Taking Charge of Your Finances as a young Indian
Becoming financially responsible is an important milestone for every Indian young adult. Learning key money management skills like budgeting, saving, investing and understanding taxes will empower you to take control of your finances and build strong financial foundations.
Make a Comprehensive Budget
The first step is to make a detailed monthly budget tracking your income and expenses.
- Calculate your total monthly income from your job, freelancing, gifts from family etc.
- List all regular expenses - rent, groceries, utilities, EMIs, insurance premiums, medical bills, transportation, recharges, subscriptions, etc.
- Add variable expenses like eating out, entertainment, shopping, travel, etc. Include realistic amounts for your lifestyle.
- Use budgeting apps like Walnut, Fynb, MoneyView, etc. to organize all this data easily. They provide insights into spending patterns.
- Allocate money to different categories based on your income and expected expenses. Ensure 10-20% goes into savings.
- Try to follow the 50/30/20 budget rule - 50% for needs, 30% for wants, 20% for savings/debt. Adjust percentages to suit your situation.
- Stick to your allotted budget strictly for at least 3 months. Refine categories as required. Develop discipline to spend consciously.
Build Your Savings
Develop the habit of regular saving to create a financial cushion for emergencies and future goals:
- Set a target for your emergency corpus - 3-6 months of living expenses is recommended.
- Open a recurring deposit account to automatically build your emergency fund.
- Contribute to the Public Provident Fund for tax-free long term savings.
- Invest in Equity Linked Savings Schemes (ELSS) for tax savings under Section 80C.
- Invest surplus savings in mutual funds through SIP for long term wealth creation.
- Save for major personal goals like higher education, wedding, home down payment, vacations, etc.
Understand Tax Obligations
As a working adult, you must understand India's tax structure and file taxes correctly.
- Know your tax slab rate based on income and residential status. Be aware of cess and surcharges applicable.
- Learn about standard and itemized deductions you can claim to reduce taxable income.
- Take advantage of Section 80C, 80D and other provisions to save tax.
- Research tax saving investment and expenditure options.
- Keep records of income from freelancing, investments, rental property, etc.
- Track deductible expenses, donations, etc. throughout the year.
- Compute TDS and advance tax if you have income from investments or freelancing.
- Use CA assistance if you have complex taxes with multiple income sources.
Continue Financial Learning
Expand your money management skills as your financial life progresses:
- Learn investing strategies - direct equity, mutual funds, PPF, ULIPs, NPS, etc.
- Understand home and vehicle loans - interest rates, EMIs, credit score, taxation.
- Research insurance plans - health, life, personal accident, property.
- Plan taxes on selling property, fixed deposits, bonds, etc.
- Project your retirement corpus needs. Understand annuities, senior citizen benefits.
- Learn estate planning basics - wills, nominations, trusts.
- Stay updated on financial regulations and changes in tax laws.
Commit to lifelong financial education. Make smart money moves to pursue your dreams and build wealth.