FINANCIAL PLANNING FOR YOUNG
FINANCIAL PLANNINGÂ FORÂ YOUNGÂ AND JUST EARNINGÂ
FIRST STAGE OF INDEPENDENT LIVINGÂ
Here  we  discuss needs of such young  persons who have just come out of college  and got their first income on their own .They have just come out of the  shadow of their parental support and  have their independent income to be called their own .Now it is time to manage  own income and expense .   They have immediate requirement of managing  accommodation  and settling  in a new place which requires  some initial  expenses .  They have dreams of buying / possessing various gadgets ,  owing vehicles  which they wanted to buy as students  and which they could not have afforded then .  They may also have responsibilities of repaying the loans  if their parents had availed for their studies . They have expectations of their parents  to contribute to the family  funds .   They also have to save for future  either  for exigencies  or for margins for their dream houses ,  marriage expenses etc . They also want to indulge in luxury  outings  with fresh stream of income they are getting . But being fresh in the job , their income is limited  to the salary  a new comer gets in an organisation .    Hence now  they have  responsibility of managing their finance  apart from emotional management of  living alone .  Here are some  suggestions for managing personal finance for young  . Each one can tailor  his/ her  own  pattern of managing according to his / her  income  , needs and  financial position of his/ her family .  Â
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 1. NEEDS COME FIRSTÂ
  Pay first attention towards managing immediate needs like accommodation  , clothing  , food etc .  Manage your needs as needs only  with  as much less expenses as  possible .  Contribute some portion of your earning to family fund  if you are staying with your parents . If you have to  settle in a place away from your house ,  accommodation  at  a little away  from city center may save on rentals . Good clothing may not be branded .  Good restaurants need not be 5 star. Home cooked food  saves lot of money .  Have your recreations  like outing , movies etc  , but keep expenses low  .    Start paying  study  loan installment .  Any money saved on basics  goes for fulfilling your other  wishes .Â
2. Â Â Â BUILD EMERGENCY FUNDÂ
If you can keep your expenses  within your income , you can start building emergency fund out of your savings .  Build it to cover at least three  months of your expenses .  Such emergency fund  will help you in case of unforeseen  job loss , accident  or hospitalization etc .  Emergency fund will give you  a breather till you  restart your earning .Â
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 1. NEEDS COME FIRSTÂ
  Pay first attention towards managing immediate needs like accommodation  , clothing  , food etc .  Manage your needs as needs only  with  as much less expenses as  possible .  Contribute some portion of your earning to family fund  if you are staying with your parents . If you have to  settle in a place away from your house ,  accommodation  at  a little away  from city center may save on rentals . Good clothing may not be branded .  Good restaurants need not be 5 star. Home cooked food  saves lot of money .  Have your recreations  like outing , movies etc  , but keep expenses low  .    Start paying  study  loan installment .  Any money saved on basics  goes for fulfilling your other  wishes .Â
2. Â Â Â BUILD EMERGENCY FUNDÂ
If you can keep your expenses  within your income , you can start building emergency fund out of your savings .  Build it to cover at least three  months of your expenses .  Such emergency fund  will help you in case of unforeseen  job loss , accident  or hospitalization etc .  Emergency fund will give you  a breather till you  restart your earning .Â
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3. Â TAKE INSURANCEÂ
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 Treat insurance as  part of  needed expenses .  It is another way of having emergency fund in case of accident ,  hospitalization etc  . Further insurance premia  to be paid  at younger age is much cheaper  than taking them as you get older .  Further life insurance is also  away of saving for future . It also helps in managing your income tax  in case you have to start paying  .  But  do not  over insure your self than what premium you can afford .  Insurance should serve only as  a  vehicle of insurance  and not as investment  . There are better avenues available for investment than taking insurance policies .  Returns on money invested in life insurance is modest only  as  insurance companies deduct risk premia  from the money invested and service charges  are also taken out .  Viist  INSURANCE  page for knowing more .Â
4. HAVE CREDIT CARDSÂ
Take  a credit card  and it will help you in emergencies  , other than serving as a  payment medium .  Chose a card with least or no fees . Many such cards are available .  Utilize the cards  for buying what you need .  Never buy  a thing because you have  a credit card and it allows  .  Never use credit card for drawing cash as  charges are heavy .  Instead utilize debit card  for drawing cash .  Keep  credit card for using it in case of emergency  . You can  smartly use credit card for your advantage.Â
Visit  CREDIT CARD  page for further  details.Â
3. Â TAKE INSURANCEÂ
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 Treat insurance as  part of  needed expenses .  It is another way of having emergency fund in case of accident ,  hospitalization etc  . Further insurance premia  to be paid  at younger age is much cheaper  than taking them as you get older .  Further life insurance is also  away of saving for future . It also helps in managing your income tax  in case you have to start paying  .  But  do not  over insure your self than what premium you can afford .  Insurance should serve only as  a  vehicle of insurance  and not as investment  . There are better avenues available for investment than taking insurance policies .  Returns on money invested in life insurance is modest only  as  insurance companies deduct risk premia  from the money invested and service charges  are also taken out .  Viist  INSURANCE  page for knowing more .Â
4. HAVE CREDIT CARDSÂ
Take  a credit card  and it will help you in emergencies  , other than serving as a  payment medium .  Chose a card with least or no fees . Many such cards are available .  Utilize the cards  for buying what you need .  Never buy  a thing because you have  a credit card and it allows  .  Never use credit card for drawing cash as  charges are heavy .  Instead utilize debit card  for drawing cash .  Keep  credit card for using it in case of emergency  . You can  smartly use credit card for your advantage.Â
Visit  CREDIT CARD  page for further  details.Â
NEW ARTICLE PUBLISHEDÂ
         TAX PLANNING FOR FY 2022-23 ( AY 2023-24 )Â
Comprehensive  Article on Income tax changes in Rules, Rates , Slabs , Rebates  and EstimationÂ
CLICK HERE TO READÂ
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         TAX PLANNING FOR FY 2022-23 ( AY 2023-24 )Â
Comprehensive  Article on Income tax changes in Rules, Rates , Slabs , Rebates  and EstimationÂ
CLICK HERE TO READÂ
​
YOUR GROSS SAVINGSÂ
You will be left with your gross savings after  paying for your needs, insurance and taxes .Out of which you will first build your emergency fund which is to be touched in emergencies only i.e when your income stops flowing in or medical  events  / accidents . . Balance amount you save every month  is the amount you can spend now  for your indulgences , keep it as margin for up coming bigger purchases or for your investment for future  .You have to decide what percentage of your savings goes where .For example  if you are left with a savings of  Rs 5,000  , You may chose  buy  a branded sun glass costing all your savings , or keep it as  a margin  for your smart phone costing Rs 40,00 you dreamy to have or for purchase of  a TV you want to have or invest entire amount in stock market .Otherwise you may also spend a portion say Rs 1,000 on  a sun glass, keep aside Rs 2,000 for margin towards smart phone and invest  balance  of Rs 2,000  in  a Recurring deposit  in  a bank or SIP for a mutual fund. Choice is yours and use it  judiciously .  You have to balance between today's pleasures  against future dreams .One need not sacrifice any one for the other .You may have both in a limited way .Remember future security will also contribute to today's peace .Now some tips on both viz spending vs investment . It is better to set aside certain portion of savings  for investment before indulging in luxuries for today .Â
TIPS FOR MANAGING EXPENSESÂ -
​PLAN YOUR EXPENSESÂ
1. First pay or set aside funds for all essential expenses like Rents, Â groceries , Bills , Insurance and taxes Â
2.  Before purchasing any  gadgets or utilities , shop around to  find  choices available  and prices shops quote . You can  check up on line also for reviews of such products ,Expensive brand need not mean  best product automatically . What a gadget is priced at its launch will be down by 30 % in three months in many cases .Prices of  many electronic items keep on falling quarter after quarter .  . Buy a gadget what suits your needs ,rather than go by popularity or a friend's advice . COMPARE prices with various vendors and you can  save substantially .Â
3. Wait for festivals , sales promotion , seasonal sales etc  when  you can get a bargain  .  Waiting for the right time pays  and you can buy what you want at a discounted priceÂ
4. Buy only want you can afford . If you want to buy an item with the help of  a loan from a bank ,check whether you can afford  EMI with your income . Any undue commitment may spoil your monthly budget and peace of mind .  You can also hunt for  a loan with  lowest EMI .Many websites  help you in searching for one such bank .Â
5. Remember to limit your expenses to the planned amount only  and postpone your expenses to next month ,if you can not afford today .Â
2.  Before purchasing any  gadgets or utilities , shop around to  find  choices available  and prices shops quote . You can  check up on line also for reviews of such products ,Expensive brand need not mean  best product automatically . What a gadget is priced at its launch will be down by 30 % in three months in many cases .Prices of  many electronic items keep on falling quarter after quarter .  . Buy a gadget what suits your needs ,rather than go by popularity or a friend's advice . COMPARE prices with various vendors and you can  save substantially .Â
3. Wait for festivals , sales promotion , seasonal sales etc  when  you can get a bargain  .  Waiting for the right time pays  and you can buy what you want at a discounted priceÂ
4. Buy only want you can afford . If you want to buy an item with the help of  a loan from a bank ,check whether you can afford  EMI with your income . Any undue commitment may spoil your monthly budget and peace of mind .  You can also hunt for  a loan with  lowest EMI .Many websites  help you in searching for one such bank .Â
5. Remember to limit your expenses to the planned amount only  and postpone your expenses to next month ,if you can not afford today .Â
     HAVE CAKE AND EAT IT TOO
     Plan your Expenses and Credit Card useÂ
    Tweak your Bank Accounts  earn Â
    and  Earn Extra IncomeÂ
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PLAN YOUR INVESTMENTS Â AND MANAGE Â WISELY
1. Your first investment is from your emergency fund . Once you have  ideally saved  fund equivalent to three months of expenses  , you can  invest in a liquid fund where you can draw the amount  in a day's notice . You can make  a fixed deposit with  a bank which would give fixed return .You can close  your fixed deposit any time by losing  a small portion of interest earned or you can draw  against it a loan where you may have to pay .Other options are investing in  cash / money market related mutual funds apart from leaving it in your savings bank accounts.Â
2. You can begin your journey of investment by simply opening a Recurring Deposit account with your bank  for  a fixed number of years .On your instruction , your banker would take the fixed amount to the account every month .Recurring deposits normally fetch the same interest rate  as  that of fixed deposit for the same period. It is  a hassle free way of saving and you may save  without feeling pinch of it .You can make Recurring deposit proceeds as margin for your future purchases  like cars , two wheeler ,  home loan etc . You can make maturity date coinciding with your planned purchases of  such items.  You can also try other fixed income investments and to know more about them , CLICK HEREÂ
3. There are other investments which can give better returns than  bank deposits , but they carry  risks of losing both investment  and interest.As your savings improve , you can start trying those  options . Before venturing  to such investments  which are classified under HIGH RISK category , learn about them . You can read  our INVESTMENTS , MUTUAL FUNDS AND STOCK to have basic knowledge on such avenues .Remember they carry high risk of losing entire investment .Know risk mitigating techniques  before investing in such schemes .Â
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2. You can begin your journey of investment by simply opening a Recurring Deposit account with your bank  for  a fixed number of years .On your instruction , your banker would take the fixed amount to the account every month .Recurring deposits normally fetch the same interest rate  as  that of fixed deposit for the same period. It is  a hassle free way of saving and you may save  without feeling pinch of it .You can make Recurring deposit proceeds as margin for your future purchases  like cars , two wheeler ,  home loan etc . You can make maturity date coinciding with your planned purchases of  such items.  You can also try other fixed income investments and to know more about them , CLICK HEREÂ
3. There are other investments which can give better returns than  bank deposits , but they carry  risks of losing both investment  and interest.As your savings improve , you can start trying those  options . Before venturing  to such investments  which are classified under HIGH RISK category , learn about them . You can read  our INVESTMENTS , MUTUAL FUNDS AND STOCK to have basic knowledge on such avenues .Remember they carry high risk of losing entire investment .Know risk mitigating techniques  before investing in such schemes .Â
​
 READ  Â
FINANCIAL PLANNING PROCESS Â Â
By : Mr N.K.A BALLAL
Retd Sr Vice-president  , ITDCÂ
CLICK HERE TO READ
FINANCIAL PLANNING PROCESS Â Â
By : Mr N.K.A BALLAL
Retd Sr Vice-president  , ITDCÂ
CLICK HERE TO READ
TIPS FOR YOUR INVESTMENT PLANNING ​
1. Before investing your savings ,Weigh various options available like Bank Deposits , Equities , Insurance . Mutual Funds , Real Estate ,Gold etc .
2. Weigh RISK AND RETURN  of each type of investment and finalize the amount of money you are willing to put in each type of investments .
3. ​List out Dealers / Bankers / Brokers  who deal in such instruments .Find out their Reputation in the market ,Reliability ,Charges and your convenience in dealing with them and short-list such persons / entities .
4. Discuss with them your investment priorities ,customer service you can get from them like the periodicity they would be updating the information regarding your investments  ,charges they would levy ( Try to get a bargain if it is possible ) .
5. DO NOT PUT ALL EGGS IN ONE BASKETÂ , EVEN IF THE SAME IS THE BEST RETURN YOU WOULD GET . SPREAD THE RISK .
It will help you in managing both market risk and liquidity risk. For example you invest all your money in one bank for fixed deposit as you​ are market risk averse.Later at the time you would like to withdraw ,Bank employees of that particular bank may be on strike on the day you need or they may be technical glitch in their system.In the worst case,bank would have gone for liquidation/merger etc .Or you would have shifted your residence and you may not be able to go to the particular bank .You may find it difficult redeem in the emergency . Hence always have alternative source where you can redeem your investment .
6. If you are investing in equities or Mutual Funds , you should be careful about market risk also.Prices and redemption value would be fluctuating continuously .You may have to wait for long before you make an profitable exit .You may lose your entire Capital too .So do not risk all your money  in single investment .In case of equities , check about the company , its back ground, sector the company belongs to ,its  financial results over the period ,market price movement over a period . In any case DO NOT RISK MORE THAN 5 % OF YOUR INVESTMENT IN ANY SINGLE COMPANY .Time your investment with an help of an Financial advisory. Also plan your exit strategy while investing itself like how much loss you are ready to take in case of adverse movement and when you will book your profit .
7. In case of Mutual Funds ,Verify the credentials of the managers of the fund , their track record  and the kind of investment they are going to make in the particular scheme . They are various types on MFs like Equity Funds , Balanced Funds , Debt Funds , Money Market ETC .Study the risks involved in each of the schemes,Redemption options available ,Managerial track record , Scheme track record etc before putting your money You may spread your risk across various types of schemes, issuers etc and invest . Again golden rule is NOT TO PUT ALL EGGS IN SINGLE BASKET . If you can regularly save ,SIP ( Systematic Investment Plan) is a good option where you can invest predetermined amount every month .
8.  While investing in GOLD ,various new options like in demarcate forms , Gold ETF , Gold bonds are available . ​They are safer , more liquid and price efficient compared to traditional PHYSICAL GOLD where you would lose by way of making charges , wastage, purity problems , theft etc . Hence if you do not require Gold in ornamental forms , you can try other options .
9. Investing in Real Estate has its own problems like illiquidity ,huge investment requirement , legal hassles etc . It may require long term funding and planning .
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1. Before investing your savings ,Weigh various options available like Bank Deposits , Equities , Insurance . Mutual Funds , Real Estate ,Gold etc .
2. Weigh RISK AND RETURN  of each type of investment and finalize the amount of money you are willing to put in each type of investments .
3. ​List out Dealers / Bankers / Brokers  who deal in such instruments .Find out their Reputation in the market ,Reliability ,Charges and your convenience in dealing with them and short-list such persons / entities .
4. Discuss with them your investment priorities ,customer service you can get from them like the periodicity they would be updating the information regarding your investments  ,charges they would levy ( Try to get a bargain if it is possible ) .
5. DO NOT PUT ALL EGGS IN ONE BASKETÂ , EVEN IF THE SAME IS THE BEST RETURN YOU WOULD GET . SPREAD THE RISK .
It will help you in managing both market risk and liquidity risk. For example you invest all your money in one bank for fixed deposit as you​ are market risk averse.Later at the time you would like to withdraw ,Bank employees of that particular bank may be on strike on the day you need or they may be technical glitch in their system.In the worst case,bank would have gone for liquidation/merger etc .Or you would have shifted your residence and you may not be able to go to the particular bank .You may find it difficult redeem in the emergency . Hence always have alternative source where you can redeem your investment .
6. If you are investing in equities or Mutual Funds , you should be careful about market risk also.Prices and redemption value would be fluctuating continuously .You may have to wait for long before you make an profitable exit .You may lose your entire Capital too .So do not risk all your money  in single investment .In case of equities , check about the company , its back ground, sector the company belongs to ,its  financial results over the period ,market price movement over a period . In any case DO NOT RISK MORE THAN 5 % OF YOUR INVESTMENT IN ANY SINGLE COMPANY .Time your investment with an help of an Financial advisory. Also plan your exit strategy while investing itself like how much loss you are ready to take in case of adverse movement and when you will book your profit .
7. In case of Mutual Funds ,Verify the credentials of the managers of the fund , their track record  and the kind of investment they are going to make in the particular scheme . They are various types on MFs like Equity Funds , Balanced Funds , Debt Funds , Money Market ETC .Study the risks involved in each of the schemes,Redemption options available ,Managerial track record , Scheme track record etc before putting your money You may spread your risk across various types of schemes, issuers etc and invest . Again golden rule is NOT TO PUT ALL EGGS IN SINGLE BASKET . If you can regularly save ,SIP ( Systematic Investment Plan) is a good option where you can invest predetermined amount every month .
8.  While investing in GOLD ,various new options like in demarcate forms , Gold ETF , Gold bonds are available . ​They are safer , more liquid and price efficient compared to traditional PHYSICAL GOLD where you would lose by way of making charges , wastage, purity problems , theft etc . Hence if you do not require Gold in ornamental forms , you can try other options .
9. Investing in Real Estate has its own problems like illiquidity ,huge investment requirement , legal hassles etc . It may require long term funding and planning .
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​e-INSURANCE  Account (  eIA  )                             SWIFT ​
                    NEW MOBILE APPLICATION FROM INCOME TAX DEPT , CLICK HERE                                                           NEW  ARTICLES ON  Â
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SMALL FINANCE BANKSÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â PAYMENT Â BANKS Â Â Â
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BHIM APPÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â AADHARÂ Â
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​e-INSURANCE  Account (  eIA  )                             SWIFT ​
 6 POINTS TO REMEMBER  FOR AN YOUNG INVESTOR :
1.   Every investment carries a certain amount and type of Risk . Hence one cannot avoid Risk  and one has to MANAGE the risk .
2 . One can spread the risk by not putting all eggs in a single basket .
3. Adhoc investments based on Market rumors / friends'advice will not help in long run . Better  Plan your self and go by your plan for investment .
4 . Do not fall prey for market frenzy / Ponzi schemes / quick buck schemes . and invest in an unknown territory  without properly studying the risks and returns of such investment . ​​​​   ​​ Such schemes make only promotors of the scheme rich and not the subscribers .Â
5. Do not delay your investment plan  and leave it for an older age as you would regret such decisions later . Start early for a peaceful retirement later .
6.   SIP ( SYSTEMATIC INVESTMENT PLANNING IS AN IDEAL INVESTMENT TOOL FOR A  YOUNG INVESTOR WHO CAN SAVE SMALL AMOUNTS EVERY MONTH AND CAN WAIT FOR A LONG TIME TO REAP THE BENEFITS .  HOWEVER  SIP CAN BE PUT IN AT LEAST 8 TO 10 DIFFERENT FUNDS  CARRYING DIFFERENT RISKS ​​​​
1.   Every investment carries a certain amount and type of Risk . Hence one cannot avoid Risk  and one has to MANAGE the risk .
2 . One can spread the risk by not putting all eggs in a single basket .
3. Adhoc investments based on Market rumors / friends'advice will not help in long run . Better  Plan your self and go by your plan for investment .
4 . Do not fall prey for market frenzy / Ponzi schemes / quick buck schemes . and invest in an unknown territory  without properly studying the risks and returns of such investment . ​​​​   ​​ Such schemes make only promotors of the scheme rich and not the subscribers .Â
5. Do not delay your investment plan  and leave it for an older age as you would regret such decisions later . Start early for a peaceful retirement later .
6.   SIP ( SYSTEMATIC INVESTMENT PLANNING IS AN IDEAL INVESTMENT TOOL FOR A  YOUNG INVESTOR WHO CAN SAVE SMALL AMOUNTS EVERY MONTH AND CAN WAIT FOR A LONG TIME TO REAP THE BENEFITS .  HOWEVER  SIP CAN BE PUT IN AT LEAST 8 TO 10 DIFFERENT FUNDS  CARRYING DIFFERENT RISKS ​​​​
PLAN YOUR TAX
Tax is  necessary social and legal obligation  and one has to provide for the same unless  it is deducted at  source . However there are various provisions under law  by which one can obtain exemption .80 series is mostly used by the middle  class. Tax consultants/ chartered accountants are helpful in getting  all eligible exemption to reduce the burden of tax .   There are various tools /investment avenues likes Housing Loans ,Insurance available which can be put to multiple uses including Tax management ,Risk management and investments .For full details on TAX PLANNING  , CLICK HEREÂ
PLAN YOUR Â INSURANCE
Events like  loss of job , accident , hospitalization , disease , theft etc or  loss of life of earning member   may be unforeseen , but not uncommon . We may not know when any of such things would happen , but we should be prepared for any eventuality. While loss of job , loss in business  or loss of life  may erode our income ,  accident or disease may  bring us unexpected huge expenses . Insuring our selves and our family against such risks should become   part of our  regular expenses and  should be treated as essentials .While insurance is available  for many risks we may encounter ,we have to separately provide for  Risk of  loss of job or business loss.
While taking insurance , care to be taken  that  all possible risks are covered through various policies adequately against maximum loss envisaged .Life insurance normally will have savings component and many use them as investment options . As they carry a substantial maintenance charges  ,they are not  suitable purely for investment purpose .There are various insurance companies offering their services . Before taking any insurance , one should compare terms and conditions, premiere charged  and suitability for of the policy and standing of the insurance company .There are  portals offering comparison services which can be use
While taking insurance , care to be taken  that  all possible risks are covered through various policies adequately against maximum loss envisaged .Life insurance normally will have savings component and many use them as investment options . As they carry a substantial maintenance charges  ,they are not  suitable purely for investment purpose .There are various insurance companies offering their services . Before taking any insurance , one should compare terms and conditions, premiere charged  and suitability for of the policy and standing of the insurance company .There are  portals offering comparison services which can be use