Hello Readers!
How do you feel when you get your first paycheck? Obviously, it would be much exciting, and above that will be your temptation to spend it the way you want, after all, it’s your money and not your parents’ pocket money.
You may have big plans with your first check, like buying a new trendy phone or partying with your friends or some other. Well, experts say it’s fine if you splurge initially, but along with it is necessary that you should inculcate some good savings habits early in your career, that you can invest for a better future.
Savings Alone Is Enough?
When you save, you actually store that part of your monthly income that is not spent at a safe place say savings bank account. The money you save is kept idle at a safe place when it has the potential to multiply your savings!
While, when you invest your saved money in financial security for the long-term, it helps your money grow and give good returns along with your invested amount. Adviser says for every individual who starts their career and financial planning, it is a must for them to understand the key difference between saving and investing.
Experts say if you just started earning, do plan your savings. Initially, you can start it by setting aside 20 percent of your take-home pay. You can also start your investment with SIP in mutual funds.
If you start investing Rs 1,000 a month in an equity fund via a SIP (systematic investment plan) from 23, you’ll end up with Rs 82.75 lakh when you retire at age 60 (assuming 12 percent annual returns). But if you delay investing by seven years and start investing at age 30, you’ll get only Rs 35.30 lakh. Thus, choose wisely and plan investment early.
Online Investment, Is It A Good Option?
While you plan to invest in mutual funds, you have two options either you can get in touch with a distributor or you can start your investment through various online web portals that allow you to invest in mutual funds.
If you prefer to invest in mutual funds via a distributor, then you might be charged a bit more. This is because a distributor asks you several questions like how much risk you can withstand, the reasons you’re saving for, and so on. Then based on your answers, they came up with a list of mutual fund schemes that are best suitable for your investment. Also, they help you fill forms, keeps you abreast with your account statements, and so on.
However, when you choose to invest in mutual funds through online portals, you have to carry out these processes by yourself. No, no you need not worry, it’s as simple as opening a Gmail account. Register yourself on any web portal that allows you to invest in mutual funds. Then fulfill your Know Your Customer details to complete your KYC registration. After that pick out a fund based on your goal and set your SIP in it wherein money flows out of your bank account and into your MF schemes, automatically, every month. You can also top up your investments in the same set of schemes, if and when you wish to invest more.
Saving On Taxes Is Important!
Financial planners say that first-time salary earners often get introduced to savings through income-tax planning. During January through March, every salaried employee is asked to submit proofs and statements of expenses and investments made that’ll help them save taxes.
Invest in an equity-linked savings scheme (ELSS). These mutual fund schemes give you income tax deduction benefits under Section 80C.
From Where Should One Start?
Well, along with planning your investment in mutual funds, it is advisable to focus on foreclosing your education loan to save your interest payouts.
Being a new investor, who starts investing at the early stage of his career, it is advised you should have a mix of equity and debt instruments in your portfolio. And before all this, it is much necessary to first prepare yourself for any kind of emergency. The best way to deal with an emergency is an emergency fund, you can create them by investing in liquid funds. Liquid funds grow slowly and steadily and you can withdraw almost instantly.
Never forget to insure yourself and your family before you plan for your future goals. buy yourself a good health insurance cover from your first few salaries. The higher the cover, the better – a sum assured of at least Rs 10 lakh is a must.
Start investing in mutual funds for the long term, with a small amount via SIP right now, and with the growing year of your job and your salary, you can top-up your investments and SIPs and add a few more mutual funds schemes.
Keep reading our articles for more updates on finance and investment!!
For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).