Personal Savings Plan: How Millennials can achieve Financial Freedom
Plan your investment strategies today--in both short- and long-term financial goals, for safe, secure and timely returns
By next year, India will have more young people in the workforce, with the average age of 29, than any other country in the world. While this gives the country a fantastic growth opportunity, it also means that as a young professional, managing your personal finances to reach your aspirations is imperative. Apart from looking for ways to move up the ladder and earn more to afford the lifestyle you desire, it’s important to learn how to make your money work for you.
Given the present economic environment in the country, it is important for you to diversify your portfolio. With RBI ready to put the external benchmark system in to action, the reduced repo rate will help you get low-interest loans. However, this may bring down interest rate on investments. In this scenario, you can choose instruments such as fixed deposits to achieve long- and short-term goals more efficiently. Tried and tested, this instrument will keep your corpus safe and build wealth irrespective of market fluctuations.
Keep economic ups and downs in mind and read on to know how you can begin a rewarding journey towards financial fitness using these 3 guidelines.
1. Start small, but start right away
When interest is compounded, your earnings on investments increase manifold. With this principle in mind, get started in your early earning years with instruments that offer you returns based on the compounding power of the rupee. While the benefit of this may not be apparent at first, the returns are highly rewarding when you choose a lengthy investment term. Even if you are not able to invest a high sum, the long tenor will compensate and you’ll see your wealth increase, which is sure to motivate you to continue investing.
Moreover, as the Budget 2019 announcements have been received well, it has created a positive environment for the market pushing its movement ahead. This has resulted in an upturn, whose benefits you can reap via market-linked investments. While you can use your bonus to invest in an FD, you can also decide on a small sum and contribute to it on a monthly basis to start a SIP. Making room for investment in the market this year will fetch you good returns.
2. Look for safety, security and timely returns
Focusing simply on high returns will not help, as that may lead you to pick compromised issuers or options. Research instruments and check their past record in terms of returns to decide on the most viable ones. You can be sure of getting assured returns from FDs with high credit ratings by ICRA and CRISIL, for instance. In case of mutual funds, selecting a good fund manager or company will help you plan the best equity and debt portfolio. Choose equity to gain high returns within a short span of time and select debt to have money handy for emergencies. Preparing for both wealth creation and contingencies is key.
To add some safety to your investment portfolio, choose options like PPF and even keep an eye on PF, in case your employer extends this to you. These are government schemes, which is why the interest rate on these instruments is adequate, and so is the assurance of return. Treat these as retirement savings and allow your savings to reap benefits in the years to come. Apart from security, you can enjoy tax benefits under Section 80C of the Income Tax Act basis these investments all through your earning years.
Build discipline and don’t shy away from financial planning
Steady investments help you accumulate finance for particular goals, be it education, marriage or retirement. So, consider creating a diversified asset spread that includes options like FDs for long-term goals, SIPs for short-term goals, PF for retirement, and gold or the like for emergencies. Ideally you should invest 85% of your savings in equity mutual funds, 15% in FDs or debt funds, and the remaining 5% in retirement savings. With increase in age and responsibilities, you can rework this mix to suit your lifestyle.
Inculcating the habit of regular savings will see you sail through financial ups and downs with equanimity. However, it is also important to observe self-control. Plan your expenses in advance and frame a budget. Learn which credit card suits your lifestyle better and helps you save more, without becoming overly dependent on it. Whenever you see yourself slipping off the planned path, track your goals. This will help you keep your debts at a manageable level and stay focused.
Attaining financial freedom involves having sufficient money for everyday spends as well as a lump sum amount for long-term goals. Thus, begin your investment journey keeping both today and tomorrow in mind.
Read more to understand financial planning better:
At Bajaj Finance Limited, Sachin is accountable to lead and build Retail & Corporate Liabilities' book, as a strategic diversification of the treasury's borrowing to strengthen the growing balance sheet with long term durable liabilities.
He was instrumental in building up and launching robust multi distribution channel strategy across D2C Retail, Digital, HNI and institutional segments.