[ghodlur]

Let me just add to the confusion you might already have with the posts from the experienced BHPians.

My suggestions would be as below:
1. Identify your goals - Education, Marriage, House, car, retirement, luxury holiday (not in any order)
2. Calculate the future expenses for the goals - There are lot of websites you can refer to or there's always T-BHP.
3. Decide your investment style - Risk taking, preferences etc. If in doubt talk to a CFA.
4. Allocate the investments first every month and then decide the spending. Don't need to starve yourself from any desires, but plan and work for it.

Discuss with friends, relatives to know their experiences also. Take an informed decision.

[raghukodali]

The way I did my financial planning over the last 25 years of my career

in my 20s - single - no major financial responsibilities - starting salary.
40% of the monthly salary to spend and 60% in saving (40% in FD, 20% in equity)
100% of the annual components (bonus RSUs etc) - 100% saved - 50% in FD 50% in equity.


In my 30s - Married - growing family- higher salary than in 20s
70% of the monthly salary to spend - 30% of monthly salary in saving (mostly FD)
Any annual components (bonus, RSU) used to buy land and build my house.


In my early 40s - Married, growing kids - much higher salary than in 30s
50% spend- 50% saving - (25% in FD 25% in equity)
All (almost) annual components saved (25% FD, 25% equity, 25% real estate) 25% depreciating assets like cars.

Now I am in my late 40s and comfortable to retire any day. I am still working and will work for the next few years, but it is my call now on when to hang my boots and spend time on hobbies and other activities.

[kamleshp]

Lot of folks have given good advise that can be followed, but the big conundrum is where to start, here is my suggestion:
1. Insurance: If you have dependents then get a term life, else wait until you start your family. Medical insurance from employer is good, but depending on current situation look for top up. Do review the situation on Insurance annually. Do not do your "investment" in insurance products.
2. Build a small corpus in FD, something you can fall back on in case you want to take a break or unforeseen expense comes up.
3. Invest in yourself - for greater returns in future, do not forget to invest in learning.
4. Avoid Credit Card debt - use it prudently but do not spend your next month's pay on CC.
5. Start PF/NPS- one of the long term retirement funds, which you should not touch till your retirement.
6. Build stock market knowledge, start slow.

For good advise I recommend you search for Dave Ramsey's Baby Steps on YouTube, and read Deepak Shenoy's - Money Wise.

All the best.

The biggest thing will be to keep your expenses well below your earnings.

[SnS_12]

Follow the principle of living a life you can afford to live rather than the one you want to live (debt). And if you have to take the bank loan route don’t use it to buy assets with it which will depreciate over time.

[yma]

There is already a wealth of information in responses to this thread. But I will add my 2 paisa.

Time is a very important factor that contributes for compounding. As a young person, you have this on your side. So that's a positive. Key is where you invest. It took me many number of years to understand that only an income-producing possession, such as a stock, bond, or working piece of real estate is a true investment.

A lot of financial advice talks about rate of return and it is important. But more important factor is how much can you save. Returns are not always in your control. You can only control % of total income that you can save and for how long you will allow that investment to compound.

Initially, you can start building an emergency fund. You can aim for 3 months’ worth of total expenses to be available in Bank FD/Liquid Fund. This will offer you enough buffer and confidence in case of any unforeseen event. Once you are at this milestone, you can move the goalpost to 6 months and later 1 year of expenses.

There is a lot of good literature to learn more about Personal Finance. I suggest you can start with these 2 resources.

1) Book - Psychology of Money by Morgan Housel. Does not offer any tactical advice but offers some fundamental advice on how to think about money.
2) Book - Four Pillars of Investing by William J Bernstein. Book is US centric but explains all important concepts of investing very well.

[am1m]

Lots of good advice, so will just repeat what I wish someone had told me at my first job:

*Save and Invest first, take care of essential expenses. Whatever is left, luxuries and enjoyment.
*Don't get into debt for depreciating assets or luxuries.
Education, a house you and your family will live in, a good business idea are all are assets. A superbike, expensive cell phone, expensive vacation, big fat wedding (you won't even remember where the wedding album is in 5 years), a flat for 'investment purposes' (land appreciates, flats seldom do, especially in already oversupplied parts of cities) - some examples of not great things to get into debt for.
*Get health insurance.

One more great bit of advice that's not on this thread, but I remember from another thread:

Originally Posted by V.Narayan

First, for most of us, maybe 2/3rds of us, our incomes grow in real terms as we grow older and hopefully more senior in our careers. The ratios can vary by person but in my case 75% of my asset creation happened in the last 10 years before retirement and 90% happened in the last 17 years. Factor this concept in.

Originally Posted by izzikio_rage

Starting this thread for advise that you'd want to share with others on what things have helped you build all this and how people relatively new to their careers should approach this

In fact, that thread (https://www.team-bhp.com/forum/shift...ng-thread.html (The Retirement Planning Thread)) will answer most of your questions.

[G20Rider]

I’m no financial expert and i’m not yet there where I can look back and say what worked and what didn’t. But I’ve been working for 11 years and I have one observation.

In the initial days of my career, I used to try and save as much as I can. No advanced tactics, just had an extra savings account and the moment salary arrives, I’d transfer a few thousands to the savings account.
This needed me to sacrifice many personal luxuries in those days and the fact was that after about 3 years of working there, amount in my savings accounts was nothing fantastic. Im probably able to save that whole amount in a month today.
When I look back, I sometimes wonder if it was worth sacrificing all those small personal luxuries for that small amount of savings.

But then I realise the most value I got out of that small savings account is not the money itself, but that it inculcated a strong habit of savings early into me. So do start on small and make it a habit.

One more important point is, nobody got rich just by saving what they have.
Always invest in yourself and and increase your income over time. Only way to be financially comfortable without sacrificing your lifestyle is to grow your income much faster than the the cost needed to fund your rising living standards as well as inflation.

[Vishal.R]

Don't go overboard with saving, important thing is investing, make investing a habit. SIPs are good option to start.

[charanreddy]

Wow, there is a wealth of information here. Allow me to pitch in with my 2 cents.

1. When you just start your job : Spend wisely and save an amount = 6 months expenses. Some people do this in 3 months and some take upto a year depending on how much you earn. Now Park this amount in an FD. This is a rainy day fund you will never touch unless incase of a job loss or equally dire requirement .

2. Once you have a rainy day fund, buy term insurance and health insurance. Term insurance amount should be atleast 4 times your gross income. Health insurance of atleast 10 lakhs. Premiums are low if you manage do this before 25 yrs of age.

3. Split your net income into 3 parts. Savings / loan EMIs / Living expenses. a good ratio is 40-30-30.

If you have an educational loan , combine savings and EMIs I.e 70% and start prepaying this loan. The faster you are able to get out of this the better. Experiment with the ratios ,
But make sure that living expenses does not exceed
45% at any time.

4. Once your educational loan is paid off, start diverting the Savings + EMI to other life goals: I.e marriage expenses or down payment for a house etc or a car .

If no immediate life plans , start putting this into a SIP.


Make sure to follow simple rules of thumb.

Value of house cannot be greater than 3 times your gross annual income, ideally less than 2 times.

Value of you car cannot be more than 1/2 of your annual income etc.

A lot of the above are super simple rules one can follow by just committing to financial discipline.


Hiring a fee only financial planner is highly recommended. For less than INR 20K a year you get good professional advise. However do not hire financial planners who don’t take a fee but take a part of your investment funds or any other factor.

All the best.

[carthick1000]

I am not a financial expert. So can't really say what you should do. But I have learnt some things on the way (of course by making mistakes), which I can share as if I am writing to my younger self.

Financial life (or life in general) is a search for answers to your own questions. The more curious you are the more you ask and the more you learn. Below are some basic questions which you can ask and then dive in the topics. There is plethora of online mediums to help answer your questions. Be clear about what you ask and be inquisitive about the answers you get. Be open to making mistakes and learning from them.

Understand your personal finance situation

- Budget to find your current situation: Income - Expenses = Savings
- What is your savings rate?
- How does your savings rate look in the future?
- What is your networth now?
- How does your networth look in the future?
- What steps do you have in place to increase your savings rate and networth?
- And many more...


Understand yourself

- What would you like to do? (Spend money on learning/experiences/travel/material things etc.)
- Are you a spender or saver or investor?
- What motivates you to spend/save/invest?
- What did you learn from your mistakes?
- What value do you create/like to create for your own life and the others around you?
- And many more...

Plan without action has ZERO value. Take action!

[Gaur]

Originally Posted by izzikio_rage

Starting this thread for advise that you'd want to share with others on what things have helped you build all this and how people relatively new to their careers should approach this

Glad that you have asked this question early on in your career, with all the advise shared i am sure you have some direction now.

Sharing some points based purely on my experience (as i am not an financial expert by any means)

: Invest in PPF straight away, any amount, best if you can exhaust the entire 1.5lac limit, you will see the miracle of compounding after 15years.
: FD's may sound old school but is a good place to park excess fund incase you are unsure of how to invest it somewhere else, till then a short term FD will help you keep pace with inflation if not beat it. also activate the Sweepin/out option available with FD's, helps you withdraw money from it without breaking it prematurely.
: If really planning to buy a house in the near future do go ahead and buy as soon as you have sufficient corpus to make the downpaymet and have factored in the future payments, whether its for investment or self use purpose its your call, the market is rigged in a way that prices seldom come down, so the best time is now.
: Clearly identify things based on what you Want v/s Need will help you avoid unnecessary expenditure.
: To satiate your hunger for automobiles, explore the used market route, few months back i got a used Honda CBR250R for 85k which delivers me the same fun/satisfaction at 1/4th the cost of other brand new motorcycles which i was exploring, may be one day i will take a big plunge but till then this helps.
: If your salary has a annual bonus/variable component use it entirely for investment straight away, i follow this almost religiously, however i have a friend who does exact opposite, splurge that amount entirely on himself/family as he spends/saves like a miser all the year around.
You figure what suits you best.

[Gansan]

1) Keep a track on your expenses. No impulsive buys. Don't pay too much attention to peer pressure.

2) This one is from Warren Buffet. Don't save what is left after spending; spend from what is left over after saving.

3) This was an advertisement tag line of a finance company long back, when I was in my twenties. It made an impression on me. "Let your first expense each month be towards saving". This was a punch line in Tamil, doesn't translate very well!

4) Live not just within your means, but well within your means.

[Acharya]

First thing first - open a PPF account and try to maximize it every year. Considering the tax exemption, it provides decent risk free returns in long run. Especially, when interest component becomes higher than your annual contribution. You will thank me that day.

Whenever you can, make a good real estate investment. Good being the operative word here - look for undervalued, good upcoming location with potential for development. Real estate will enable you to leverage your future earnings while investing, and push you for higher monthly savings.

SIP - Invest in index based ETFs, India should see good returns on index in next 10-20 years. Individual stocks investment depends on your understanding of it's business and performance, take your pick.

More than anything, live your life within your means.

At the same time, dream real big!
Believe it or not, dreams do come true in long run, provided one remains committed to the dream.

[kaushikduttajsr]

I'm a proud saver and even more proud that I have successfully inculcated this habit in everyone at home. My 2 cents:

1. Emergency fund: Save 3 months of salary in a savings account

2. Emergency back up: Save 3 months of salary in a debt fund. Plan your recurring expenses and add to this fund. E.g. I spend 20k on auto insurance, 60k on health insurance and another 40k on auto maintenance annually. I have created an SIP of 10k in this account.

3. Save taxes: Max out 80C and 80CCD with ELSS and NPS respectively. It's the best bang for buck you can ever generate for long term.

Next is the investment plan that compounds:

Please invest a large share in equities. At your age, I put 100% of this bucket into equity as you have age at your side. Long term investments into equity rarely turn negative. I prefer SIP into the following instruments; FYI I'm 34.

1. Large cap or ETF or Index funds: 40% of investible surplus
2. Mid cap or International Funds: 30% of your investible surplus
3. Small cap: 20% of your investible surplus
4. NPS: 10% of your investible surplus upto 50k annually

What else?

1. Buy a house and also a car
Don't listen to anyone who says buying a home and car is useless. There is no price for mental piece. A home above your head and a car to dash off when your work consumes you - these are unparalleled benefits. The finfluencer crowd is dead against ownership but I don't see any benefit of seeing 100mm in your account without indulging in the basics. I'm at that stage in life where I see my friends convert from one side to the other

2. Invest in yourself
Don't think twice before buying that book you wanted to read. Don't think twice if want to buy that PS5 and don't think twice before going for that tier 1 MBA or MS. But if you want to take that Euro trip, do consider visiting Himachal first

3. Save before you spend
Won't elaborate. Enough people have said enough about it.

4. Don't mix investment with insurance
Don't listen to your uncle who sells LIC. If you buy insurance, buy term insurance. Don't look for returns from your insurance.

5. This is too complex silly
Fine. Save up 6 months of salary for emergency. Then invest 80% of your surplus in ETF/Index funds and the rest in bank FDs.

Godspeed!

[sukhbirST]

I agree and support all above points but there are few pieces of advice, which I would like to share. First fulfil your desires and dreams you had till now. Sometimes we are not able to ask and keep things in our heart, could be an Apple phone, holiday trip, gift to someone etc. Read somewhere - Life is lost in Living. Learn to spend and save also.