Money tips to help young earners plan their finances

MAKE A BUDGET & START SAVING

Budgeting is the simple exercise of reconciling your income with your expenses, and should be your first step. Note down your monthly spending as per your ease of usage: Excel sheet, simple diary, mobile app, or desktop. 

FRAME YOUR FINANCIAL GOALS

You have started saving, but will you have enough to buy a house 10 years down the line, or even a car five years hence? People tend to save aggressively and invest with extreme vigour, but do so blindly, jeopardising their goals. This is a mistake common to most investors, irrespective of the age group. The next step then is to frame your goals.

Don’t just make a mental note of the things you want to finance, but write these down in detail. Split your goals into three categories: short-, medium- and long-term goals. Then list each one clearly, along with the number of years to achieve each, and the exact amount you will need. Once you have penned down your goals, you will be able to determine how much and for how long you will need to invest. 

SAVE FOR AN EMERGENCY

Caught in the thrill of making money, the urgency to buy things and eagerness to save for bigger goals like a house and a car, the new earners typically forget the preparation for financial emergencies. Be it the sudden loss of job, medical eventuality or sudden financial support required by a family member, you will need to be ready for contingencies. 

AVOID DEBT TRAPS

You are probably the most vulnerable when it comes to debt traps as you start working. With few responsibilities and the new-found power of money and credit card, it’s difficult to curb the consumerist urges. You should understand the difference between needs, wants and greed.”