You work at a company you love. Your job is good and your pay is better. At the end of the day, you go out with friends and have a good time. At this point, saving for the future might be the last thing on your mind. But guess what; even a little saving each month can go a long way to secure your future.
Create an emergency fund
In the present, everything may be going well, but the future is unpredictable. And as a responsible individual, you need to have a financial safety net in case anything goes wrong. Experts suggest that an emergency fund should be equal to 3-6 months of monthly income. This might seem like a large amount. Luckily, you don’t need to create this fund overnight. By saving small amounts of money each month, you can gradually create this emergency fund.
Give a standing instruction
As the name suggests, an emergency fund is to help you in times of emergencies. That means, you should be able to access the amount at short notice. As a result, investing in a liquid mutual fund is a good option. The best way to set up this fund is to give a standing instruction to your bank account. Every month when you receive your salary, you can transfer a fixed amount of money into this fund automatically. The amount doesn’t have to be very big. At the beginning, even 2-5% of your salary is good enough.
Gradually increase your savings
Building your emergency financial fund is a good way to inculcate investment discipline. For instance, saving Rs 500 per month is good. But don’t stop at this level. As your income level rises, you have more disposable income at hand. This means, you can increase your monthly savings. So, by saving Rs 1,000 (or more) per month, you not only reach your emergency fund faster, you can finance other goals too.
Invest for the future
As a young individual, you have many goals and dreams. And when you put these goals on paper, you will find out that most of these goals are interlinked with money. For instance, you may want to purchase your first car, go on your first world tour, set up a retirement account and so on. These goals may not be possible without proper financial planning.
Let’s take an example. Imagine you want to travel the world on your 30th birthday. This is an exciting goal but it can be quite costly. And unless you start saving for this goal now, you may not be able to achieve it in time. By increasing your savings, you can slowly but surely reach your other financial milestones one at a time.
Every day is not sunny, bright and beautiful. There are rainy, gloomy days too. And if you don’t have an umbrella for rainy times, your day is pretty much ruined. A savings fund is like an umbrella for rainy days. It is an important part of personal finance. The more you save, the better you will be at handling uncertainties in the future. Analyse your monthly expenditures and see which of them are absolutely necessary and which of them are unnecessary. By minimizing superficial expenditure, you can maximize your savings.