Welcome Finance Enthusiasts !!

“Do not save what is left after spending; instead spend what is left after saving.”

                                               ~Warren Buffet

Money management is an important life skill. If you don’t know how to manage your finances then you will end up losing more than having more. You wish you were taught in school but since that did not happen below are the few pointers to start with.

📌Age Factor

Your age is the biggest factor which governs how much you should save and invest. If you are in your 20s and have just started to earn then invest from your first pay cheque itself. Compounding is magic. Please do not expect returns in a short duration they will multiply in the long run. It is important you start as early as possible. Buy life insurance as early as possible, it is cheap when you are young.

📌Risk Appetite and Risk Tolerance

Risk Appetite is the amount of risk you are willing to take to achieve your goals. It is like rolling a dice and hoping it is six.

Risk tolerance is the amount of money you can afford to lose without being too bothered about it. Imagine in ludo you are on block 94 and the dice did not roll six, it gives 2 and a snake eats you up and you are back on block 77, but hey it is okay you can climb up again.

Below are the types of risks and the suitable age group:

High – In the age group 20 to early 30s

Medium – In your late 30s to mid 40s

Low – After 45 your risk appetite significantly comes down

📌Goals

An individual’s money management depends on the responsibilities they shoulder. Your investment decision needs to align with your short term and long term goals. If you want to study further or buy a house then your investment approach will be different for both the goals.

📌Save-Invest-Grow-Repeat

If you want to understand saving then read the quote at the start of the blog. Maintain separate bank accounts for saving, investments and expenses. Your money has to work to make more money. If your money is not growing while you sleep then you will be working till the day you die. Start a SIP with a minimum amount and you will never regret this investment. Don’t follow unsolicited suggestions. Turn to an expert for answers, just because something worked for someone does not mean that it will work for you.

📌Emergency Fund

Your emergency fund is the sum of 6 months expenses. Consider it as your hidden treasure. We live in uncertain times in case any emergency comes up this fund will save you. Your savings and investments will be safe and you will have money ready at your disposal.

I know what is going on in your mind, you feel your income is less and it is impossible to assign for all the above pointers. My dear friend, your future self will thank you for all the sacrifices you made. I get all the hype about enjoying youth and going on adventures. This hedonistic approach is thrilling when the responsibilities and adulthood don’t hit. After you reach a certain age your youth experiences will be a thing of the past. So it is better to save some money for adulthood.