Tips for Personal Finance - for young people starting their career

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Since you are starting your reformed career afresh, I would like to share some of my lessons in personal finance, which I have got by reading and by hard experiences. I would like you to benefit from it. For now, you might just read the mail and close it. But, I suggest you visit this mail later in your life to make sure you are doing all the required.

Here are the things, you will have to build, while you keep working in coming years. Also, I have prioritized from top to bottom. You will have to follow one by one in this order.

(i) Emergency Fund: Build an Emergency Fund in your savings account. This amount should be atleast 3 months of your salary. This fund helps in emergency. FYI, i am not able to build this fund completely anytime:-). Ofcourse it is a difficult one:-)

(ii) Life Insurance: Have one insurance, since you have two dependants already. In worst cases, your family should get benefitted. You can choose tax saving schemes also, since you are earning in india. This insurance should solid and that should make sure it meets most of your concerns in your absence, in worst case. So, I think it will come to Rs.1000 to 2000 per month range.

(iii) Mutual Funds: Choose SIPs(Systematic Investment Planning) for mutual funds. You don't need to invest at one time, instead you can invest monthly. These days there is even Micro-SIP. You can invest even Rs.200 per month. Normal SIPs cost minimum of Rs.1000 per month. Since India is booming, investing in market is good. We cannot go for investing in shares individually, since we don't have much knowledge. So, mutual funds is a good choice, since somebody(fund managers) else will manage your accounts. You should think of tax saving schemes in mutual funds also - i think it is called ELSS.

(iv) Real Estate: Owning a House by loan will give you a lot of tax saving. I think this applies to land also. Overall, if you take a house loan, and buy a land it will work out better i think. Land in Madurai OR Apartment in cities(chennai/blore) are very good options. You can do this, wherever you are working. Buying a land in madurai is a good option, whereever you are.

(v) Education Fund for children: Have some post office savings. Not much returns here, but thing is it will be safe and not much risk. NSC/KVP are helpful in terms of Tax.

(vi) Your retirement savings: Better to go with Mutual Funds, in terms of retirement. Start saving Rs.1000 pm for your retirement today. Retirement funds is about TIME. Earlier you start, it is better. If you think retirement is long way, and you don't need to think about it right now - you are wrong. Retirement Nest Eggs has to be built right from this point. If you do that in mutual funds and right funds, after consulting with a investment consultant, you can make a lot in long-term. Mutual Funds are very good in long-term like 20 years etc., Since you are in young age, we can have retirement funds in Mutual Funds and Shares. Nothing wrong in it, but later on in late 40s, you can change it into some bonds and fixed deposits etc.,

Overall, this is what I think you can consider. Always, remember your savings and investment should be DIVERSIFIED, like the variety above. We should have financial goals and milestones set like Life Emergency, Separate Nest Egg for your wealth building measure, Children Education, Children Marriage, Big Vacation, Property buying like Bike, Car etc., and at last comes Your retirement. You should create various financial vehicles like the ones listed above in your lifetime and those should meet your milestones someday.

I hope I have made my points clear. If you have any questions, please let me know - we can talk further about this.