ATM :: 6 financial planning tips for those starting out | Updated On: August 01, 2013 13:53 (IST) | NDTV Profit


Today, the people in their 20s are in a world where they are forced to make more financial decisions than ever. When we actually observe the trends among the current professionals, most of the financial mistakes are committed during the early part of their career. The impact of these mistakes has a significant downside on their future financial well-being. The following steps ensure that they imbibe the much needed financial discipline and lay a foundation for their secure financial future.

1. Avoid cash-starved month-ends
The most common phenomena observed among the young professionals are the variations in their lifestyle in a given month. Their lifestyle starts on a high note with frivolous spending and as the month progresses, it trends downwards. Planning the expenses and differentiating expenses and committed and non-committed expenses would help them in stabilizing their life style. The long term impact of such financial habits is also significant. Minimize your non-committed expenses and ensure that you save enough for your future financial well-being.

2. Differentiate between needs and wants
Differentiating between needs and wants ensures that you spend your hard earned money wisely. Needs are something which you have to have; wants are something you would like to have. For example, while your monthly household or utility charges are a need, buying an expensive cell phone is a want. You can postpone your wants but not the needs. Always ensure that your money is not disproportionately allocated among needs and wants. Do not let your wishes spoil your saving routine.

3. Cover all bases of risk management first
Every individual on an average faces three emergencies in life. These emergencies can range from a potential job loss to a major health scare. One has to take necessary steps to ensure that such unforeseen emergencies do not cause chaos in their financial life. Especially, the young professionals lack enough savings to counter these situations. They need to make sure that they an emergency fund which account for three to six months of their expenses, adequate life insurance and medical insurance. The decisions of insurance should be need based rather than tax based.

4. Get that piggy bank back
Most of the people in their twenty’s, who just started their first job experience a sense of financial freedom. It is during this time, one has to get back to the roots and inculcate the habit of saving even if it is a small amount. Savings is one of the toughest things to start. It’s the most common resolution everyone makes and skips. Start with the modern day grown up man’s piggy bank: SIP. Start saving at least 500 a month. You can accumulate substantial amount even with minor savings.

5. Start preparing yourself for the biggest vacation of life
Retirement, is perhaps the longest vacation of a professional’s life. People generally kick start their career in 20’s and often think it is too early to save for their retirement. However, the financial intelligence has a different story to tell. Early stage of the career is the ideal time to start retirement planning. Especially in case of retirement savings, if you start at a young age you can enjoy the benefits of compounding and ensure that you have a financially secure retirement.

6. Avoid unnecessary tax related baits
Often we tend to buy products or make investments without doing the due diligence on our total tax structure. Having a tax plan in place by the start of financial year will help you make better decisions, and even reduce the burden on financials during the end of financial year. Also, analyze whether you need to make tax saving investments or not. Even if you have to make them, remember tax saving investments generally have a longer time horizon or lock in periods. This might impact your liquidity needs in the near future and often your long term ability to achieve your goals. Never consider tax planning in isolation. It should be an integral part of your holistic financial plan. provides personal financial advice online.

Disclaimer: The opinions expressed in this article are the personal opinions of the author. NDTV Profit is not responsible for the accuracy, completeness, suitability, or validity of any information on this article.

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