Mastering your money: A go-to guide for every milestone

Let’s be honest: managing your finances can feel overwhelming! While most of us excel at earning, deciding what to do with that hard-earned cash is a different challenge altogether. At its core, money management is about making intelligent choices with your resources. It’s about ensuring that every rupee you earn is working hard for you, paving the way for a secure financial future.

Your money deserves a well-thought-out plan, not just a place to collect dust. Regardless of your age, it’s essential to have a clear vision of your financial pathway. In this article, we’ll unveil some fundamental strategies that will help you chart a course for a secure future.

In a dynamic country like India, it is important to focus on the financial management of young earners. For individuals in their 20s who have recently entered the workforce, this moment represents a significant opportunity for financial independence. As one begins this journey, questions about effectively managing finances may arise. To provide guidance, the following structured four-step approach offers a foundation for sound financial management:

3. Establish your safety net: A portion of your income should be earmarked for emergency savings and adequate life and health insurance. This foundation will protect you from life’s unpredictable twists and turns.
4. Kickstart your retirement fund: Starting young means you don’t need to invest big sums; even modest contributions can lead to a comfortable future. The earlier you begin, the better positioned you’ll be when retirement rolls around.
5. Plan for major milestones: Whether it’s your child’s education, wedding expenses, or the dream home you’ve always wanted, starting your savings early pays off in the long run.
6. Pursue your aspirations (with responsibility): Once you’ve secured the essentials, don’t hesitate to allocate funds towards your passions—be it travel, a new hobby, or any dream that excites you.

Regardless of your life stage, consider these tailored approaches:

If you’re in your 20s: Prioritise security! 

As a young professional, this is the ideal moment to invest in a term life insurance policy and health coverage while rates are favourable. Safeguard yourself against life’s uncertainties before moving on to future plans.

If you’re in your 30s: Time to get serious—but no need to panic!

If you’ve already begun investing, fantastic! Now’s the time to align those investments with specific goals. If you’re just getting started, there’s no need for concern—there’s still plenty of time to carve a successful financial path. Focus on what you’re saving for and how much you’ll need to reach your objectives.

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If you’re in your 40s: Approaching milestones!

Some goals may be just around the corner! As they come closer, it’s wise to re-evaluate your strategy. Shift away from high-risk investments and consider more stable options like debt instruments, passive incomes and hybrid funds. If you haven’t begun saving yet, this is your wake-up call! Don’t stress—just start right now. Prioritise your health insurance and retirement planning. Strive to allocate approximately 65 per cent of your portfolio to equities and 35 per cent to debt for optimal growth potential.

If you’re in your 50s: Retirement on the horizon!

Retirement is fast approaching, and by now, many of your significant life goals should be within reach. It’s crucial to focus on fortifying your retirement funds. Reduce your exposure to risky investments and transition toward safer options like hybrid and debt funds for stability.

The final takeaway: Regardless of your age or stage in life, it’s never too late—or too early—to seize control of your finances. With thoughtful planning and wise decisions, you can create a bright and secure financial future filled with opportunities.

The author is Head - Online Business, Axis Securities.