Getting the first paycheck is always a joy of moment for any youngster. I remember giving party to the colleagues on receiving my first salary. That’s the trend. And so the working life begins.
As young, energetic and dreams in our eyes we want to enjoy each day of our life. Work hard the whole day and party in the night is the funda of life. A handsome salary with no liabilities the first move in our career brings lot of new aspirations.
This is also the age where young and energetic develop habits of managing their finances which go a long way in deciding the financial well-being. While very few are able to resist their temptation of enhancing their lifestyle with every raise in salary, in many cases youngsters are found to be restless with their spending habits. Enjoy today and pay later is the mantra with which they live. This personal behavior becomes the curse of later years of life as the debt pile up. Sometimes the trap is too heavy to recover.
Financial Planning is an approach which helps in managing personal finance more efficiently. By creating a discipline in savings and investments, it lays the foundation for a secure future. Although a written financial plan is always very helpful, following some basics of financial planning in life the desired results for a financially can be achieved.
1. Identifying your goals: Young generation have very short term goals which are more inclined towards their earnings rather than savings. Very less thought is given on long term goals like retirement and the chase is on buying a car or a house. Whatever it is every goal requires a pre-planning. Identify and list various goals which you want to achieve. This will help in prioritizing on the basis of your financial situation.
2. Budgeting: Start budgeting as you start earning. This will help in knowing where each penny is being spent and you can identify where your maximum expenses are happening. By developing a habit of creating a budget you tend to follow a discipline in all your financial decisions.
3. Savings: Inculcate a habit of savings as you start earning. As youngsters we are restless and like to spend our entire earnings to enjoy the present without worrying about the future. Resist this temptation and pay for yourself first. Save for various financial goals you have identified and then utilize your earnings for your entertainment.
4. Use Credit sparingly: Credit card & personal loans has been the most easiest way of financing the lifestyle. What we forget is that whatever we purchase today on credit will be repaid from our future earnings. If the credit goes high the future earnings get impacted. Hence use credit cards and loans very wisely. Buy through your debit card which will keep a check on expenses. Even if you decide for credit, have surety to repay it later.
5. Be prepared for unexpected: There can be situations like job loss which can stop your income for few months. Start building a contingency fund for such situation. Remember you should be able to meet at least six month expenses if such situation arises.
6. Start investing for long term goals: Early stage of investing helps you to reap the benefits of compounding with minimal savings. Start investing for your retirement. A small investment at this age will go a long way in meeting retirement needs later in your life.
7. Learn about managing money: Read about personal finance. There is flow of information today through books, magazine articles in newspapers blogs etc. which are a good source of enhancing your knowledge. Subscribe to good newsletter and magazines related to personal finance. Remember, your knowledge play a very big role in financial decisions you make.
8. Hire a professional: Look to hire a professional for prudent decisions if you face any difficulty. There are host of services available from good financial planners including hourly consultation. See what will fit in your budget. Good financial planners make you understand the basic of personal finance before going for any recommendation.
Financial Planning is not any rocket science but a simple process which helps you in managing your financial well-being. As youngster we are tempted by environment around us which leads us to spend lavishly. The only way to save yourself from costly mistakes which may ruin later years of life is by being patient and increasing the self-knowledge. Resist the temptation and learn about managing money yourselves. Hire a professional to focus on your working career. Even if you are not following the financial planning process fully, implementation of certain basics of personal finance in your life will go a long way in managing your financial future when you will need it the most.
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This and All the other Articles/Videos on this blog are for general Information and educational purposes and not to be taken as an Investment Advice. Any Action taken by Readers on their Personal finances after reading our articles or listening to our videos will be purely at his/her own risk, with no responsibility on the Writer and the Investment Adviser. Registration Granted by SEBI, membership of BASL and Certification from National Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors.