FIRST STAGE OF INDEPENDENT LIVING : Here we discuss needs of such young persons who have just come out of college and got their first income on their own .They have just come out of the shadow of their parental support and have their independent income to be called their own .Now it is time to manage own income and expense . They have immediate requirement of managing accommodation and settling in a new place which requires some initial expenses . They have dreams of buying / possessing various gadgets , owing vehicles which they wanted to buy as students and which they could not have afforded then . They may also have responsibilities of repaying the loans if their parents had availed for their studies . They have expectations of their parents to contribute to the family funds . They also have to save for future either for exigencies or for margins for their dream houses , marriage expenses etc . They also want to indulge in luxury outings with fresh stream of income they are getting . But being fresh in the job , their income is limited to the salary a new comer gets in an organisation . Hence now they have responsibility of managing their finance apart from emotional management of living alone . Here are some suggestions for managing personal finance for young . Each one can tailor his/ her own pattern of managing according to his / her income , needs and financial position of his/ her family .

1. NEEDS COME FIRST
Pay first attention towards managing immediate needs like accommodation , clothing , food etc . Manage your needs as needs only with as much less expenses as possible . Contribute some portion of your earning to family fund if you are staying with your parents . If you have to settle in a place away from your house , accommodation at a little away from city center may save on rentals . Good clothing may not be branded . Good restaurants need not be 5 star. Home cooked food saves lot of money . Have your recreations like outing , movies etc , but keep expenses low . Start paying study loan installment . Any money saved on basics goes for fulfilling your other wishes .

2. BUILD EMERGENCY FUND

If you can keep your expenses within your income , you can start building emergency fund out of your savings . Build it to cover at least three months of your expenses . Such emergency fund will help you in case of unforeseen job loss , accident or hospitalization etc . Emergency fund will give you a breather till you restart your earning .
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3. TAKE INSURANCE

Treat insurance as part of needed expenses . It is another way of having emergency fund in case of accident , hospitalization etc . Further insurance premia to be paid at younger age is much cheaper than taking them as you get older . Further life insurance is also away of saving for future . It also helps in managing your income tax in case you have to start paying . But do not over insure your self than what premium you can afford . Insurance should serve only as a vehicle of insurance and not as investment . There are better avenues available for investment than taking insurance policies . Returns on money invested in life insurance is modest only as insurance companies deduct risk premia from the money invested and service charges are also taken out . Visit INSURANCE page for knowing more .

4. HAVE CREDIT CARDS

Take a credit card and it will help you in emergencies , other than serving as a payment medium . Chose a card with least or no fees . Many such cards are available . Utilize the cards for buying what you need . Never buy a thing because you have a credit card and it allows . Never use credit card for drawing cash as charges are heavy . Instead utilize debit card for drawing cash . Keep credit card for using it in case of emergency . You can smartly use credit card for your advantage.
Visit CREDIT CARD page for further details.

YOUR GROSS SAVINGS : You will be left with your gross savings after paying for your needs, insurance and taxes .Out of which you will first build your emergency fund which is to be touched in emergencies only i.e when your income stops flowing in or medical events / accidents . . Balance amount you save every month is the amount you can spend now for your indulgences , keep it as margin for up coming bigger purchases or for your investment for future .You have to decide what percentage of your savings goes where .For example if you are left with a savings of Rs 5,000 , You may chose buy a branded sun glass costing all your savings , or keep it as a margin for your smart phone costing Rs 40,00 you dreamy to have or for purchase of a TV you want to have or invest entire amount in stock market .Otherwise you may also spend a portion say Rs 1,000 on a sun glass, keep aside Rs 2,000 for margin towards smart phone and invest balance of Rs 2,000 in a Recurring deposit in a bank or SIP for a mutual fund. Choice is yours and use it judiciously . You have to balance between today's pleasures against future dreams .One need not sacrifice any one for the other .You may have both in a limited way .Remember future security will also contribute to today's peace .Now some tips on both viz spending vs investment . It is better to set aside certain portion of savings for investment before indulging in luxuries for today .

TIPS FOR MANAGING EXPENSES -
​PLAN YOUR EXPENSES

1. First pay or set aside funds for all essential expenses like Rents, groceries , Bills , Insurance and taxes
2. Before purchasing any gadgets or utilities , shop around to find choices available and prices shops quote . You can check up on line also for reviews of such products ,Expensive brand need not mean best product automatically . What a gadget is priced at its launch will be down by 30 % in three months in many cases .Prices of many electronic items keep on falling quarter after quarter . . Buy a gadget what suits your needs ,rather than go by popularity or a friend's advice . COMPARE prices with various vendors and you can save substantially .
3. Wait for festivals , sales promotion , seasonal sales etc when you can get a bargain . Waiting for the right time pays and you can buy what you want at a discounted price
4. Buy only want you can afford . If you want to buy an item with the help of a loan from a bank ,check whether you can afford EMI with your income . Any undue commitment may spoil your monthly budget and peace of mind . You can also hunt for a loan with lowest EMI .Many websites help you in searching for one such bank .
5. Remember to limit your expenses to the planned amount only and postpone your expenses to next month ,if you can not afford today

PLAN YOUR INVESTMENTS AND MANAGE WISELY :

1. Your first investment is from your emergency fund . Once you have ideally saved fund equivalent to three months of expenses , you can invest in a liquid fund where you can draw the amount in a day's notice . You can make a fixed deposit with a bank which would give fixed return .You can close your fixed deposit any time by losing a small portion of interest earned or you can draw against it a loan where you may have to pay .Other options are investing in cash / money market related mutual funds apart from leaving it in your savings bank accounts.

2. You can begin your journey of investment by simply opening a Recurring Deposit account with your bank for a fixed number of years .On your instruction , your banker would take the fixed amount to the account every month .Recurring deposits normally fetch the same interest rate as that of fixed deposit for the same period. It is a hassle free way of saving and you may save without feeling pinch of it .You can make Recurring deposit proceeds as margin for your future purchases like cars , two wheeler , home loan etc . You can make maturity date coinciding with your planned purchases of such items. You can also try other fixed income investments and to know more about them , CLICK HERE

3. There are other investments which can give better returns than bank deposits , but they carry risks of losing both investment and interest.As your savings improve , you can start trying those options . Before venturing to such investments which are classified under HIGH RISK category , learn about them . You can read our INVESTMENTS , MUTUAL FUNDS AND STOCK to have basic knowledge on such avenues .Remember they carry high risk of losing entire investment .Know risk mitigating techniques before investing in such schemes .

TIPS FOR YOUR INVESTMENT PLANNING ​

1. Before investing your savings ,Weigh various options available like Bank Deposits , Equities , Insurance . Mutual Funds , Real Estate ,Gold etc .

2. Weigh RISK AND RETURN of each type of investment and finalize the amount of money you are willing to put in each type of investments .

3. ​List out Dealers / Bankers / Brokers who deal in such instruments .Find out their Reputation in the market ,Reliability ,Charges and your convenience in dealing with them and short-list such persons / entities .

4. Discuss with them your investment priorities ,customer service you can get from them like the periodicity they would be updating the information regarding your investments ,charges they would levy ( Try to get a bargain if it is possible ) .

5. DO NOT PUT ALL EGGS IN ONE BASKET , EVEN IF THE SAME IS THE BEST RETURN YOU WOULD GET . SPREAD THE RISK .
It will help you in managing both market risk and liquidity risk. For example you invest all your money in one bank for fixed deposit as you​ are market risk averse.Later at the time you would like to withdraw ,Bank employees of that particular bank may be on strike on the day you need or they may be technical glitch in their system.In the worst case,bank would have gone for liquidation/merger etc .Or you would have shifted your residence and you may not be able to go to the particular bank .You may find it difficult redeem in the emergency . Hence always have alternative source where you can redeem your investment .

6. If you are investing in equities or Mutual Funds , you should be careful about market risk also.Prices and redemption value would be fluctuating continuously .You may have to wait for long before you make an profitable exit .You may lose your entire Capital too .So do not risk all your money in single investment .In case of equities , check about the company , its back ground, sector the company belongs to ,its financial results over the period ,market price movement over a period . In any case DO NOT RISK MORE THAN 5 % OF YOUR INVESTMENT IN ANY SINGLE COMPANY .Time your investment with an help of an Financial advisory. Also plan your exit strategy while investing itself like how much loss you are ready to take in case of adverse movement and when you will book your profit .

7. In case of Mutual Funds ,Verify the credentials of the managers of the fund , their track record and the kind of investment they are going to make in the particular scheme . They are various types on MFs like Equity Funds , Balanced Funds , Debt Funds , Money Market ETC .Study the risks involved in each of the schemes,Redemption options available ,Managerial track record , Scheme track record etc before putting your money You may spread your risk across various types of schemes, issuers etc and invest . Again golden rule is NOT TO PUT ALL EGGS IN SINGLE BASKET . If you can regularly save ,SIP ( Systematic Investment Plan) is a good option where you can invest predetermined amount every month .

8. While investing in GOLD ,various new options like in demarcate forms , Gold ETF , Gold bonds are available . ​They are safer , more liquid and price efficient compared to traditional PHYSICAL GOLD where you would lose by way of making charges , wastage, purity problems , theft etc . Hence if you do not require Gold in ornamental forms , you can try other options .

9. Investing in Real Estate has its own problems like illiquidity ,huge investment requirement , legal hassles etc . It may require long term funding and planning .

6 POINTS TO REMEMBER FOR AN YOUNG INVESTOR :

1. Every investment carries a certain amount and type of Risk . Hence one cannot avoid Risk and one has to MANAGE the risk .
2 . One can spread the risk by not putting all eggs in a single basket .
3. Adhoc investments based on Market rumors / friends'advice will not help in long run . Better Plan your self and go by your plan for investment .
4 . Do not fall prey for market frenzy / Ponzi schemes / quick buck schemes . and invest in an unknown territory without properly studying the risks and returns of such investment . ​​​​ ​​ Such schemes make only promotors of the scheme rich and not the subscribers .
5. Do not delay your investment plan and leave it for an older age as you would regret such decisions later . Start early for a peaceful retirement later .
6. SIP ( SYSTEMATIC INVESTMENT PLANNING IS AN IDEAL INVESTMENT TOOL FOR A YOUNG INVESTOR WHO CAN SAVE SMALL AMOUNTS EVERY MONTH AND CAN WAIT FOR A LONG TIME TO REAP THE BENEFITS . HOWEVER SIP CAN BE PUT IN AT LEAST 8 TO 10 DIFFERENT FUNDS CARRYING DIFFERENT RISKS ​​

PLAN YOUR TAX :Tax is necessary social and legal obligation and one has to provide for the same unless it is deducted at source . However there are various provisions under law by which one can obtain exemption .80 series is mostly used by the middle class. Tax consultants/ chartered accountants are helpful in getting all eligible exemption to reduce the burden of tax . There are various tools /investment avenues likes Housing Loans ,Insurance available which can be put to multiple uses including Tax management ,Risk management and investments .For full details on TAX PLANNING , CLICK HERE

PLAN YOUR INSURANCE : Events like loss of job , accident , hospitalization , disease , theft etc or loss of life of earning member may be unforeseen , but not uncommon . We may not know when any of such things would happen , but we should be prepared for any eventuality. While loss of job , loss in business or loss of life may erode our income , accident or disease may bring us unexpected huge expenses . Insuring our selves and our family against such risks should become part of our regular expenses and should be treated as essentials .While insurance is available for many risks we may encounter ,we have to separately provide for Risk of loss of job or business loss.

While taking insurance , care to be taken that all possible risks are covered through various policies adequately against maximum loss envisaged .Life insurance normally will have savings component and many use them as investment options . As they carry a substantial maintenance charges ,they are not suitable purely for investment purpose .There are various insurance companies offering their services . Before taking any insurance , one should compare terms and conditions, premiere charged and suitability for of the policy and standing of the insurance company .There are portals offering comparison services which can be of use .