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8 Steps for young earners to plan their finances

Feb 08, 2018 | 2 years ago | Read Time: 3 minutes | By iKnowledge Team

Trying to plan finances early in career? 8 Tips that can help

The early bird catches the worm. Same is the case with financial planning. The earlier you start, the better it is. So, let’s look at eight tips that can help you plan your finances better.

  1. Identify your financial goals

Shooting a target with a blindfold is difficult, isn’t it? This is what you essentially do if you save or invest your money without setting financial goals. It is best to set yourself goals for every stage in life. They can help give you direction to achieve your life dreams.

  1. Make a budget

It isn’t advisable to go into a war without taking stock of your armory. Ditto with financial planning. Take stock of your finances before you start investing. You need to consider the taxes you pay, your monthly expenditure and so on before you decide the amount you want to invest. That said, you would want to ideally invest 10–20% of your earnings to achieve your goals.

  1. Use your salary wisely

The quantum of salary is in the hands of your employer. But, how you spend it is in your hands. Ideally, you shouldn’t spend more than 75% of your earnings. Set yourself an expense list at the beginning of the month, and try to stick to it.

  1. Choose your investments carefully

No two investments serve the same purpose. Each one is designed uniquely. So, do extensive research before you choose your investment avenues. The decision should depend on the urgency of your life goals and your risk appetite.

  1. Maximise tax savings

Tax planning is important. There are numerous investments that could help you save taxes under Section 80C of the Income Tax Act. Life insurance is inarguably one of the best tax-saving options. It not only helps you save taxes but also ensures your family is safe in case you pass away. Taking insurance early in life can be beneficial because you are generally required to pay lower premiums.

  1. Insurance that save taxes, and more

There are several types of insurance in the market. Term policies and Unit-linked Insurance Plans (ULIPs) are two such insurance products.

Term policies offer you insurance and guarantee returns to the policyholder at the time of maturity. ULIPs, on the other hand, offer not only insurance cover but also give you the option to invest in mutual funds, stocks and bonds. Part of your premium is used as payment for your life insurance, while the remaining is used for investment purposes. So, assess your needs before you choose the right insurance policy. You can click <here> to learn more about Aegon Life’s term policies and ULIP plans.

  1. Insure the right amount

It is necessary you consider inflation and other factors before deciding your insurance amount. You could follow a simple thumb rule— your term insurance amount must be at least 10 times your annual income. That’s because a low amount can be detrimental for your family in case you pass away.

  1. Plan for medical emergencies

Medical emergencies come unannounced. Therefore, it is advisable to have a back-up plan for such contingencies. You could invest in a term insurance plan to protect yourself in times of emergency. If you opt for Aegon Life’s iTerm Plus Insurance Plan with Life & Health Plus option, you can choose critical illness sum assured between Rs. 5 lacs to Rs. 50 lacs.

To sum it up

Failing to plan is planning to fail. So, plan your investments well in advance.

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