Personal Financial Management | The importance of starting early

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If I were to start my career all over again; the one thing I would do differently is attention towards the financial planning — savings & investments — at the start of my career.

The joy of getting your first job & your first pay cheque is great and time flies before you realize that you haven’t saved (& wisely invested) enough. There is absolutely nothing wrong with going to movies with friends, eating out, partying, buying that snazzy shoes & jeans, fulfilling all your needs & wants. The problem is in not paying attention to regularly putting aside some part of your salary towards savings & investments IN THE EARLY PART OF YOUR CAREER.
Not much but just 10% of your salary would be enough to start off your long term savings & investment plan.

As an illustration, here are some examples of the power of saving & investing small amounts over long periods of time:

  • 1000 rupees invested monthly (with 10% increase in investment every year), earning a 10% rate of return, over 35 years will give you ~1 crore.
  • 3000 rupees per month will give you 3 crore & 5000 per month will give you 5 crore over 35 years

To illustrate, the power of starting early:

  • 3000 rupees will give you 3 crore in 35 years, 1.7 crore in 30 years (if you start 5 years later) and just 88 Lakhs if you start saving 10 years later (in 25 years) and just with 10% return

The first step in personal financial planning is to be aware for the need for it. Thankfully, today in the internet age, there is no dearth of information on this subject. Here are some blog posts, that I stumbled upon, which explain several aspects of financial planning.

http://www.jagoinvestor.com/2009/06/can-you-live-with-90-of-your-salary.html

http://www.jagoinvestor.com/2009/02/early-investor-smart-investor.html

http://www.jagoinvestor.com/2011/03/retirement-planning-india-future.html

http://www.jagoinvestor.com/2009/07/6-steps-of-doing-retirement-planning-by.html

So, if you are a young professional, start saving & investing wisely — right at the start of your career. Open a demat account and get some SIP’s going.

The reality is that wealth is generated by people who invest smartly and with discipline, not who just earn lots of money.

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