MONEY MANTRAS FOR THE 20-SOMETHING! -
Apparently making money isn’t enough. You need to know how to grow it...
You make enough to keep yourself happy and you’ve even made your fair share of investments —you’d think that would be enough, right? Apparently not! Here are five money lessons which you should learn to make your money grow.
SAVE FOR RAINY DAYS
Of course many of us do this. It’s just that some of our ideas of saving are a little warped. When the salary comes in, we pay off bills, insurance premiums and so on. These are actually just investments. Savings has other meanings too. One should start a contingency fund, which is equal to about three months salary. What’s a contingency fund? Well, it’s money that you keep liquid in case of an emergency.
PLAN FOR RETIREMENT NOW
You may not retire in the next five years, but apparently you’ve to start planning now. If you invest Rs 5000 every month at the rate of 10 per cent p.a for the next 25 years, you will have a retirement fund of Rs 66.34 lakhs! And if you start a year later, you’ll have lost almost seven lakhs and three years later, 18 lakhs. Moral of the story: The earlier you start, the more you have. So, start from that very first pay check.
LIFESTYLE SHOULDN’T BE A LIABILITY
Right now, for many of us lifestyle is the biggest liability. Many of us blow up a big chunk of our salaries on eating out and shopping for bags and shoes. It’s a fetish that many can’t help but indulge. Well, understand that it won’t hurt so much to buy one bag less a month.
INVEST ACCORDING TO GOALS, NOT MARKETS
When you see a fund doing well, your immediate reaction is to want to invest in it. Big mistake! If you need money to buy a home or a car in the next three years, then investing in equity is just not a good idea. If the markets crash, you will lose the money and will not be able to meet your goal. So, even though the returns will be less, short term investments will keep your money safe. The rule: For short term goals— two to three years— invest in debt and for long term goals, i.e. seven to eight years, invest in equity. Of course, to do this you will need to actually have goals!
DON'T MAKE INVESTMENTS JUST TO SAVE TAX
Come March, every one starts making hurried investments. For most of us the main goal is to save tax! So, we end up putting our money into whatever tax-saving schemes that seem profitable at that time. From now on, invest in schemes that will help you meet your goals and save tax at the same time. Lastly, the lesson that will scare the living daylights out of you. Do you know when you should make your will? The moment you have your first asset — a bank deposit, gold jewellery, shares...anything remotely valuable!
Apparently making money isn’t enough. You need to know how to grow it...
You make enough to keep yourself happy and you’ve even made your fair share of investments —you’d think that would be enough, right? Apparently not! Here are five money lessons which you should learn to make your money grow.
SAVE FOR RAINY DAYS
Of course many of us do this. It’s just that some of our ideas of saving are a little warped. When the salary comes in, we pay off bills, insurance premiums and so on. These are actually just investments. Savings has other meanings too. One should start a contingency fund, which is equal to about three months salary. What’s a contingency fund? Well, it’s money that you keep liquid in case of an emergency.
PLAN FOR RETIREMENT NOW
You may not retire in the next five years, but apparently you’ve to start planning now. If you invest Rs 5000 every month at the rate of 10 per cent p.a for the next 25 years, you will have a retirement fund of Rs 66.34 lakhs! And if you start a year later, you’ll have lost almost seven lakhs and three years later, 18 lakhs. Moral of the story: The earlier you start, the more you have. So, start from that very first pay check.
LIFESTYLE SHOULDN’T BE A LIABILITY
Right now, for many of us lifestyle is the biggest liability. Many of us blow up a big chunk of our salaries on eating out and shopping for bags and shoes. It’s a fetish that many can’t help but indulge. Well, understand that it won’t hurt so much to buy one bag less a month.
INVEST ACCORDING TO GOALS, NOT MARKETS
When you see a fund doing well, your immediate reaction is to want to invest in it. Big mistake! If you need money to buy a home or a car in the next three years, then investing in equity is just not a good idea. If the markets crash, you will lose the money and will not be able to meet your goal. So, even though the returns will be less, short term investments will keep your money safe. The rule: For short term goals— two to three years— invest in debt and for long term goals, i.e. seven to eight years, invest in equity. Of course, to do this you will need to actually have goals!
DON'T MAKE INVESTMENTS JUST TO SAVE TAX
Come March, every one starts making hurried investments. For most of us the main goal is to save tax! So, we end up putting our money into whatever tax-saving schemes that seem profitable at that time. From now on, invest in schemes that will help you meet your goals and save tax at the same time. Lastly, the lesson that will scare the living daylights out of you. Do you know when you should make your will? The moment you have your first asset — a bank deposit, gold jewellery, shares...anything remotely valuable!
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