Well begun is half done

While it is often said that the earlier you start saving,the better it is,it is acceptable if you spend freely in the first year of your career. For a young person,‘the desire and freedom to spend’ is of great importance,and anything which curbs this becomes an object of hatred. Hence,if saving and investing are thrust upon you right from the start,you become averse to them later. You have not yet benefited from the money that you have earned and many desires remain unfulfilled.

So,it is not wise to talk about things like finance and financial planning at the beginning itself. You can take the liberty of splurging during the first year,so that at the end of the first year,most of your wants are more or less fulfilled. After you have settled into your job and enjoyed spending your own money,you can start getting serious and look at planning your finances.

Learn various aspects of finance: It is easy to take the help of a financial planner. Although this is a more professional and organised approach,you must also get your own hands dirty.

Understand the basic concepts of saving and investing,and also how each investment avenue works. Appreciate the positives and negatives of every asset class. You can refer to the internet,newspapers,personal finance magazines and books and also attend personal finance forums to improve your knowledge. When you are clear about the fundamentals,you can easily understand the various happenings in the market and also what your planner is telling you.

Start a recurring deposit,which helps you save regularly and is a safe investment option for a newcomer. It is simple to understand and inculcates the discipline of saving. As you begin learning various concepts of personal finance,you must start a recurring deposit side by side. You can invest any amount,according to your salary,and depending on the amount you can save after your expenses.

You must understand that with regular investing,you are not only stopping wasteful expenditure,but are also allowing your money to grow. Do not expect phenomenal returns right from the beginning. A recurring deposit at the beginning of your career is suggested to get you into the habit of investing regularly,and also to let you see your money grow gradually.

Get the important things done first: Most people start their financial career with the sole aim of building wealth,without understanding basic investment principles and completing the must-dos at the beginning.

Certain activities like life insurance,health insurance,creating an emergency fund,starting PPF and NPS accounts and getting your basic documents in place are of prime importance. Once you establish a risk cover and have a retirement plan in place,you can gradually look at new avenues like equity mutual funds,real estate,stocks and other investments over a period of 2-4 years.

Establish goals and plan your financial life: As and when you begin investing in different avenues,you must determine your goals and the time-frame for each of them. You can plan your investments in different areas after defining and prioritising your goals. Determine the present estimated cost for each goal and,then,inflate it to the approximate value as on the due date.

For example,if you estimate the cost of your child’s marriage to be R10 lakh at the current cost,it can balloon up to R76.1 lakh after 30 years at 7% per annum inflation. Thus,inflation plays a critical role when you determine your goals and plan your finances. Do regular reviews and invest wisely by consulting experts. It is very easy for a new investor to get excited about making money and take wrong decisions while planning his finances. The above steps would help bring some order and progress in financial life.

* The writer is CEO,BankBazaar.com

Things to remember

* You can take the liberty of splurging during the first year

* After you have settled into your job,you can look at planning your finances

* Understand the basic concepts of saving and investing,and also how each investment avenue works

* Appreciate the positives and negatives of every asset class.

* Start a recurring deposit,which helps you save regularly and is a safe investment option for a newcomer

* With regular investing,you are not only stopping wasteful expenditure,but are also allowing your money to grow

* Do not expect phenomenal returns right from the beginning

* Get the important things done first. Once you establish a risk cover and have a retirement plan in place,you can gradually look at new avenues like equity mutual funds,real estate,stocks and other investments over a period of 2-4 years

* Establish goals and plan your financial life

* As and when you begin investing in different avenues,you must determine your goals and the time-frame for each of them

* Plan your investments in different areas after defining and prioritising your goals

* Determine the present estimated cost for each goal and,then,inflate it to the approximate value as on the due date