Here are 8 easy financial planning tips for young professionals

Updated on: 1 Feb 2024

Smart financial planning is crucial for all young professionals because of fluctuating financial standing and inflation rates. Doing so enables you to:

Save for financially demanding times
Build a fund for retirement
Grow your wealth
Saving from your income
Invest additional funds regularly
Build better saving habits
Provide security against inflation and more

With these benefits in mind, here are some easy-to-follow tips you can rely on.

Tips for Financial Planning for Young Professionals in India

Before you incorporate the suggestions given below, map out your short-, mid- and long-term goals. This way, you can effectively use the steps based on your goals and current financial standing.

Tip 1: Focus on Financial Literacy

Before driving into planning, you must know the basics. You can read a few books on personal finance or do basic research online. Understanding factors that affect your finances and how to grow your wealth can help you build a solid foundation for inculcating good habits.

Tip 2: Avoid Overusing Credit Card

While it is a great tool to help you bridge gaps, at the end of the day, it is a loan that attracts interest. Overusing it can lead to a debt trap, which may negatively affect your finances and credit score. So, it is important to exercise self-control and use it responsibly.

Tip 3: Learn Budgeting

Budgeting is another wise step towards financial planning for young professionals. It allows you to manage the monthly cash flow. With this, you can avoid unnecessary expenses and save more, even with a limited income.

The most common practice is using the 50/30/20 rule of budgeting, but you must customise your budget per your requirements.

Tip 4: Start an Emergency Fund

This simple practice is the key to overcoming unforeseeable financial troubles. Be it a savings account or money market Investments, this will be helpful in times of uncertainty, such as unexpected job loss. During this time, you can rely on your emergency reserves for essential bills and loan repayments to avoid added financial burden from penalties or additional loans.

Tip 5: Align Investment with Goals & Risk

When you don’t invest as per your requirements and tolerance, you run the risk of making hasty or ill-informed decisions that harm your future finances. So, it is crucial to keep your goals and risks in mind. Once you have that, here are some investment options you can choose from:

Stocks
Gold (physical or bonds)
Real estate
Mutual funds
Fixed deposits
PPF and EPF
Government policy and saving schemes

Also Read: Budget planning tips to follow

Before choosing, compare the pros and cons to make an informed decision that suits your needs. Moreover, remember to diversify your portfolio to counter uncertain market conditions.

Tip 6: Plan Your Retirement Early

Saving for retirement in your 20s will help you get better interest on your principal deposits. In addition, investing in such goal-specific schemes early on can result in lower monthly premiums, which benefits in the long run.

Tip 7: Optimise Your Tax Planning

You must leverage the deductions and exemptions offered by the government to lower your tax liability. This can help you save significant amounts that you can invest in other schemes and secure your growth.

Tip 8: Maintain a Healthy Credit Score

With good creditworthiness, you get better and more affordable access to financial services and products, which can be beneficial in the long run. As such, one of the most underrated yet smart financial planning tips is to build and maintain a good score. Here are some ways in which you can do that:

Pay your EMI and credit card bills on time
Maintain a healthy mix of secured and secured credit
Check your credit score periodically
Get one loan at a time
Keep your credit utilisation ratio under 30%

Following all these tips will help you boost your current financial health and build a stable and strong future. You can also apply for a Personal Loan to get up to ₹5 lakhs with no end-use restrictions and kick-start your financial planning.

Moreover, you can enjoy interest rates starting at 2% p.m., flexible repayment options, zero foreclosure charges and many more benefits. Download our Personal Loan App or go to our website to apply online.

FAQs on Financial Planning

What is the 50-30-20 rule?

This is a rule of budgeting where your income is allocated as follows:

50% for your needs, such as utility bills, EMIs, groceries, insurance, etc.
30% for your wants, which includes your dining, gym, shopping, etc.
20% for savings and investments

How do I financially prepare in my 20s?

Here are a few things you must do:

Prepare a budget and stick to it
Keep savings for emergencies
Start investing for your retirement at a lower premium
Pay off your debts
Maintain good financial habits
Plan your finances towards owning a home
Cover yourself and your family with insurance

How do you budget money?

This is a personalised process, so you must remember your financial goals and aim to save more. You can use any other rule that suits your needs and plan accordingly.