5 financial tips for professionals in their 20s
Early 20s is a very exciting time in everyone’s life. You have just completed your studies and have taken up a job and you are now finally financially independent. While you live your life and have fun, here are a few investment advice that can help you get ahead of your peers.
- Reduce your taxes– Invest in a SIP of ELSS which are the tax saving Mutual Funds for efficient tax saving. Investments of up to 1.5Lakhs in ELSS are eligible for 80C tax deductions. Over and above the tax saving, historically then have given returns of 15%-25% and are ideal for tax saving and wealth creation.
- Save to achieve your dreams– If you dream about going on a back packing trip to Europe or USA or anywhere else with your friends and think it is too hard as it costs too much money – you can do it. You just need to start investing early for your goals. Use a Goal based Investment advisory to make it easy for you.
- Go easy on your credit card– This bring us to tracking our expenses. We understand that you spent the former part of your life studying and slogging to get where you are today and all you want to do is enjoy your life and have fun which is fine but be mindful of how much you are spending and what you are charging on your credit card. It is easy to spend more with plastic and much harder to pay later. Use your credit card responsibly. Remember that you’ll be relying on your future earnings to pay for today’s credit card purchases. And if you keep a running balance, you’ll also be paying high interest rate. Don’t fall into this trap and stay within a budget.
- Create an emergency fund– The purpose of this fund is to financially support you in case of loss of job, sickness, accident or any other emergency. This fund should be large enough to support your 6-8 months of living expenses. Suppose your 6 months’ living expense is 2 lakhs then you can start a SIP in a liquid fund which is a short term debt mutual fund, for an amount that will help you achieve your goal in 12-18 months.
- Get risky, get rich– Interested in knowing how to make your 1st Million rupees or 1st Crore??? It is easy. Start investing in equity, you have the power of age and compounding on your side. Equity Mutual Fund give a high return of 15% or more when held for a period of 5 years or more. Start a SIP of 10k in a Large Cap or Multi-cap mutual fund and continue to invest for 5.5 years ie 66 months. By the end of this you would have made 10 lakhs rupees.