Congratulations on your first job. Now you may be thinking of how to indulge yourself for stuff you have been thinking for a while. The euphoria of being financially independent will settle in few months and then you will probably think that your salary is too less for all your dreams. Everybody wants to be rich and famous but very few of us have actually sat and thought about how rich do we really want to be and what will keep us secure in life. Something along the lines of ‘what makes you happy’ – think about it and the answer might surprise you.
To have money in your hand every month does not guarantee you the lifestyle you anticipate throughout your life. Circumstances and needs always keep changing. Today’s sound financial situation does not necessarily foretell an equally rosy future. A loss of income, even temporary, can eat into your savings or lead to debt. An uninsured loss can wipe out your accumulated wealth. Insufficient savings can force a reduced lifestyle during retirement. Frequent or unplanned borrowings can leave negative money i.e. debts for future. Also, poor tax planning can result in paying higher taxes than what you are liable to pay. All this, combined with changes in your life cycle needs and/or external economic changes can make you and your future generations financially vulnerable.
You need to plan and manage your current income (the money you earn today) and your future income (money you can expect to earn in future) according to your needs. These needs are your goals, your dreams.
People who write their goals are much more likely to achieve them. Sit down by yourself or with loved ones and start to imagine your future. Consider what drives you in your life and how that has changed over time. While no one can tell you what you should want in life, the list of questions below should provide you a fair idea of how you should think about your future.
- What milestones do you see in the future? – Start a family, Send kids to college, Buy a new home, Retire, etc.
- If you could do anything, time and money aside, what would that be? – Spend more time with your family, A second home, Start your own business
- What would you like to add in your life? – More time, More money, More social life, etc
- What would you like to reduce in your life? – Debt, Job stress, etc
Having a vision for the future and planning for that vision are as important as money in achieving a fulfilling life.
Envisioning your dreams and putting them down on paper is the first step in making them a reality. The next step is to prioritize the goals that are most important to you and to establish milestone for reaching them. Start with a monthly Systematic Investment Plan (SIP) for at least 20% of your salary. You must invest monthly SIPs into large cap and mid/small cap equity mutual funds. You should also increase the amount of SIPs with each salary increment.
Reflect on your life, your dreams, and your goals. Unless you know what you want to achieve, you will never be able to reach where you want to be. Start planning financially for your dreams.
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