5 smart financial steps young adults should take this year

1. Create and follow a monthly budget

No amount of financial planning can bear fruit if you do not follow a budget. By setting a budget, you can evaluate incorrect usage of money, identify the sources of wastage and avoid budget shortfalls.
Here’s what you need to do:
i) Set a budget that accounts for your monthly income
ii) Take your bonuses and earnings from previous investments, into consideration

iii) List your monthly expenses including EMI payments and monthly expenses
iv) Come up with the amount you can invest every month
v) With this clarity, you will find it easy to save more
Make sure you stick to the budget. You can set aside a part of your income for ad hoc expenses each month, so that you can take care of unforeseen expenses.

2. Understand how you can save on taxes

Taxes can be complicated for the uninitiated but with a steady income in hand, it is important to understand the basics. Based on your annual income, you are required to pay a percentage of your income as tax.
When you analyse exemptions that you can utilise, you can reduce your tax payments by investing in the specified securities. So, make it a priority to look for tax-saving instruments that you can invest in this financial year.

Additional Read: All You Need To Know About Income Tax In India

3. Review and re-align your investments

With the stock market experiencing a great start in 2018, now is the time to review your approach towards investments in stocks.
Start by looking at how much your investment portfolio has gained in the last year. Next, decide how much you need to save and by when. With these answers in mind, invest in stocks so your portfolio has the right mix of financial security and educated risk.
This will help you develop a systematic approach to achieving long-term financial goals.

4. Start planning for retirement

You’ll need more funds for your monthly expenses post-retirement, which is why you need to start planning for your nest egg. Start with safe investments such as PPF and fixed deposits that provide security along with some liquidity.

Additional Read: Why Are Fixed Deposits Better Investment Avenues than PPF?

Next, consider investments in mutual funds for higher returns, but try to minimise the risk by picking the right ones. You can also consider equity investments, based on expert advice and research.

5. Review your debt

Taking a small loan is good, as it can help in building your credit score. This comes in use, when you need a larger amount of credit, such as a home loan. But, if you have taken a car loan, for example, ensure that you make regular and timely repayments. Make part prepayments to pay off the loan before the tenor ends. This helps you save on interest and leaves you with more money to route your investments.

With better clarity on your financial priorities for the year ahead, you shouldn’t waste any more time in getting started.

DISCLAIMER: The mentioned fixed deposit interest rates are indicative only, and may be subject to change periodically. Please check the interest rates on our website.