Getting Started with Finance Management

 It is very important to manage our finances wisely, be it savings, expenses or investments. I will try to briefly explain how to get started and and what to do in a long run. Please bear with me and read the entire article.

First- Analyze and Categorize

The very basic thing to do is to analyse your monthly needs and set a budget to spend on them. By needs I mean groceries, travel expenses, mobile recharges, loan emi, house rent etc.

Then comes your wishlist or wants. You can think of it like your weekend trips, parties, once in a lifetime thrills (climbing  Mount Everest or space flight with Jeff Bezos etc. :-D), latest new phone, bike, car etc. This list could go on.

Money Allocation or Budget Planning

And finally let's talk about investing money. I prefer to think of it like a property which you rent for some extra income. Well if done properly, it can give get hefty returns. The basic rule that you get all over the internet will be like save first and spend later or 50-30-20 rule (ratios may differ but concept is similar to what you would find over the internet). In 50-30-20 rule, 50% should go to your needs, 30% to wants and minimum of 20% of your income in investment. Well this works fine for beginners but just remember there's no hard rule which is mandatory to follow. The main thing is you should develop a habbit of investing.

In my experience, anyone should first work on having enough bank balance to last for 6 months of expenditure. Why? Consider this as an emergency fund. You may increase it gradually as you expenses increase over the years. Try to maintain this bank balance. Some people may suggest you to save as much as 6 months of salary as an emergency fund. Well you can do so but I would advice you otherwise and gradually increase it.

So what should be your investment plans?

I would say start with a medical insurance, then take a term insurance cover (premiums can be as low as Rs.500 per month for a 1 crore cover). Then go for tax-saving schemes. Since these days almost everyone has a mobile so getting started won't be a problem. I personally use ETMONEY app. Also there's another nice app called Groww which my friends use for investments. Both apps have nice UI and paperless workflow to get started with.

I would suggest to check insurance companies website directly instead of buying them from apps. Also it would be good to get in touch with insurance agents for the best plans that you can get for yourself.

In terms of medical insurance, I prefer Care Insurance. There are other players as well you can check them out as well. You can avail tax deduction under section 80D.

Then, I would suggest to invest in ELSS plans. These are tax-saving schemes with 3 year lock-in period. In my case I started investing in these plans using ETMONEY app. You have an option for lumpsum or SIP. I would advice you to choose SIP, markets can be unpredictable and investing monthly can average out in positive returns.

If you guys have someone who is in trading, you can try intraday trading through Groww app. Start with a small amount until you get used to it.

And please do explore other investment options as well. This is just the tip of the iceberg.

A pro-tip. ;-), getting life insurance and medical insurance policies is a wise desicion but avoid buying too many policies from insurance companies. No matter what an insurance agent may tell you to convince you, don't buy policies more than you need, it may feel like a burden later on. This is a mistake I made. Instead invest wisely in other areas which may give you more returns.

To summarize create an emergency fund, identify your needs, make a wishlist (enjoy your life too. like small weekend getaways and other stuff) and allocate funds. Then start investing, just remember, you can start investing to achieve your long term goals (fulfill items on your wishlist like cars, home, international trips etc.) or for wealth creation or both.

The above suggestions that I have made are based on my experiences till now. Also after watching several videos in youtube and reading articles online, I though I should write about my own experience.

In my upcoming blogs I will try to give interesting scenarios which will give you guys an idea of how investments can help you grow financially. 

Please do share your experience, feedback and suggestions in the comment section below.