Got your First Job? Here’s how You Can Plan Your Finances and Save for Your Future!
Wealth creation is not something that happens overnight. However, it doesn’t take as long as you think it does too. If you begin early, you will have a fortune to bank upon! However, most people are in a hurry to create large savings in a short time. And in that process, they wait until they’re earning a massive salary. However, financial experts suggest an alternative approach. Instead, here is what you should be doing!
When you are right out of college and start working, you have very few liabilities. So, that’s the time to start saving! Instead of buying everything you come across just because you have a fancy salary coming into your bank account, evaluate your purchases. If you do not give the career and financial planning the thought it deserves, you’ll be in deep trouble. Whether you have any liabilities or not, you need to focus on the present and keep saving for the future.
Think of the Savings Budget
Most people plan their budget around their expenses. This means they keep aside money from their earnings for all their liabilities and expenses and then try to save what is left over. While paying rent and bills is not optional, experts suggest an alternative approach to this! It is important to start building a savings budget.
As the name suggests, this is a budget that focuses on your savings before expenditure. And in this approach, you plan your savings, keep aside the funds, and then plan your budget for the month. That’s because, without planning, we are unable to invest the money in the right avenues.
So, it is important to save money right at the onset. Once you fix a particular amount every month for your investments, you can spend the rest of it guilt-free. If you start with a smaller amount, say 1 %, you can gradually scale it up to a more reasonable amount, such as 5-10%. As your earnings increase, you can scale up your savings higher to 25 % of your total income.
Have clear financial goals. Having a clear picture of why you are saving, how much you need to save, and planning on attaining the savings goals is very important. Knowing the destination or goal is crucial for finances because it will help you understand and evaluate your saving and spending approach.
And while doing so, it would always help if you could break your savings plan into multiple chunks of short-term, medium-term, and long-term goals. Besides, all the investments have some liquidity, which will help you in case of an emergency. You can do this by leaving some funds in your savings account or investing in a liquid mutual fund account from where you can withdraw the money easily.
Saving is Earning
Well, a penny saved is a penny earned. So, if you need financial security, it is important to have a strong savings account. It is also important to watch your spendings. While we are not asking you to haggle every time you buy, there’s nothing wrong with looking for the best deals.
When you try the get the best deal out of every penny, you naturally save more money. And that, in the long-run, can turn into some additional wealth for your future.
Understanding Tax Savings
When you start earning, the inflow of money is enticing. And you might not pay heed to the tax brackets, savings, and understanding the nuances of taxes. However, it is more important than you think!
Talk to your financial advisor, peers, and seniors to understand how they plan their taxes. Try and calculate the returns from your investments after you consider the tax you need to pay. And yes, the best way to save tax is to ask your employer for a more reasonable salary –structure, read a tax-friendly one.
Watch Your Expenses
The thought of buying your first vehicle, your first everything comes to your mind when you start working, but hey, wait up! Think before you buy it. It may be easier said than done. But, by following simple things, such as spending less on credit cards, or looking for a more reasonable bachelor pad before moving out of your parent’s home, makes sense.
As soon as you buy a home/car, you are bound by EMIs and continue working in the company where perhaps you won’t want to work shortly! So, if you are financially flexible now, you may be financially confident later and buy nicer cars and houses that you can truly afford!
Also, stop overthinking! While you must think of your future, you must do it by having fun all the time! Work hard, invest, and have fun as well! Enjoy the process. You will sooner or later reach your goals.
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