When you are young, even starting to think of planning your finances is half the battle won.Team Scripbox
March is often the cruellest month when it comes to finances. If you haven't planned your taxes and expenses, then you're probably wondering where the money went. It happens often enough. When you are young, even starting to think of planning your finances is half the battle won.
So if you're thinking about how to make sure you don't face another March like this one, congratulations and welcome to the journey. Given your age, just keeping the following simple principles in mind should make you comfortable in your investing journey.
1. Start saving 30 percent of your post-tax salary
Though it is early, the habits you form in the early years of your life will remain with you for the rest of your life. Learn to live within your means. Save 30 percent of your post-tax salary. If you can do this for the first 3 years of your working life, it will become a habit.
2. Separate bank account for expenses & salary
Isolate your expense (and salary account) and your investment account. Upon receiving your salary, shift 30 percent to your investing account. When you start doing it systematically, you will learn to live within your means. You may need to say ‘No’ to a few expensive restaurant visits or wait for a discount sale before you purchase something you want – but such habits will stand you in good stead. Remember that the first car for most millionaires that you see today has been a used car. The legend goes that Azim Premji bought a second-hand car from one of his employees, well after he became billionaire.
3. Where to invest
4. Beware of credit cards or loans
5. A few quick things to remember, since time is on your side
The following table provides approximate number of years it takes to double your money across many investing avenues and to what extent it can beat inflation. The longer the time period, the more the risk levels are reduced.
Welcome to the wonderful world of investing. Working towards financial freedom may not buy you happiness, but it does give you several options in life.