First save then spend


 

I have just started earning! I can’t save! My salary is so low, how can I invest in Mutual Funds?

Is this what you have in mind? You may be tempted to spend on things you have always wished for. It is absolutely fine to do so.

Don’t forget, freedom always comes with responsibility. At this age the foremost responsibility on you is your own.

Financial Planning is organizing your

  1. Savings
  2. Spending
  3. Bill payments

First save then spend.

At this age money is to buy a new mobile or saving for the first car. Then, there are people who start investing mainly for tax saving in 80C and when they see their money growing, their perspective changes towards money. They become more aware about their spending. When they see their investments growing, they feel like saving even more.

The biggest problem is the a large number of people who don’t save or don’t save enough. Whatever they do is without any planning and generally is of no use (from the perspective of financial planning). One Best way for saving more is to start saving systematically.

The most powerful tool that you have at this age is a long period for COMPOUNDING. The earlier you start the more years you have for compounding. Start small and think BIG!

Consider an example of someone who started investing INR 5000 in a month at the age of 25 till the age of 65. Even with a 12% return (assuming Mutual Fund grows 12% CAGR) he can make it INR 2.7CR, whereas if you will start this thing at 35, you will end with about INR 85 lakhs. You lose 1.9 Cr In 10 years if you start SIP late.

YOUR RETIREMENT FUND AT THE AGE OF 60
If you start a sip of Rs.5,000/- when you are 25 2.7 CR
If you start a sip of Rs.5,000/- when you are 30 1.5 CR
If you start a sip of Rs.5,000/- when you are 35 85 LACS

* WE ASSUME YOU RETIRE AT THE AGE OF 60
* WE ASSUME MUTUAL FUND GROWS WITH 12%CAGR

That’s the POWER OF COMPOUNDING.

You learn to create financial discipline. You can enjoy your current life without worrying about your future.  A  Financial Planner can help you do that.