Let’s first define financial planning before we understand how important it is for youngsters in India. Financial planning is a systematic process for managing money. It helps people achieve their financial objectives. Here is an example of Rahul and Devendra who graduated from the same college in the same year. They also began their careers together with similar salaries. Both of them had no dependent family members.
After three years on the job, Rahul purchased a brand new car worth Rs 6 Lakh, while Devendra was still struggling to buy a two-wheeler of Rs 80,000. Devendra asked Rahul, ‘How could you afford the car?’ Rahul said, ‘I have been advised by my uncle, who is a financial advisor, to save and invest to accomplish financial goals.’ Saving and investing are an integral part of financial planning. Youngsters who have just begun their career must focus on sound financial planning.
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A budget is a financial plan for a given period. Put simply, a budget is a tool used to manage income and expenses. Your budget must include every rupee earned and spent. A good budget helps cut unnecessary spending while helping you set aside money for emergencies.
Make a budget as soon as possible to save and invest for a bright future.
Despite the size of their salary, youngsters must start investing as soon as possible. Where to invest? They can invest in stocks, mutual funds, bank fixed deposits, national saving certificates, real estate depending on risk profile.
Not all youngsters can follow the same investment strategy. For example, youngsters willing to take moderate risk may not be comfortable with stocks. Investing in FDs is an ideal choice for youngsters seeking a fixed rate of return. Buying properties is another lucrative investment option for youngsters.
Many youngsters do not avail either health insurance or term insurance. They do not buy health insurance believing they would always be healthy. In today’s world, health issues are increasing because of many reasons, like lifestyle changes, hectic travelling or not paying enough attention to health care.
Youngsters with dependent parents must have term insurance, which covers risk. The parents get the death benefit on the demise of the policyholder within the term of the plan. You also need health insurance to protect finances from emergency hospitalization.
See Also: Basics of Financial Planning
Youngsters must save money for their retirement from the first day of the first job. It is hard to believe, but it is the truth. Retirement planning helps them lead a financially secured post-retirement life.
It includes recognizing income sources, risk and asset management, forecasting expenses, executing a savings program and so on. The following are the most common retirement investment options:
See Also: Step By Step Financial Planning
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