Just Started Earning? This Is Your Ultimate Guide To Start Investing!
First jobs and first salaries are special. Whether it’s that extravagant shopping spree or the thoughtful gesture of giving those earnings to our parents, we all know what we want to do with our first salaries. But what do you do next with your earnings?
In these times of consumerism and online shopping, it doesn’t take too much effort to spend all our earnings. Even if we do decide to save money, the lack of financial knowledge or understanding of various options available, leaves us clueless. So how does one go about investing for the first time?
Firstly you must start saving money. From the time you start earning, you should start putting aside money for future use. Put aside some part of your earnings as savings and then spend the rest.
Once you have developed a habit of saving regularly, it is time to start investing. Why do we need to invest? Remember that burger that cost Rs 20, 10 years back and costs Rs 60 now? Over time, on average, things get more expensive. The term for this is inflation. Inflation eats into the value of our money. Now think about that dream home or car you want to buy in a few years. It will cost way more in the future, than it costs now. Thus it is important to invest our money so that it increases in value and beats inflation.
Before you start investing, you should ascertain the amount of money that you can most definitely put aside every month. This will help you take the decision of where and how to invest your money.
So how should you start investing?
Build an Emergency Fund - Keep aside money to cover basic living expenses for at least three months, in case of an emergency. This money should be kept in a highly liquid/ accessible investment product such as your Savings bank account. Another 3 months worth of expenses should be parked in a six month Fixed Deposit or Liquid Mutual Fund.
Start a Systematic Investment Plan (SIP) – The easiest way to ensure we are investing regularly is to invest in Mutual Funds through SIP method. With a SIP, we invest a fixed amount every month in Mutual Funds. Investing in Mutual Funds is recommended because an experienced team of professionals invests your money. You could have a look at the “Advisory” section on the Basis app to see how you could get started.
While you now know what to do while investing for the first time, it is important to know what not to do. Here are a few things you should keep in mind -
Do not expect to get rich quickly – When you wish to get rich quick you are more prone to fall for marketing gimmicks or risky products that may not suit you. Always remember, when it comes to investing, being patient and disciplined is rewarding in the long term.
Do not fall for the debt trap – Don’t take huge loans that you may not be able to repay with ease. Ideally all your loan EMIs should not exceed more than 40% of your income .
Do not rush into insurance as an investment - Insurance is a risk protection product you need in case you have financial dependents. Don’t buy bundled products of insurance and investment.
Saving and investing are habits that you should inculcate from the very beginning of your career. Keeping in mind the above points, will ensure you start your journey of achieving your financial goals and reduce the risk of making mistakes. You can download the Basis app and begin your journey to financial independence with easy to understand knowledge boosters and a forum to ask your questions!
Basis is a first-of-its-kind platform, aimed at enabling women to achieve financial independence through expert advice, in-app knowledge boosters and supportive communities.
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