll need to purchase private health insurance. Get life insurance that is at least 15 times the sum assured’s annual income.
5- Set goals
Establish objectives Set goals for yourself, such as marriage, a car, a home, your children’s schooling, and retirement. You’ll be able to tell how much time you have for each aim. Then, based on inflation, estimate everyone’s spending and begin saving and investing accordingly.
6- Allocation of Assets
Determine how much money to put into each asset. This should be determined by the amount of time you have remaining to complete each goal and your risk tolerance. For a long-term aim like retirement, investing in equities, for example, might be an excellent option.
7- Portfolio of Investments Make a portfolio of investments. Equity mutual funds, debt funds, gold funds, sovereign bonds, and PPFs should all be included. It is vital to invest in everything at the same time. These can be gradually added to your portfolio.
8- Tax Preparation
Tax preparation, in addition to investing, is required to grow savings. Popular tax-saving investments include PPF, ELSS, and NPS. Make such investments with a long-term aim in mind, such as retirement.
9-Â ESTATE MANAGEMENT
Finally, after your nominations have been made, be sure that your property is easily accessible to your legal heirs or anyone you desire. It is preferable to purchase life insurance through the “Married Women’s Property Act.”
