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HindustanTimes Sat,19 Apr 2014

Ditching New Year resolutions already? Save your finances

Sumedha Deo, Hindustan Times  Mumbai, January 29, 2013
First Published: 16:12 IST(29/1/2013) | Last Updated: 18:22 IST(29/1/2013)

A month into the New Year and many of us are already finding it hard to stand by our resolutions. But even if you’ve already started skipping the gym and taken a few drags from your friend’s cigarettes, try keeping the resolve to manage your finances better. Here’s what financial experts suggest you can do, as per your age and subsequently, income bracket.

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In your early 20s You’re fresh out of college and enjoying your first job. The best news for you is that you’ve started thinking about money early. “People generally get wise about money after working for four or five years,” says Rajesh Shah, a 26-year-old chartered account and chartered financial analyst. “Start saving with your first salary — I suggest you squirrel away a third of the total into a savings account — and you’ll develop the habit of saving fast.”

Another good habit to cultivate early on is to “keep a log book of your expenses,” says Nicholas Patankar, associate at Standard & Poor’s. “Open a small equity SIP (Systematic Investment Plan) of R500 in a reputable mutual fund,” he adds. Amar Pandit, CEO, My Financial Adviser, insists that getting your insurance covers in place at this early age is equally important. “People generally ignore insurance when they’re young since they haven’t faced any medical emergencies. But without adequate medical cover, all your other financial plans face the risk of simply falling apart,” he says. When you’re young, you are also able to get good insurance deals at lower costs with higher covers.

In your mid to late 20s By this age, most people start dreaming of buying bigger toys — cars, houses and educational degrees top the list. “A short-term plan could involve opening a recurring deposit at 8.5 per cent for a couple of years,” says Patankar.

Pandit suggests that you define your goals clearly before making an investment plan. “If you’re saving for a car or higher education, decide which one is more important and work towards that first,” he says. “If you need money in a couple of years, then investing in debt is a good idea. For long-term plans, opt for equity.”

Late 20s to early 30s This is when most people are looking to settle down and start a family, so buying a house or saving for a wedding becomes the priority. “It’s difficult to raise a lump sum corpus in a short time, so you must plan,” says Pandit, who suggests that opening a Public Provident Fund (PPF) account as a long-term option for saving, especially for those who fall in the 30 per cent or more tax bracket is a good idea as well. “Have sufficient contingency funds and liquidity in place; you never know when you may need it,” he adds.

Patankar also advises looking into more solid policies, such as life insurance. “Don’t fall into the insurance trap of agents and buy a policy promising nine per cent over 20+ years. Rather, think of opening a PPF account, which will double your money in 15 years,” says Patankar.

Disclaimer: These are only suggestions. Consult your accountant before making investments.

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