Are you someone who has recently started earning or hearing about earning money then this blog is for you!!
Do you know that every year many people in India fall into hundreds of financial traps and this is especially applicable for those who recently start earning
Because they have no clue what to do with the money they are the easy prey to all the predators
So if you are someone who has recently started earning or hearing about earning money then you should read this blog till the end.
Because in this blog I am going to share 10 tips that can help you live a financially comfortable life and avoid all the financial traps.
let’s get started
Top 10 Financial Tips for Beginners 2021
Always take a term plan:
The moment you start earning people would suggest you take the LIC policy. your parents would have taken it your relative would have taken it in short most of them have taken a LIC policy it is almost like a mandatory thing just like a ritual.
How can you not take a LIC policy the moment you start earning you will get multiple calls from the insurance agent they will tell you that insurance is one of the best investment do not fall into the trap.
Ok don’t take me wrong life insurance is important but only the term plan you should take a term plan which is the purest form of insurance so if anything happens to you tomorrow your family will get the financial support but the problem is people mix insurance and investment people end up taking endowment or Ulip plan.
But why they are a bad investment is because of multiple reasons, for example, they have got poor transparency low liquidity poor return, and high commission charges.
For example, when you take an endowment plan you would have no idea where these people are investing your money another reason why endowment plans are bad is because of poor return if you ask anyone.
What is the annual return on insurance they will have no idea in fact you can ask your parents and I am sure they will have no idea the reason why people end up mixing insurance and investment is that they have no clue how to calculate the return on their insurance?
In addition to this, if they know how to calculate the return they will not make this mistake another reason is when you want to take out your money in
Let’s say a couple of years you will not even get your investment money back so they have got a very poor liquidity.
So tip number one, do not mix insurance and investment always take a term plan which is the purest form of insurance that would be available at a very low annual premium tip number.
Avoid the debt trap:
Avoid the debt trap the moment you start earning you will get calls from credit card companies or banks for personal loans car loans etc.
Congratulations you are eligible for the free credit card congratulations you are eligible for the personal loan as if this is the biggest achievement of your life.
Now since you have recently started earning you would be tempted to buy those iPhones cars and all possible stuff just swipe the credit card and you are one isn’t it simple.
No, what they are doing is they are making you fall into the dead trap what is that trap let me explain.
Let’s say you start earning money and you always wanted to buy your dream car now you don’t have the money but you still want to buy the car so that you can post the photo on Instagram and Facebook.
Let’s be honest who doesn’t like doing that you feel successful you feel that you have accomplished something in your life but since you don’t have the money you will end up taking the car loan and you will pay the monthly EMI.
Now since you have recently started earning your salary would be on the lower side so you have got all the expenses like your home rent grocery transportation weekend party and on top of this, you have got your car loan it means.
By the end of the month, you are left with no savings.
Now let’s say you get a call from a credit card company and they offer you a free credit card and you think let me take this credit card and buy this iPhone on EMI to make things worse since you are not left with any savings you will end up swiping your credit card and end up paying the minimum amount due.
But do you know that if you pay the minimum amount on your credit card what is the annual interest you would pay you will end up paying almost 30 to 36 percent annual interest on your credit card
Now every month you will end up paying high interest on your credit card and when you get a call for a personal loan you get tempted to fulfill all your other desires so, in this way you end up with a car loan credit card, personal loan, etc and you fall into the debt trap.
The problem is it is very difficult to come out of the debt trap.so, tip number two avoid the debt trap
make sure that you do not take a credit card or any loan during the initial phase of your life.
By the way, a credit card is very useful if you know how to use it I personally enjoy a lot of benefits with
the credit card if you want me to make a separate video of a credit card do mention it in the comment box at the same time.
I’m not saying that you should not spend your money at all you should spend your money with your first earnings you should buy gifts for your parents and relatives but all I’m saying is you should keep a track of your expenses.
Do not overspend:
Do not overspend tip number three never keep too much money in the saving account what yes never keep too much money in the saving account.
The reason is simple when you keep your money in the saving account you get interest in the range of 2.5 percent to 3.5 percent per year but the inflation rate in India.
Which is almost around 5 percent what does it mean it means that when you keep money in a saving account your money is actually shrinking.
So, how much money you should keep in your savings account you can keep around one month of your
monthly expense and where can you park the rest of the money to keep it in the safer option.
Which are at least able to beat the inflation, for example, a liquid fund is a good option to park your excess money.
Take a medical plan:
A medical plan is a must the moment you start earning you should take a medical plan many people in India lose their lifetime of saving just because they don’t have a medical plan.
The health care cost in India is rising at a fast rate a few days of hospitalization can cost lacks.
You might have to end up breaking all your investments or end up borrowing money so make sure that you take a medical plan at a young age because at a young age the premiums are low.
Build an emergency fund:
Recently one of my friend who was working in a travel company in Bangalore lost his job he was very talented there is no doubt about it.
But he lost his job due to COVID-19 now he had a car loan and a home loan and no savings just imagine his state of mind.
He had sleepless nights he even felt sick he had to borrow money from his friends and family.
Now I pray that you don’t have to face this kind of situation but you should always be prepared for the rainy days.
So, always ensure that you build an emergency fund which is of almost six to nine months of your monthly expense now how to build this emergency fund you can park this money in FD or you can keep it in low-risk debt instruments like your money market fund or liquid fund.
Avoid lifestyle inflation:
So, this lifestyle inflation is a big problem in our country I know people who earn one lakh per month but in spite of that, they are living paycheck to paycheck because of lifestyle inflation.
So if you want to live a financially comfortable life always avoid this lifestyle inflation.
Avoid too much usage of social media:
Avoid too much usage of social media do you know that social media is indirectly a big factor in influencing your buying decision.
When you see your friends buying a new car or going for a euro trip you feel that your friends are living an amazing life and you are just wasting your life this indirectly create an urge to buy stuff.
Increase your income:
While it is good to save and invest money the most critical part is increasing your income you can buy all the luxuries provided your salary is also increasing at the same rate and you are able to save and invest the rest of the money.
If your income is not increasing then in spite of saving you will not be able to live a financially comfortable life.
So, how to increase this income find out all the latest in-demand skills in your field upgrade your skill set do the certifications alternately try to identify the second source of income as well as invest your money which will give you a good return on investment.
Learn the power of Compounding:
The power of compounding is the eighth wonder of the world trust me guys this is amazing you don’t need 50 to 100 returns overnight you just need an average 10 to 15 returns for the next 15 to 20 years and the power of compounding will do the wonders for you.
For that, you just need to invest in discipline and keep patience for your wealth to grow.
All you need is the right knowledge to invest the money which takes us to the last and final tip number 10.
Invest in knowledge:
while you might have done your engineering MBA, MBBS or cracked your civil service examination but i am sure when it comes to money management a lot of people have no idea unfortunately financial literacy is a big problem in our country.
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