The majority of new employees receive their first salary when they are in their mid-twenties. What they all have in common is a basic plan in their heads for what to do with their money; especially in the first few months. If they see that their savings account is still in the green and growing on a regular basis, they may feel satisfied.
While spending on oneself is perfectly acceptable, newcomers who have recently begun earning should reconsider this approach. Financial planning and discipline must be instilled in young individuals from an early age. This guarantees that saving money becomes a lifelong habit. This ensures a ready corpus accessible for a variety of critical milestones later in their lives. “It is critical to evaluate current income levels and spending patterns in order to strike a balance,” explains Navin Chandani, MD & CEO of CRIF High Mark.
The earlier they start saving, the less they will need to set away, and thus more benefits of compounding. To begin, young people should recall the concept ‘Income minus savings equals spendings’. Make a strategy to save a particular amount of money each month from their earnings. Even if you can just invest a modest amount, it will help you get off to a good start. If you save Rs 2000 per month for 30 years, you may amass around Rs 70 lakh assuming a 12% annual growth rate.
You might not be able to solve objectives like your own marriage, family, or buying a home right now. It is best to choose a proportion that you are willing to save from now on; it may be 5%, 10%, or 25% of your monthly payments. You may revisit it and improve it in the future based on your objectives.
Here’s a brief checklist from Chandani for any young adult to start saving:
Create a budget – Creating a monthly budget of income and costs is the first step in determining if you are spending on necessities or on luxury products.
Follow the budget – You should save at least 25% of your monthly income, and keeping to the budget is an efficient approach to do so.
Pay on time – Pay all the payments well before the due date.
Start Investing – Set aside cash from your monthly savings for investments on potential assets that will increase in value over time.
Use the power of compounding – This will assist you in creating money while maintaining discipline.
Protect yourself – Protect yourself by investing in a life and health insurance plan to cover any unforeseen events.
Have an emergency fund – Create an emergency fund separate from everyday investments to meet unforeseen needs. This ensures that savings are not drained in time of need.
Start building a good credit score – It will help you receive good credit prospects at any time in your life.
