Use the 50-30-20 rule – If you are confused about how to distribute your earnings towards the various heads, use the simple 50-30-20 rule where 50% goes towards meeting your needs or your basic expenses, 30% towards your wants or discretionary expenses, and the remaining 20% towards savings/investments. This will ensure that you maintain your standard of living while saving a part of your income. The 30% allotted to wants can be used as you want. Whether you wish to use that to buy the latest smartphone or invest in a scheme of your choice or splurge on something else is up to you.
Track your expenses – If you can measure them, you can manage them. Knowing where your money goes is the best way of managing it. If you list out all your expenses for a couple of months, you will have a fair idea of how much you spend under various heads like rent, food, utilities, clothes, entertainment and so on. Once this is established, you will be able to track your expenses each month and determine whether you are over the budget. It will help you cut down on your discretionary spending and stay well within your budget. Figures don’t lie and writing them down will tell you exactly how you are managing.
Limit your credit – Living beyond your paycheck is a common mistake that youngsters make and before they realise it, they get trapped in the dangerous cycle of debt. Remember, a credit card is not an extension of your paycheck. Credit cards charge monthly interest on the outstanding amount. Never let your credit spending exceed 40% of your net income else your budget will go haywire and future goals will become unreachable. Instead, use your income prudently by planning your expenses, cutting down unnecessary spending, and investing wisely. Spending beyond your means is the first thing to be avoided if you want to budget for a healthy future. The simple mantra should be not to buy what you cannot afford.
Have a diversified portfolio – It is important to be aware of all the investment options available. It is good to have an idea of the returns offered by various asset classes. This will help you to plan your investments. Creating a diversified portfolio across asset classes can help you manage market risks better. Instead of worrying about the size of the initial capital, it makes more sense to focus on planning to invest regularly and making that a part of your monthly budget.
Believe in ‘Slow and steady wins the race’ – As long as you have a clear roadmap for your future in the form of a budget which tells you how much you plan to spend, how much to save and to invest, you can be sure that regular investments via mutual funds starting at the beginning of your career might help you build a decent fund for the future. It is not about how much you earn; it’s more about how well you spend each rupee that counts.
Let us sum up with an apt quote from Joe Biden, “Don’t tell me what you value, show me your budget, and I’ll tell you what you value.” Your goals, dreams and aspirations are spelt out in your budget. That is one of the best indicators of where you are headed and what you want to do with your life. Budget your future and you will have a readymade roadmap that will help you move towards your destination.
This is an investor education initiative by ICICI Prudential Mutual Fund. Visit www.icicipruamc.com/note to know more about the process to complete a one-time Know Your Customer (KYC)requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website(www.sebi.gov.in/intermediaries.html). For any queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations Officers. Additionally, investors may also lodge complaints on https://scores.gov.in if they are unsatisfied with the resolutions given by AMCs. SCORES portal facilitates you to lodge your complaint online with SEBI and subsequently view its status.(http://www.icicipruamc.com/note) (http://www.sebi.gov.in/intermediaries.html) (https://scores.gov.in/)
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
(This article is generated and published by ET Spotlight team. You can get in touch with them on firstname.lastname@example.org)