Your 20s are probably the least stressed years of your life. With fewer obligations to take care of, you have the freedom to spend your hard-earned money the way you want. But not everyone gets to enjoy this bliss. If you get swayed by desires and give in to careless spending, you may end up with frivolous buys and late regrets.
However, if you’re careful and strategic, you can build a solid foundation for living your best life. Wondering how to get there?
Here are five tips to help you get more from your savings and investments.
Start with Budgeting
Without a budget guiding us, we may never know where all our money goes. So, begin your investment planning with budgeting. Take stock of your fixed and living expenses over the course of 3-4 months. Also, put away 10-20% of your earnings towards savings.
This will give you a better idea of your spending patterns and where you can cut costs. The amount left will be your disposable income.
Don’t Invest Without a Rhyme or Reason
Are you saving for a new car? Perhaps to finance your master’s degree abroad? Or, are you saving blindly? If so, stop and take some time to define your financial goals. This will help you understand where and how to invest for maximising growth potential.
You can create short-term, medium-term, and long-term goals, complete with the years it’ll take to reach them. Also, don’t forget to factor in your future earning capacity, loans, and other obligations while framing these goals.
Once you have a clear idea, you can easily identify suitable investment vehicles.
Pick the Right Instruments
Regular investment can yield handsome returns, but if your money is parked in the right financial instruments. Some excellent avenues for young earners in India are recurring deposits, fixed deposits, mutual funds, etc. Nonetheless, you should perform adequate research before deciding.
To ensure you’re picking the right investment vehicles, judge the option based on factors like:
- Tax liability
- Capital gains
- Risk tolerance
- Investment horizon
If they align with your financial requirement and risk profile, you’ve found your match.
Prioritise Liquid Savings for Emergency
Before you spend a single penny, build a corpus for rainy days. So, even if you lose your job or face any other interruption in your working life, you will have a buffer to get back on track in no time.
You can invest your surplus in a liquid investment vehicle like a fixed deposit online or a sweep-in account. Just make sure your corpus is easy to access and penalty-free whenever a need arises.
Monitor Instrument Performance Periodically
Investing without tracking your expenses or instrument performance is like shooting in the dark. This is especially true for market-linked instruments, whose performance can change with different market cycles.
Ideally, you should change your asset allocation as your risk profile or financial goals change.
Start Early, Earn More
The sooner you begin investing, the better your earnings are from the compounding effect. So, put your hard-earned money to work for you and start planning your investments early.
After all, the early bird gets the worm.