Set your goals. So what are the steps?
Think where you want to be in five years: How much will you have invested? Will you own a home? Where? What size? Will you have kids who will go to college someday? What kind of car do you see yourself driving? Will you take time off from work to study? To have a baby? To pursue a different career? What else is important to you financially?
Think about the roadblocks and the potholes along the way- you do not want to fall, do you? Write down your financial worries. Being late on credit card payments, delaying the student loan repayment, borrowing from your parents (anybody), increasing housing EMIs, ..could be endless, so please be truthful. Make a list of your financial worries
You should also make sure to budget money to invest. Ideally, that will be about 10% of take-home pay.
Set Aside an Emergency Fund (6 months home expenses)
Your first investment goal should be to set up an emergency fund—money you can tap in case you lose your job or are hit with an emergency bill, such as medical expenses.
Start Building Your Core Portfolio
Once you have taken care of the emergency fund, it is time to choose the building blocks for your portfolio. This does not have to be difficult. Index funds—either conventional funds or exchange-traded funds—fit the bill nicely.
If you are going to be adding to your investments monthly, use a conventional mutual fund Systematic Investment Plan. If you are in your 20s or 30s and are investing money for the long term (you do not plan to touch it for at a long time), you can use an allocation something like this:
• 10% Money market mutual fund (emergency reserves being built up)
• 25% Balanced fund: with about 65% in equity
· 65% — SIP in a multi-cap mutual fund as an SIP route.
To start your life with a good financial base, you need to understand your assets and liabilities (net worth), set priorities for your goals, create a realistic spending plan, set up an emergency fund, and put the core pieces of your investment plan in place.
If you have been academically successful, socially successful, you surely can be financially successful. To start, you need not be successful, but to be successful you need to start!
