5 Financial Planning Tips for Young Professionals
"The future belongs to those who believe in the beauty of their dreams", said Eleanor Roosevelt. Believing in dreams is one thing and achieving them is another.
It requires years of hard work and patience to make your dreams a reality. This is because, whether big or small, ideas need money. To achieve those dreams at the right time, you need an effective financial plan. If you're a young professional wanting to know how to go about it, here are five simple tips to get you started.
1. Commit to start saving today
As a young professional who has recently started earning, you may not be too keen on holding on to your money. You want to splurge on things that you had long wanted to buy. You can get them all, but it is a good idea to be mindful of your indulgences. This way, you will value your purchases more. Decide an amount you want to save every month and spend from what is left after saving. Your savings are what can help build a promising future for you.
2. Look into your investment options
Don't let your money sit idle in your savings account. Make the best use of the power of compounding by starting early—an amount of Rs. 10,000 invested for ten years can amount to Rs. 26 lakhs and for 15 years can give you Rs. 42 lakhs. Many people don't start investing early due to the lack of financial awareness. Look to SIPs to inculcate a good savings habit. You can make use of goa-based SIPs or mutual fund buckets to assist you in addressing every financial goal depending on your time horizon and risk appetite.
Additional read: 7 things you need to know about NPS
3. Use a budget to track your expenses
Most of us have grown up seeing our mothers managing the household on a budget. They would ensure the house runs smoothly while also working to save a few rupees wherever they could. Take a cue from this by planning out your own budget. Budgeting gives you an idea of your expenses and the need to cut down where it's not required. Once you start budgeting, saving also becomes more manageable. Make it a habit to track your expenses at the end of every month and make necessary adjustments to increase your savings component.
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4. Hold against impulse buying
A significant dent in one's bank balance often comes from impulsive shopping. Be it through online shopping or at retail stores, tempting sales and discounts often lure us into spending money. You may end up buying something you don't need or is of little value to you. To ensure you make mindful buying decisions, follow the 48-hour-rule. Wait for 48 hours to make a purchase if you spot an item you wish to buy. You could change your mind or not be so inclined to buy when you see the item again.
5. Take the benefits that ELSS has to offer
Invest in Equity Linked Saving Schemes (ELSS) to get tax deductions under Section 80C. These are mutual funds, which can help you claim a tax deduction of Rs. 1.5 Lakhs. Another option is to invest in the National Pension Scheme (NPS). It is a government scheme, which can give you an additional benefit of Rs. 50,000 in tax deductions.
Additional read: 7 things to know about ELSS
Your future depends a lot on what you do with your money today. Following these five financial guidelines can help you control your finances and monitor your net worth to give you an idea of your financial direction. Employ these tips to get you trending upwards and make the right money moves.
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