It’s almost the end of February. Time to plan your next year’s budget.
Let this year’s mantra be: Save. Save. Save. No matter how small.
This post will find resonance with those who are just starting out on their careers, work part-time or are looking to start saving money, and therefore wondering where to start.
Here’s what I did when I started:
- Public Provident Fund (PPF) account: Opening a PPF account early helped me discover the magic of compounding over longer periods, while it also inculcated in me a habit of saving more and see them multiply ;). Starting your PPF in late teens or early twenties gives you the leg up in covering the 15 year lock-in period while you still have less number of liabilities.
- Recurring Deposit (RD): This is another savings instrument I swored by. I started with Rs 500 a month, and at the end of a year I would have a substantial amount in my hand to put to good use. It was better than spending it on sundry things. Right? Thereon, I started timing my RDs. For instance, you need money during festivals, or do some small course or travel! Based on a rough estimation, I would time the RDs say a year or two years in advance. Like this I had spaced out a number of RDs against different months. It helped! Liquidity or cash was available with me when I most needed it. And when not used I would reinvest them into FDs or fixed deposit. This also proved to be a boon when it came to building the 6-month contingency fund (repeatedly advised by experts).
- Employee Provident Fund (EPF): I experienced the power of EPF starting with my second employer only. The beauty of EPF according to me lies in its high rate of interest and the fact that every month a little portion of your take home salary gets automatically deposited in your EPF accounted along with a contribution from your employers. You do not have to make an extra effort to save. The same account can be carried forward to your next employer.
- Mutual Fund (MF): This I was slow to start, but became a regular with systematic investment plans (SIP). One thing that I was careful about though was I committed what I could do without for, say next 5 years. This is because any market cycle, takes that much time to go full round. One big advantage of SIPs is they average out market risks, thereby giving good returns in the long run. Another thing that you do occasinally is track the performances of my MF schemes. This is something I started doing only when I was well into investing in MF, until then just invest in a good fund. And STAY invested no matter how the market is (Very Important :)).
Of course, I did not do all of the above at once. Time and patience are virtues when it comes to growing your money. Diligence is the key 😉
If you have any doubt regarding this, please feel free to comment. I will try to answer within my limited knowledge and experience. Until then, happy savings! 🙂