When we’re in our 20s and have just started earning, budgeting isn’t really a popular word in our vocabulary. We hear our parents talking about it all the time but we have enough time to do so. Isn’t it? Not really. In most cases, our financial commitments are at their lowest in our 20s, which is why this is the perfect time to think about and implement money-saving tips. Most of us have a misconception that to save money, we need to earn more money but it can be the other way also. If you wait until later in your life, building a certain corpus will require a substantial amount of your income.

Here are 5 important yet easy tips for prosperity that will help you understand and use money better.

1. Track your spending:Before you start saving without thinking, start tracking your expenses. This includes every penny you spend because that way you will know where your money is going. At the end of each month, you’ll be able to figure out avenues that are not necessary and these are the places where you can cut your spending. Once you know your spending habits, you can create a monthly budget. Stick to it and put the remaining money in a retirement fund or emergency fund.
2. Diversify your money:After saving 6 months money by budgeting, you will have a good corpus to start thinking of investing. You will be happy to know that you can start investing in SIPs with a minimal amount. 500. Apart from SIP, you can also convert your investment in various ways. If you are planning to buy a house in 5 years from now, calculate your financial goal and invest accordingly. When you diversify, you also reduce your losses and since you are young, you will not be in a hurry to double or triple your investments by choosing riskier stocks.
3. Consider Mutual Funds: Now that you’ve completed the hard part of saving money and are looking forward to eating a good fundraising cake, how about we offer you an icing on the cake? By investing in mutual funds, you can not only save money but also earn more money with the returns you earn. The best thing about investing in mutual funds is that there are both long term as well as short term schemes. If you are looking to invest money for an overseas vacation, a short-term debt fund will give you the flexibility and tax-saving opportunity you may need for a year or so. Similarly, you also have the option of investing in equity funds, if you have long-term goals. For a diversified portfolio, good amount liquidity and stable returns, mutual funds are the best way to go.
4. Create an emergency fund: From medical to financial and other miscellaneous expenses, any emergency can be anything. Trouble often comes unannounced and for young people it often comes in the form of job losses. If you have a habit of saving money every month, then aim to build an emergency fund of 3 months at the earliest. As you grow up, you should aim to build an emergency corpus of 12 months as you will take on more financial responsibilities in the journey of life. We are all seeing how a global pandemic can affect work and life in such a big way. This is yet another reason to prepare ourselves for unforeseen situations by creating a fund that will help us when the going gets tough.
5. Avoid accumulating debt on credit cardsCredit card benefits are attractive but if you want to maximize the potential of having a credit card, the best way is to use it only up to the amount you can repay. Many people have a habit of paying the minimum due amount on a credit card, but it attracts a good amount of interest. Additionally, it ruins your credit score and accumulates your debt. Make a healthy habit of paying off credit card cards in full every month and continue to make money smart. Views are personal: Author Kunal Jain, Director, Samridhi Investment Services Pvt Ltd

Disclaimer: The views expressed are those of the author and are personal. TAML may or may not subscribe to it. The views expressed in this article/video are in no way intended to predict or time the markets. The views expressed are for informational purposes only and do not imply any investment, legal or taxation advice. Any action taken by you based on the information contained herein is your sole responsibility and Tata Asset Management will not be liable in any way for the consequences of such action by you.

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