What every Indian in their 20s should know about their money?

What every Indian in their 20s should know about their money?

It is an overwhelming experience when a fresher like you, just out of college receives the taste of financial freedom with your first pay packet. It is way more than the stipend or pocket money you were getting till a few days ago.

The feel is like you have the whole world in your hands and you no longer have to ask for pocket money from your parents or elders at home! In fact, your heart wants to spend the money – your own money in buying gifts and goodies for your home and loved ones with pride.

And yes, now the latest fashion in clothes, accessories, and gizmos seem to be must-haves and most of you would love to splurge on them and more.

This is but natural a tendency with all youngsters and is well deserved too.

I am sure you will also agree that while having a great time splurging money wherever and whenever you feel like is a great feeling of freedom and happiness, there are likely to be financial commitments that you would need to and should make at the same time.

This is because in a few years, by the time you are 30 years old, your life and life stages are likely to have changed. This would come with undeniable financial responsibilities of parent(s) and/or wife and child or both.

Suddenly you may feel financially burdened and stressed thinking about how you are expected to meet the expectation for all. Trust me this is a common problem with most youngsters – who feel that you have a ‘lot of time’ and things to do before you can think of saving or investing in your 20s.

Looking at responsibilities through the ‘rear mirror’ of your car is an unwise thing to do. They are actually closer than you think. 


So what should I do?

Investment for beginners is a thing to learn and how to manage your money in your 20s is a skill to acquire, if you want to grow wealth in the long run, live a financially healthy life and fulfil all your dreams.

We have a specialized course on financial planning, (PS This is not just like any other course!)

This article will give you an overview and tips on –

  • how to manage money in your 20s
  • where to invest for beginners
  • investing in your 20s
  • making money in your 20s


When should I start to save/ invest my money?

So what is the magic mantra for investment for beginners? It is quite simple you see.

Just Start early. Stay invested. Get better returns. No rocket science at all.

Yes, you must start early, even perhaps start from your first pay-check itself. You can start with small investment amounts of even Rs 500 a month/ year (depending on the nature of the investment tool you are considering) and later on increase the amount as your pay packet gets fatter.

This is because when you start investing in your 20s, even with very small amounts, it will still leave you with a much wider investment horizon. The longer the period for which you remain invested in a plan/ investment tool, the better will be your chance to diversify your investment between risk and income/ debt instruments to maximise wealth creation in the long run.

For example, when you are in your early 20s, your retirement is aeons away. However, if you start putting aside money in a reliable instrument, it will accrue a fortune for your golden years which otherwise will get stunted even if you delay it for say, 5 years.

One thing you much get clear at the onset. Saving money in a bank is not the same as investing money.

Saving money is more like hoarding money at a minimal interest rate like in a savings account that will not beat inflation. On the other hand exposure to equity and equity-related investments are capable of beating inflation and thus support wealth creation in the long run.

For example, say you are saving Rs 100 in a bank for an average interest rate of 2.75% to 3.5% in the bank savings account but retail inflation stands at 5.52% today. This means what you can buy at Rs 100 today, will cost you Rs. 105 tomorrow. But your bank will give you only Rs 103 approximately. Hence your money will be losing in its value lying only in the bank.

On the other hand, an investment in equity over a time horizon of 10 years and more is likely to get you about 10% compounded annually (and more) and thus beating inflation, leading to wealth creation. 

Here are top 5 reasons why you should start investing in your 20s

What are your basic needs?

If you are wondering how to manage money in your 20s; you must first make a checklist of your basic yet mandatory monthly expenditures. This is because a chunk of your money will go into that whether you like it or not.

They can include an EMI for your education loan that you need to set off.  If your city of work is away from your hometown, then you will have rent, conveyance, utilities, groceries, medicines and insurance at least, to account for.

This is likely to eat into approx. 50% of your salary. Let us take a closer look into these items and how you can optimise your expenses.

1) Education loan

Loans on your shoulders are never a good thing to have. So along with the EMIs, whenever you make an extra income as an incentive or bonus, you must use it to set off your loan to clear it off at the earliest.

Same for your credit card loans. Always try and pay off the credit card dues in full to avoid getting into the vicious cycle of interest accrued on the outstanding amount.

That will increase your disposable income to a large extent to consider discretionary expenses of your choice.


2) Rent

The largest chunk of your salary at hand is likely to go into rent and all associated utilities, monthly groceries, and medicines.

If you see that your hands are getting tight because of high rent, you may look at moving to a different locality where rent will be relatively less.

You can also look at sharing an apartment with someone else if you do not have frequent visitors from home. That will help to lessen the financial burden on you.


3) Health Insurance 

Whether you are single or married, the investment for beginners must commence with a health insurance coverage of at least Rs. 5 lakhs if you are in a Tier I city. In case your parents are not covered as of date, then consider a family floater with the same amount of coverage to start with. 

If you are married with children, then the family floater should be Rs. 10 lakhs.

Later on when your income increase further, you must look at adding top-ups for critical illnesses and hereditary illnesses if any to ensure maximum protection to yourself and your family in the face of any unforeseen medical exigencies.

I am sure you are aware of holes in people’s pockets that the rising costs of medical expenses create if these expenses are not planned well.

If you are looking to buy unbiased and best health insurance plans, feel free to reach out to us!

4) Term life insurance 

It is prudent to buy a term life insurance cover of at least 22 times your annual salary (as estimated and approved in the regulatory guidelines of IRDA).

This will ensure your financial liabilities (if any) will be taken care of at a minimal cost in case life poses any uncertainty in the form of death, disease or disability. Any financial burden on the family will be prevented.

Yes, if you are 25 years old and want to buy Rs. 50 lakhs term insurance cover, it will cost you anything between approx. Rs. 5000 and Rs. 6000 a year (source policybazaar.com online applications).

This comes to just about Rs. 16 a day which is perhaps a throw-away price for buying  ‘peace of mind’! Isn’t that a great bargain for what’s at stake?


Where to invest for beginners?

Of the remaining 50% of the salary, you should aim at investing at least 30%. Remember all your investments should be well thought of and be based on various financial goals of your life. You are likely to have short term, medium-term and long term goals. 

However if you do not have an education loan to repay and/ or are based out of your hometown for work, then you must aim to invest about 50% of our salary at hand. This will ensure your money is working for you to make you wealthy!

1) Long term goals:

These goals have an investment horizon of 10 years and above. They may include planning for retirement, children’s education, investment in real estate, a family vacation in a foreign country, wealth creation, etc.    

The best investment for beginners in India is SIPs (Systematic Investment Plan) in equity and equity-based schemes. When you invest in these kinds of SIPs with a long term horizon of over 10 to 15 years and beyond, then you safely earn a return of over 10% compounded annually. It has been observed that a monthly SIP of Rs 3000 over 35 years can earn you a whopping 12% return and build a capital of Rs. 1.9 crores.

With the increase in your paycheques, you must look at increasing your contribution in SIPs. Not just equity and equity-related schemes; SIPs are available in debt-related and a combination of debt and equity schemes as well.

SIPs in Equity Linked Savings Schemes (ELSS) have a dual advantage of returns and tax benefits U/S 80C on your investments in the scheme as well. All ELSS have a lock-in period of 3 years for the tax benefits it offers.

So depending upon your goal and risk appetite you should be able to consciously choose schemes to help in making money in your 20s

However, largely popular investment for beginners in India for long term investments have been Employee Provident Fund (EPF) and Public Provident Fund (PPF) schemes.

These two schemes will reap you the best interest rates among all known small savings schemes in the country. While EPF is a set of mandatory monthly deductions and contributions made by your employer from your salary, PPF is a voluntary account opened by individuals with various State Bank branches of India.

The best part about investments in PPF is that –


  • You can open and maintain the account with just Rs. 500 a year.
  • With the increase in your income, you can increase your contributions year on year.
  • The maximum you can contribute to your PPF account is RS. 150000 per year.
  • The lock-in period on the PPF scheme is 7 years; partial withdrawals are allowed post that.
  • All withdrawals from your PPF account are tax-free.
  • Your annual contribution into your PPF account is eligible for tax relief U/S 80C too.


2) Short / Medium-term goals:

To meet your short term and medium-term goals, there are an array of debt instruments like fixed deposits, bonds, debt/ income fund, liquid funds, etc. where you can invest your money.

In case you are a person who wants to play it safe and would want to secure a steady flow of money for yourself, you may want to invest your money in a debt instrument that would generate a monthly income for you for the chosen term.

Then Post Office Monthly Income Scheme (POMIS) is the right instrument for you. 

You can invest a total of Rs. 4.5 lakhs in your POMIS account that will yield you a guaranteed interest of 6.6%.  Later on in life, you may invest another Rs. 4.5 lakhs in your wife’s name as well if you want.

The best part of this investment option is that there is no tax deducted at source on the monthly disbursements!


3) Build an Emergency Fund:

We, the lucky survivors of the Covid-19 pandemic can vouch about the fact that life is very uncertain. So is work. There is no guarantee in anything.

Thus siphoning of money into a new/ separate account to build an emergency fund would make a wise choice for all youngsters like you to seamlessly tide over the times of financial crisis that may arise in future.

To achieve this goal, you can choose from various tools like fixed deposits, recurring deposits, or even a separate savings account.


Any money left to spend for fun and on free will?

Yes of course! You have managed your money so well that you still have 20% of your at hand salary to spend it the way you want to! You can spend this money on buying clothes, accessories, gadgets, eating out, gifts for your loved ones, weekend trips to nearby destinations, donations, etc. Isn’t that wonderful?

Just keep in mind that these discretionary expenses should not ideally overshoot 20% of your salary at hand. In case it does, try and trim it mindfully with a smile without hurting your own emotions or others.  

However, if you do not have any loan on yourself and your workplace is in your hometown itself, then surely you may at times take the liberty to spend even 25% of your monthly at hand salary. And trust me it is okay to do that.

Shopping and spending time with friends after all are great stress busters!


Avoid these money mistakes if your objective is making money in your 20s

While there are many mistakes in life that are forgiven and forgotten too, mistakes around money matters are hard to cope with and recover from. This is because it is your hard-earned money.

Thus you need to be careful not to fall into matters of money in your days of young adulthood as you might take a lot of time to bounce back but the scar will remain.


Here are the 5 common money mistakes to avoid in your 20s.

1) Monthly expenses not budgeted:

Managing your money first time all by yourself in your 20s will be exciting but can prove to be a challenging affair as well. If your calculation goes wrong, remember you won’t have pocket money to fall back on.

Thus the 50:30:20 rule discussed here can be handy. It is wise to start with a detailed list of mandatory expenditures for the month to allocate/ reallocate money as required.

2) Rising Debts:

While it may look great to flash a bunch of credit cards in your wallet when you are young, it is strongly advised to keep just one credit card for your use as required.

That is because it is simply impossible to remember all transactions made on different credit cards and keep a track of multiple payment cycles.

Thus people, mostly youngsters like you fall into a trap of revolving credit with very high interest rates that can be as high as 40%. Keeping debts on loans and credit cards has never done well for anyone.

It will 

  • not only get you into a vicious cycle of revolving credit,
  • eat into your disposable income paying EMIs with high-interest rates,
  • also adversely affect your credit score which will require you to run from pillar to post to set it right when you need it
  • Take away your night’s sleep and make you stressed.


Thus make it a habit to settle your credit card bill in full, on or before the due date. A monthly reminder on your smartphone will help do the needful for you.

For other EMIs on loans, SIPs, etc. and monthly payment of phone bills among others, auto-debit mandates with your bank will save you from all late payments with extra charges.


3) Saying ‘No’ to more income opportunities:

You are young and vibrant filled with energy and passion in your 20s.

That ensures making money in your 20s more viable with so many opportunities around. Other than your regular 9 to 5 job, you can make that extra money by investing prudently inequity and dividend-yielding schemes, as a freelancer in your specialised area(s), helping start-ups, giving tuitions, among other things.

These will not only keep you fruitfully engaged but boost your confidence and add to your disposable income as well. So don’t be complacent, go for more!


4) Shutting out personal needs/ wants

Never play Uncle Scrooge on yourself and try to save every paisa. That will not help.

That is not the reason or objective of planning and making investments. When you see your friends and peers enjoying their life, it will only lead you to depression, stress and make you unhappy.

Remember it is good to spend money and treat yourself and your loved ones once in a while. It builds your morale, keeps you happy and motivated too. However, if you need to splurge on something really expensive compared to your pocket –

Stop. Step back and Think whether you REALLY need it NOW or it can wait for a LATER DATE. That will save you from regrets later on.


5) Do not be the soft target:

Are you the kind who can’t say no to friends when they ask you to settle bills during getting together? All the time? Every time? Beware of leeches/ parasites.

This is a very common feature in young people in their 20s. It is a great virtue to be warm, generous and kind-hearted, but it is also important to understand if you are being taken advantage of by your own people in your social circle.

Over a period of time, it is bound to make you feel bad instead of improving your mood. If that is the case, though it is a hard choice to make, you must look at making changes with whom you hang around.

This is the right thing to do in the absence of fairness and compassion within the group. There is no place of guilt in this action of yours as it is not good to feel financially lost because of some unworthy people. 

Though this article detailed options of investment for beginners and how to manage money in your 20s, it is your willingness and foresightedness that will ensure how efficiently and effectively you manage your money to ensure that you live and gift your loved ones financially happy, healthy and stress-free life. 


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5 Reasons to Start Investing in Your 20’s

5 Reasons to Start Investing in Your 20’s

Investing wisely is the only way to achieve sound financial well-being in the future. But, the young millennials today have the mindset of ‘living in the moment’ which keeps them away from the world of investment.

The thought of investment or financial planning is in the least of the priorities list. Financial planning for beginners takes a back seat as the focus gets more on immediate need.

It is important to understand the fact that your hope and dreams can be achieved only by the right planning of your finances.

‘’I started investing at 11, but regret not starting earlier.’’ – Warren Buffet

Like one of the most successful investors Warren Buffet regrets, plenty of investors hold the similar regret of ‘not starting early’ in the later years of their life.

As seeds sown today help you bear fruits in the future, for your dreams to flourish you need to plan and invest today. For most of the young earners, the word ‘investment’ is meant for middle-aged people who are nearing their retirement.

But, the perfect time for investment is when you are in your twenties, years in which you can plan for all your major life events. Now is the time to understand the benefits of investing and be a visionary to plan for your future financial well-being.

Here are five major reasons to start investing in your 20s:


1) You can Access the Power of Compounding

One of the main advantages of investing early is the power of compounding benefits to grow your investment. When given enough time and invested wisely, the power of compounding does wonders to your wealth creation process. Compounding means reinvesting your earnings and earning a return on both principals and reinvested money.

The power of compounding helps your investment grow at an increased rate. The compounding effect increases with an increased investment time horizon.

That means, the longer you stay invested or earlier you start investing, the greater will be the power of compounding on your investment.

Let’s understand the benefit of compounding effects over the long-term on your investment with an example:

Let’s say you would like to invest INR. 2,000 monthly in a large-cap equity fund (Systematic Investment Plan) for the next 30 years.

Let’s assume you are 25 years old saving with a vision to build a reasonable retirement corpus. Coming back to the investment, large-cap equity funds are considered to deliver good returns over the long run, say about the annualised return of 15% to 30%.

However, let’s assume your investment into a large-cap equity fund delivers an average annualised return of 12%, your total investment over 30 years, i.e. INR 7, 20,000 would deliver an estimated return of INR 63, 39,828.

That means, the total value of your investment at the end of 30 years would be INR 70, 59,828, which is nearly tenfold growth. Let’s say, if you make the same investment at the age of 35 years for the next 20 years, you would invest INR. 4, 80,000.

Let’s assume the investment delivers an annualised return of 12%, your estimated earnings would be INR 15, 18,296 and the total value of your investment at the end of 20 years would be INR 19, 98,296, which is fourfold growth.

Power of Compounding on Equity Mutual Fund SIP Investment:

Particulars Number of years of investment
30 years 20 years
Monthly Investment (in INR) 2,000 2,000
Number of Months 360 240
Total Investment (in INR) 7,20,000 4,80,000
Assumed annualised rate of return 12% 12%
Estimated total earnings (in INR) 63,39,828 15,18,296
Total value of investment (in INR) 70,59,828 19,98,296


That means, with the power of the compounding effect, investing INR 2, 40,000 over a 10 years period can make a huge difference of INR 50,61,530.

So, Invest early and let the magic of compounding power work in your favour.


2) You can Exploit the Power of Time

Time plays an important role in the potential success of your financial life. Time is money! There is a cost attached to the time not utilised wisely. When you are in the twenties, you have fewer responsibilities on your shoulder.

Bigger responsibilities like taking care of the family, elderly, and other household responsibilities are yet to set in. Hence, it is a perfect time for you to focus more on investment. As you have just started earning, you may not earn big, but you can invest a bigger portion of your earnings. Investment for beginners is not rocket science.

By devoting time and energy, you can gain the required knowledge on financial products and various investment options. As you understand and explore investment options, you can create an investment strategy for your long-term wealth creation.

Systematic investment plans are great investment options to explore the equity market and grow your money.

As you will have a longer time horizon for each of your financial goals such as buying a car, wedding, buying a house and retirement, etc. You can consider investing a major portion into ‘high risk, high return’ asset classes such as equity. As a young investor with a higher risk appetite, you can explore various investment options.

Choosing the investment wisely is more important to earn an inflation-beating return and accumulate a reasonable corpus for future goals.

Time value of money and inflation are two major elements to be considered while doing financial planning for beginners. We all know that the value of money decreases with time. A sustained high rate of inflation also brings down the value of your money and its purchasing power.

For example, if a mutual fund investment generates a post-tax annualised return of 15%, the real rate of return by the investment would only be 12.38% per annum after factoring in inflation at 5% per annum.

In simple terms, your investment selection should be depending on the amount that you need for your future goals.

Systematic investment plans can make a great investment for beginners as it allows you to set aside a fixed amount regularly every month and also allows you to benefit from volatility in the equity market.

SIPs will also increase the return potential over the long run to achieve your goals. There are other options also to consider such as exchange-traded funds (ETFs), direct equity, and REITs (Real Estate Investment Trust) to set aside your bonus money and diversify your investments.

Any of the investment options that carry high risks such as stocks or real estate, when you have long years ahead, you can recover from potential losses along with potential capital appreciation.

With time your small investments can also reap good benefits.


3) Helps you Avail Financial Security at Reduced Cost

When you are young and in sound health, you can avail yourself of life cover and health cover at a reduced cost.

Financial planning for beginners starts with insuring and availing financial security against unforeseen events in the future. Term insurance and health insurance are two main essential requirements to avail financial security.

When you start investing in your 20s, you can avail yourself of much higher life cover and comprehensive health insurance coverage at a reduced rate of premium. Let’s take an example to understand this benefit of investing.

Let’s say you are buying a life insurance coverage of INR 1 Cr at the age of 25 years costing you anywhere between INR 7,000 to 8,000 annually (INR 600 to INR 650 monthly).

The same policy for the coverage of INR 1 Cr may cost you anywhere between INR 11,000 to INR 12,000 when you buy at the age of 30. This works similarly for health insurance. Let’s say you are availing of INR 5 lakhs coverage for an annual premium of INR 6,000 (INR 500 monthly) when you are 25.

The same policy with similar coverage would cost you approximately INR 9,000 when you are 30. Hence, start investing in your 20s to avail financial protection at a reduced cost.


4) Helps you Build Corpus for Future Goals

As you start your career, you may have various dreams in your mind such as buying your favourite vehicle, a fancy vacation to your favourite destination or buying the latest smartphone.

If you are recently married, you may want to surprise your spouse with an expensive gift. Dreams are many! But you need to be financially well equipped to achieve those dreams.

Though there are credit cards and personal loan options available, making money in your 20s can save you from debt traps. Systematic savings regularly can help you accumulate wealth over some time to achieve each of your financial goals or dreams.

Financial planning for beginners hence plays an important role in shaping up a sound financial life.


5) Shields you against Financial Emergencies

Emergencies can pop up anytime unexpectedly such as the Covid-19 pandemic that we are facing right now.

Pandemic and many other events can lead to the economic downturn, loss of job, etc. leading to many financial difficulties. You can never be too secure as uncertainties pervade our life.

Making money in your 20s helps you shield yourself against such financial emergencies in the future.

Now that you understand the need to start investing in your 20s, you might wonder how to start, how to plan, or how much to invest as a beginner. Financial planning is a broad concept with various key elements to consider in the planning process. This involves insurance, paying off your debts, creating a budget, and then investing in the right products.

But financial planning lays down a strong foundation for your long-term financial independence and overall well-being. Here are a few important tips on financial planning for beginners. Let’s take a look!


Key tips on financial planning for beginners

1) Identify and set your goals

Identifying and understanding the financial goals is an important aspect of investment for beginners. Once you have a clear vision of what you want in your life, it becomes easy to craft a plan to reach those goals in the order of your priority.

Once you set your goals, you can assess your ability to take risks while investing. With time, your goals may change, which needs to be considered in the ongoing financial planning process.


2) Create a budget and track your expenses smartly

The next step is to streamline by creating a budget and sticking to it. Having a monthly budget plan inculcates a financial discipline in you.

If you do not track your income and expenses, you will find yourself struggling for finance at the end of the month. You need to track your monthly expenses smartly so that you can set aside a major portion of your income for investments.

Tracking expenses does not mean cutting short on the necessary expenses and also some on the fun element. All you need to do is get organized and disciplined while managing your monthly income.

Additionally, you can look for ways to increase your monthly income or cash flows.


3) Craft a plan to get out of debt

Student loans, credit card outstanding, and personal loans can cost you heavily when you don’t manage them effectively. Even with a feasible budget, getting out of high-interest debts can be challenging.

To get free from these high-interest debts before you reach your 30s, you need to have a solid plan. For example, when you get your first hike in your job, divert your extra income towards your student loan instead of spending more on lifestyle.


4) Insure adequately

Investment for beginners should start with buying insurance. As soon as you start working, securing yourself and your family should be your priority.

Even financial advisors recommend insuring yourself adequately before you start with your financial planning. Adequate life cover and health cover are an important necessity.

Health emergencies can evade your entire savings. Hence, shield yourself before you plan. Availing insurance also provides you tax benefit under Section 80C and 80D of the Income Tax Act, 1961.


5) Create an emergency fund

Always have 6-8 months of your income as an emergency fund to deal with unforeseen circumstances. Having an emergency fund protects your investment.


6) Plan your taxes

Tax planning is also an important aspect of financial planning. Your investment choices should be in line with the tax efficiency.


7) Create your investment portfolio

Your investment strategy should be goal-based. As you have the advantage of time, you can allocate a higher portion of your money into equity mutual funds and equity keeping low exposure to safe investment options.

Create a well-diversified investment portfolio to manage the overall risk and to maximize the potential return.


8) Monitor and review your investments

Once you start investing, it’s important to keep a tab on those investments, review and revise whenever there is a new opportunity. Your income and expenditure keep changing with your age.

Hence, review and change your plans to keep them in line with your goals.

Financial planning for beginners not only requires time but also needs basic financial and investment knowledge.

The only way to get skilled to plan your investments is by increasing your financial literacy.


Boost your financial literacy!

There are many ways to boost your financial literacy. Some of them are:

1) Make use of the digital platform

The digital platform is a good place to brush up on a few financial terms. You can get plenty of information online to understand any financial product or investment option. Investment for beginners can get easy with valuable information available on the net.

However, information available on the digital platform may not always be correct and up to date. Hence, you cannot solely base your investment decisions on that information.


2) Seek expert help

You can get an in-depth insight on any investment option or on building a diversified investment portfolio, seeking expert help can add great value.

A financial advisor can help in financial planning for beginners and guide them through the entire financial journey. However, these services come at a certain cost. Investment for beginners can get easy with the help of Robo advisors or virtual advisors who are relatively cheaper.

You need to evaluate if the advisory cost works well for you or not in the initial years of your career.


3) Newspapers and podcasts

Business newspapers and podcasts on financial planning for beginners can help you gain a lot of information to equip yourself with financial knowledge.

You can get tips and advice on a variety of personal finance aspects.


4) Enroll in a quick financial planning course online

If you need to gain in-depth insight and be serious about stepping up your financial literacy level, enrolling on short-term courses is the best option. These courses are specific.

You can choose the aspect (such as financial planning, investment basics, and equity research, etc.) in which you need deeper insight and then take up a short-term course to boost your knowledge.

Taking up these courses can help you over the long run in financial planning.

All that you need to do as a beginner is to devote time to understand the investment options available and then plan your investment depending on your financial goals and the need.

You can learn the basics of investing in no time. One of the best ways to learn on investment for beginners is through the courses of Koppr Academy. One such course on early financial planning is ‘How to Make More Money’.

This course helps in financial planning for beginners. You can learn the benefits of investing early, identify your goals, create a budget, efficiently save tax and make rational investment decisions to achieve financial

Earning Rs 25,000? Here’s how to invest your salary wisely to get BEST returns!

Earning Rs 25,000? Here’s how to invest your salary wisely to get BEST returns!

The feel of the first paycheque in life is always thrilling and filled with anticipation as it is your first step to financial freedom. It is thrilling because you can now spend your own money the way you wish to, without having to ask anyone.

On the other hand, you are also filled with anticipation about how to invest your salary judiciously to ensure it helps you achieve your financial dreams and aspirations with élan. 

Thus gaining know-how on investment strategies for beginners becomes important.

Having said that you may be wondering ‘how much to invest if my salary is INR 25,000?’ What is the right plan(s) to invest in? What are the investment options available?

How much to invest in insurance, mutual funds, shares or real estate among other available options? Also, how much to keep in savings account for meeting monthly expenses and/ or meeting exigencies? 

Most of the youngsters have a tendency to hit upon an investment in a retirement plan to start it, without putting much thought behind it as their first investment.

However, before making your investment choices on where to invest your money and how much to invest.


Top #6 things to consider before investing:

You should ideally consider a few things in life like your:

1) Age –

Start investing as early as possible in life as investments/ products will cost much less when you are young.

Your investments will also get more time to maturity and the power of compounding (wherever applicable) will get enough time to show its magic in creating wealth for you.

2) Life stage –

At the time of planning your investments, whether you are married or single, with or without children, single and responsible for old parents, etc. will determine your financial goals and your investments options accordingly.

3) Financial dreams or goals you want to achieve in life –

You are likely to have various financial dreams viz. wealth creation, planning exotic vacations, children’s education,                 retirement planning, assets creation, etc. These dreams can be realised through investments in different asset classes.

4) Timeline you have to your chosen financial dream(s) –

Whether the financial goals are to mature in 2 years, 5 years or 10 years time or beyond that will also determine the investment tool(s) you need to put your money in to support your financial dreams.

5) Investment capacity

This is an important consideration for you when you define your financial liability as you must cut your coat always according to the available cloth.

Never make a commitment beyond your capacity; else it will be difficult to feed your investment till maturity/ term as the case may be.

With the increase in income in subsequent years, you will get time to increase your commitment to most of your existing investments.

6) Risk appetite –

Though you are young and have ample time to grow your wealth over a period of time with maximum exposure to equity and equity-related investment options; your attitude towards such investments or risk appetite may not support optimal equity exposure in your investments per your age.

Thus investment tools need to be suggested and chosen not just based on your need, but your risk appetite as well to ensure your peace of mind.

Keeping all of the above and more in mind, you must choose the investment options that will help support your financial objectives in the most efficient way.


There are certified financial planners/ advisors in the market as well, who are equipped with the knowledge and experience to guide you on how to invest your salary in the most prudent manner.

Discussed here are the various investment options for youngsters like you in the age group between 22 and 30 that are best suited to support your financial needs/ dreams based on various income levels.

Let us take a look at how to invest your salary along with the investment strategies for beginners if your earning is about Rs. 25,000 a month. 

a) Life stage: Single living with parents

If this is your first job and you are single and, living with parents who are not totally financially dependent on you, the thumb rule says, that you should be able to save/ invest at least 50% of your annual salary in various investment vehicles suggested here.


1) Systematic Investment Plan (SIP):

A Systematic Investment Plan is a wonderful tool for wealth creation in the long run if your time investment horizon is about 10 years and more.

So consult a financial planner on how to invest your salary in a committed monthly amount in suitable equity (debt and balanced options are available too) based SIP(s).

You can start your first SIP even with a minimum of Rs. 500 commitment per month to yield a handsome return over a period of time.

The SIPs should be continued for the term and additional SIPs (when salary increases) to diversify the portfolio should be made to support your various long term financial goals that are expected to come up in future.

Today SIPs are possible even in stocks for long term investments. You may also look at starting a SIP in ELSS or Equity Linked Savings Schemes that not only yields good returns that beats inflation, it also helps you in saving tax as well u/s 80C.



2) Life insurance:

A term insurance policy with sum assured or life cover worth Rs 50 lakhs.

If you are below 30 years old and enjoy good health, then as per regulatory guidelines (by IRDA), you can get a life insurance cover in lieu of 22 times your average annual salary of the last 3 years.

So if your annual salary is say, Rs. 3 lakhs then you are entitled to 66 lakhs (3 lakhs x22) of sum assured or life insurance cover.

Since you are young, the cost of the insurance will also be low; hence you must take a term plan for at least Rs 50 lakhs to start with and should increase the cover as your annual compensation increases.

For example, when your income becomes Rs. 50,000 a month, then the ideal sum assured on your life should be at least Rs. 1 crore (6 lakhs x 22 = 1.32 crores) that you can keep revising based on your financial liabilities.  This will take care of any future liabilities (if any) at minimal cost in the face of any life uncertainty and will prevent any financial burden on your family.


3) Health insurance:

As per the thumb rule*, a Health Insurance coverage of at least 5 lakhs must be taken if you live in a Tier 1 city to take care of any medical emergency in life.  In case your dependent parents are not covered, then you can also consider a family floater of a similar amount to begin with. 

With the increase in your income, later on, you may also look at an additional top-up for critical illness for the whole family including you to protect you and your loved ones in the family against unforeseen critical and terminal illnesses. 


4) Public Provident Fund (PPF):

Public Provident Fund has a 15-year maturity with a 7 year lock-in period. The annual interest rate on PPF is 6.4% which is still the highest guaranteed return available on any debt instrument today for your age group.

You can look at opening and maintaining a PPF account with a minimum of Rs. 500 a year to keep the account active. The highest individual contribution can go up to Rs. 1,50 000 a year.


Later on, you may want to slowly increase your contribution into your PPF account as this instrument is tax-efficient as well as u/s 80C.

Moreover 7 years from the date of commencement of this instrument, your PPF account provides you liquidity in times of financial emergency through partial withdrawals.

So do keep nurturing this investment every year as all the withdrawals from your PPF account are tax-free in your hands by law.


b) Life stage: Married with a child:

If you are 30 years old or below and are married with a child and your earning is around Rs. 25,000 a month, you should be able to save at least 25% to 30% of your income to meet your future needs.

You must consult your financial planner/ advisor to guide you on how to invest your salary prudently in the above investment vehicles among other available options; in order to help you achieve your financial goals. 

The best thing about salaries is that they keep getting revised every year under normal circumstances.

With the increase in the annual income levels, you may get confused about how much to save and how much to spend or how to invest your salary and where to invest your money optimally without having to compromise on your wishes to buy luxuries for your loved ones at the same time. 

However, it will be good to remember the following points with regards to various investment options at the very onset of your career to decide wisely whenever and wherever required.


1) SIPs as retirement and wealth accumulation plan:

Early Investments in equity-based SIPs can serve as a great plan for building a big retirement or wealth accumulation corpus because the returns it is likely to generate over a span of 20 to 25 years or more than traditional investments. This is because –

    1. Compared to any retirement plan, the fund will be managed aggressively as they have better equity exposure than any traditional retirement plan. Thus the expected retirement corpus will be much more compared to a normal pension scheme where exposure to equity is much less; given the conservative nature of the plan and its objective to play safe with the investment strategies.
    2. Such SIPs have historically been effective in beating inflation at any point in time and been successful in building a big corpus to invest further as desired.
    3. Though, if you invest in a normal pension scheme, one-third of the corpus will be tax-free if you withdraw as a lump sum at vesting age. The remaining two-third is taxable if you withdraw without reinvesting it for annuity (pension) income thereafter. The returns you can expect from SIPs are likely to offset the loss you may have incurred in the tax-free return from the traditional pension plan.

2) Life insurance

Though you start with a 50 lakhs life cover on you, per the thumb rule, be watchful and revise the life insurance cover as and when you grow in your career and your salary increases.

It is important to keep in mind that with growth in your career come additional responsibilities that may even require you to travel for work.

It will also increase stress levels that add further uncertainties to life. Hence an adequate life cover would become critical to ensure that the lifestyle you have gifted your family with growing income levels, as the earning member is maintained in the face of any uncertainties posed by life.

Not to forget the higher education costs of your child too.


3) Health insurance

If you are married with a child. I.e. a young family of 40 years old or less, the coverage must be of at least 10 lakhs in a Tier 1 city.

Remember, medical Insurance becomes even more important as you grow not just in years, life stages, but in your career as well in future.

Stress, hereditary and lifestyle diseases generally and slowly surface as a fall-out of growth in career and additional responsibilities and increase of pressure at the workplace.

While all these make it important for you to take care of your health by maintaining a good exercise regime, proper diet and sleep routine; it is also critical that you maintain a healthy medical insurance cover for self and family at any point in time to mitigate any financial exigency arising out of untoward health condition(s).

4) Investments in debt instruments other than PPF:

In case you are a risk-averse person, you must try and have some exposure in debt instruments like fixed deposits and debt mutual funds as well aimed at getting you better returns compared to the savings account and allow you liquidity as well.

5) Other debt instruments like MIS:

If you are not a person with a great risk appetite and look for a steady flow of monthly inflow of money from your investments, then the best investment plan for monthly income is perhaps the Post Office Monthly Income Scheme (POMIS) that gets you an assured 6.6% interest on investments.

As an individual, you can invest up to Rs. 4.5 lakhs and a joint account would allow for an investment of Rs. 9 lakhs. If you are a resident Indian and have money to invest in safe vehicles, this instrument is a good avenue where the monthly disbursement is not subject to TDS (tax deducted at source).

Other monthly income schemes are available with Bank Fixed Deposits MIS, Mutual Fund Systematic Withdrawal Plans too. 


Points to keep in mind:

When you plan your investments, it is best to keep the following in mind so that you can create a healthy investment portfolio.


1) Loans

One thing that you must avoid is to take personal loans for meeting small financial goals, like planning a vacation, buying an expensive consumer durable or a motorcycle or your first car when income increases, etc.

Rather you must use your older SIPs and/or FDs to support these purchases as required as and when you plan such investments.



2) Build and Emergency fund

All of us struggling with the landscape scale pandemic like Covid-19, know how uncertain life and work is. There is no guarantee anywhere about anything in life.

This makes keeping aside a specified amount of money in a separate account on a monthly basis towards building an emergency fund definitely an act of wisdom for youngsters like you.

You must look at maintaining about a 3 to 6 months salary as an emergency fund for the future.


To Wrap it Up:

Most of the structured organisations make deductions for Employee Provident Fund, National Pension Scheme from the salaries of the employees and also provide you a medical insurance coverage (floater) that covers your spouse and child as well.

Some organisations extend the medical insurance coverage to your parents too (at times employees need to pay the premium for the latter).

There is a decent amount of accidental insurance coverage in your life too given by the company as a part of their employee benefits.

In these situations, young employees like you feel the urge to reduce or withdraw their investments in life insurance, medical insurance and PF contributions.

This is a big mistake people make; given the uncertain environment, we operate in. Thus you must not only continue with your existing investments as detailed here, but you must also try and look at other avenues to invest further as your income increases.

Experts are of the opinion that once your income crosses Rs. 1, 00, 000 then you may look at investments in real estate if your family does not have their own home unless your objective is solely to get the tax benefits associated with home loans.

Experts also say that when your incomes cross the Rs 2,50,000 a month mark, you should ideally aim at investing 20% of your salary and more in various other asset classes like but not limited to, commodities, stocks/ equity, debt instruments including debt funds, bonds, liquid funds, various other insurance plans and real estate as well.

An investment portfolio strategically designed early in life is a sure shot way to achieve true financial freedom that ensures happiness and peace of mind to see your financial dreams come true.

So what are you waiting for? Start your research or connect with your financial advisor to rise and shine with your financial planning for the future today!

What to Do in Your 20s to Retire Before 40?

What to Do in Your 20s to Retire Before 40?

Ashish, a 26-year-old Delhiite, is a financial advisor in a multinational company that offers financial solutions to business houses globally.

Being a traveloholic, Ashish loves to take short breaks every couple of months. This is where his post-retirement goal of being a globetrotter has stemmed.

He wishes to take retirement from his active job by 40 and then travel the world. To fulfil his dream, he needs two things: Money and Fitness.

There could be many millennials or post-millennials who also think like Ashish and wish to retire by 40. You could have entrepreneurial goals post 40 or following your passion!

So, if you are also in your 20s and have similar aspirations, do read on to know how you can build your financial portfolio in the next 15-20 years. 

PS: You need to actively take care of your health to be able to enjoy your post-retirement life, though!


Early Retirement Planning – a New Concept

Ashish’s father, like many Indian parents, does not really understand why Ashish wants to retire early.

He often mentions his own story to Ashish and proudly tells him that at the age of 58 when he was all set to retire from his post as a bank manager in a national bank, he got a 2-year extension. It was one of the happiest days of his life. 

This phenomenon of getting a job extension is not new to us.

Most of us have seen our parents slogging and working hard till the workplace forces them to hang their boots. The most predominant idea in our parent’s mind is to work for as long as you can and retire as late as possible.

An idea that automatically is passed on to us, the current generation. 


And thus, it is quite obvious that the notion of early retirement is not of Indian origin. Most people believe that it is a ripple effect of the FIRE movement that started in the United States of America.

The full form of FIRE being – Financially Independent Retire Early. 


What Makes Financial Independence so Important?

When we speak about early retirement, financial independence is a key element. Not being able to be independent financially would make it almost impossible to retire early.

In simple words, you are financially independent when rather than you working for money, money works for you.

Let us take a look at the 2 major aspects of financial independence.


1) Active and Passive Income

When we talk about financial independence, we need to have an active and passive income. Active income refers to the money that you earn with your hard work, through your work or your job.

Passive income on the other hand, as the name suggests, is passive. You can get passive income without having to work. You can also say that when you are financially independent, you don’t work for money, rather your money works for you.

For example, the money that you have in the bank fetches you an interest. For this interest, you did not have to make any extra effort.

Let me explain with another example, if you rent out a piece of property, the rent that you get is your passive income. And so, it is your money which is working hard to get you more money.


2) Other Income Sources

In order to consider yourself to be financially independent, you would have to be at a stage where your passive income is much more than your active income.

This stage can be reached when you do not really need your 9 to 5 job and you are not dependent on your salary to manage your expenses.

You earn enough through commissions, brokerage etc. and with these sources of income, your bank balance will always be brimming. 


How Can I be Financially Independent?

According to financial experts, there are three major elements that can support you in your goal of being financially independent.

Let us take a look at them:


1) Aggressive Savings

Most of the people who work today generally have a 50-30-20 Income rule, where they spend 50% of their income on their needs.

These are the most basic needs which are crucial to lead life, such as your house rent, food supplies, healthcare etc. 30% of the income is kept for your desires and wants.

These wants are not really a requirement, but because you like them you want them.

For example, you have a number of shirts, but in a shop, you see one that you really like. Now, even when you don’t really need it, buying it is your expense. The remaining 20% is used as a saving, to be used in the future, in the time of an emergency.

However, to plan an early retirement, you can’t really make use of this old 50-30-20 rule, rather you need an extreme way of saving. It is recommended that you save at least 50% to 70% of what you earn.


2) ‘Frugality’ is the Word

When you want to practice extreme savings you simply cannot afford to be a spendthrift, rather, you need to cut down your expenses on just about everything.

Small everyday savings can go a long way, avoiding fancy restaurants, going on a shopping spree, buying expensive gadgets is a Big No.

The crux is that you need to live on the bare minimum. You would have to sacrifice a lot more and keep your everyday desires and lures under check.

Rather than following the formula Savings= Income-Expenditure, follow the magical formula, Expenditure= Income-Savings.

Let me give you another example of being frugal: suppose your need to buy a new phone, so rather than splurging on a phone that costs over 50K, you can also settle for one that costs about 10-12k. Ultimately, you are going to use it for the exact same features.

Spending only on the things that you really need is paramount. So the next time you feel tempted to swipe your cash card, stop and think. And then think a little more.


3) Enough Passive Income

The basic difference between a rich man and a common man is passive income. It is the secret of not just becoming rich but also staying rich. For someone who is not able to create enough to manage his expenses, may not be in a position to retire by 40.

When you start generating enough passive income, it is probably one of the first signs that you are nearing your goal of financial independence. 

    1. Your rental income is probably the best way to earn passive income. However, having property to be rented out is itself a costly affair. 
    2. In case you do not have a property to rent, you have other options such as dividend income that can be generated through stocks. 
    3. Bank deposits are a great way to earn instant passive income

Everyone has the ability to earn passive income, however, the idea has to come from you, depending on the resources you have.


For those of you who have a lot of responsibilities on your shoulders and cannot save 70% of your earnings, FIRE also has the concept of Barista FIRE.

Here, you save as much as you can and build a corpus big enough that allows you to retire from your 9 to 5 job at an early stage.

But, you still continue to work on a freelance basis, work part-time or pursue your dream job/ start-up/ career.


So, basically, you work hard and save harder till your late 20’s and then with the help of this saved corpus or/and if you are lucky along with the help of your parents/ family you will be able to build a platform for yourself from where you can make your start-up take-off.

If your business plan hits the jackpot and turns into a big success you would again be able to retire by the time you reach your late 30’s or max 40.  


How Much Money Do I Need to Retire Early?

The concept of “FIRE” is American, and so for people in India, doing the same things as Americans would neither be possible nor useful. You have got to make the necessary alterations to suit your requirements as well as objectives.


So while doing your retirement planning, one of the first things that you need to do is to find out the answer to the question ‘how much should I save for retirement in India’ and for this you need to have a TRA, Target Retirement Amount.

Now to help you calculate this amount, FIRE gives you this simple formula: 

Retirement Amount = 25 times your Annual Expenses

Let’s say that your expense in a year is around INR 10 lakhs, so you need to aim at a retirement amount of a minimum of INR 2.5 crores.

So, you need to be able to build a corpus as big as this amount to think about early retirement.

Download the Koppr app and start planning your finances for FREE!


How to Prepare for Retirement before 40?

Retirement Planning becomes easier when you charter a course at the right time.

Here are top 11 things that you can do, to keep yourself on track. Let us take a look:


1) The Right Career

If you are still in your early 20’s you need to put a lot of thought into what it is that you really want to do. Starting early will help you speed up reaching your goal.

Weigh the pros and cons of whatever it is that you wish to do and move ahead.  A family business, your own start-up, setting up a business or even a 9 to 5 job, make a plan and then focus on the execution.


2) Estimate Your Post Retirement Expenses

This is probably the first rung of the ladder. When you want to retire early and are thinking about how to prepare for retirement, the first thing that you need to do is calculate the “how much” would you need on a monthly basis.

An ideal situation would be that you enter your retirement period debt-free, however, you would have to cater to rent, grocery, clothing, transport, travel, utilities, insurance premiums and healthcare.


3) An Emergency Fund

Be it before or after your retirement, having an emergency fund is crucial.  Life is unpredictable and ups and downs are its part and parcel.

Your budget may alter in different phases of retirement,  at the same time you need to keep a separate fund in case of a medical emergency or a financial family commitment.


4) Strategically Budgeting

Making a budget is easy, sticking to it requires strict discipline. You would have to earn more and spend less. We have already spoken about frugality and its importance.

You would have to clearly differentiate between your needs and your wants and then make a saving strategy.


5) Bank The Extra Cash

Though most of us rely on plastic money and prefer making cashless transactions, still putting the extra cash that you get in the form of gifts should be put in the bank straight away.

These small additions to your savings account fetch you interest and thus, can go a long way too.


6) Find More Ways To Save

Apart from living on 30-40% of your income, it would be a great advantage if you can explore more ways of earning an extra buck. Depending on your job profile, see if you can work overtime or find a part-time job.

Take tuitions, work on commission, make investments, just about anything that works for you.


7) Seek Professional Help

Another important aspect is choosing relevant saving vehicles that would allow you to save more in a shorter period of time. For this, you can always seek the help of a financial advisor.

A professional would be able to help you in designing a road map and also developing an investment strategy that works for you. The plan would help you reach your goal in a more systematic way.

Reach out to our certified financial planners to help you design your financial journey


8) Minimize the Debt

One more key element in being financially independent is to keep a very minimal debt as you enter your retirement period.

If you find you too tempted to use your credit card for every small thing, better to discard it.

Here’s how you can manage your debt effectively


9) Insurance is Important

All your savings can go down the drain if you are stuck with a medical emergency. With sky-rocketing healthcare services, hospitalisation can bite a big chunk from your savings.

Having a comprehensive health insurance policy can greatly help you secure your savings.

It is also imperative that you buy a life cover so that even if something happens to you, your family would be able to deal with a financial setback.

Get insurance planning with certified financial planners from Koppr with 0% commission.


10) Check Yourself Through Smaller Objectives

You also need to estimate the growth of your savings. Making short-term goals would help you in getting a fair and honest picture of whether the ‘Goal of Retiring early’  that you have made for yourself is within your reach or not.

Set a monthly saving goal, and gradually go to half-yearly and yearly goals. If you are able to reach your set limit, you can consider that you are on the right track.


11) A Back-Up Plan

Stay positive and work towards your goal, but at the same time be realistic and always have Plan-B.

By putting all your emotional eggs in one basket, you may be heartbroken if ‘early retirement’ doesn’t happen for you.


Early Retirement – Do You Really Want It?

The idea of early retirement can be very appealing, but, most of the time youngsters are drastically underprepared for the same. Though, there are many who are prepping up to shed their 9to5 gig as early as possible.

And though this can be seen predominating the US, to do so in India, you need to really think it through. 

If you are someone who is already in your dream job/ or are doing something that you are passionate about, early retirement might not be the right option for you.

For example, if you are a school teacher who loves teaching and interacting with young ones, you may not really want to retire. Forget about retiring at 40, you may want to keep teaching beyond 60 too! 

However, if you are someone who has Monday Blues on a weekly basis and often finds yourself stuck in a career that you resent, then you may want to call it quits.

But even if you begrudge your job, does that leave retirement as the only option.

Explore the options of changing your vocation even if it means having to start from scratch or taking a sabbatical or acquiring a new skill-set.

Having a broader outlook might offer you a better and wiser choice. 


The Bottom Line

Retiring early may seem a distant dream, but it sure is possible. However, you cannot do it without having a very clear road map in front of you.

And thus, it requires a lot of planning and aggressive saving. Remember, it is never too soon to begin mapping and saving for your retirement. The day you get your first paycheque is probably the best day.

You would have to be proactive and very disciplined in your approach. In a time when you can shop online sitting in your cosy bed, not being lured by Big Sales and Deals might be a little too difficult.

If you are really good at stalled gratification and can seize every opportunity to save more and more. 


There must be a lot of people who would want to retire early. After all who wouldn’t want to sit back and relax. However, keep in mind that if you aim to retire early, it would require a lot of preparation.

Every small expense, saving would have an effect on how early you can reach your goal.

But, with the right plan and hard work you would surely be able to say sayonara to your workplace and retire at 40, and then as they say “After climbing the mountain, you can finally enjoy the view”.

We have designed a special course on financial planning and how to grow your money at a very early stage. Enroll now!

First Job? Here’s how to invest your first salary

First Job? Here’s how to invest your first salary

Every ‘first’ is special. However, when it is the ‘first job and ‘first’ salary, the feeling is unparallel. It not only gives you financial freedom but also sets you free and can work as a confidence booster.

However, we often get way too excited with our first salary and spend it on things which give momentary pleasure. It is not wrong to fulfil those dreams which you had and wanted to fulfil with your own money, but you also need to consider certain other things which can give you long-term benefit. 

In this article, we will discuss Investment for beginners. We will tell you how to start your investment journey with multiple avenues that are available. We will also help you chalk out the plan for starting your investment journey.

One of the crucial things that will be discussing is why you should invest early and how it helps you accumulate more wealth. 


Basic financial concepts

Before we dig into the different ways or steps of investing your first salary and the subsequent ones as well, you should be aware of certain financial concepts which will affect your money. There are three basic financial concepts which are – 

  • Compounding 
  • Inflation 
  • Risk

You need to understand how each of these factors affects your investments both in the short and long term.


Compounding of Money

You must have come across elderly people and even some of your friends and colleagues who suggest you start investing early. Have you ever wondered why you should invest early and what benefits you can have by doing the same?

This takes us to the concept of compounding.

What is compounding?

If we talk about compounding, then it can be defined as the process of earning interest over interest. This means, the amount you invested in any investment instrument, that earns interest, and you reinvest that interest and then earn interest on both the principal amount invested in the beginning and also the interest that you reinvested.

This is going to give you more return than investments within simple interests.

Most of the investment vehicles provide the benefit of compounding.  The interest so generated over the principal amount and accumulated interests over a period of time is known as the compound interest.

The compound interest is calculated by 

= [Principal (1+ interest rate) number of periods] – Principal 

= [P(1+i)n] – P

= P[(1+i)n – 1]

For instance,  you have invested your Rs. 10000 for 5 years at an interest rate of 5% compounded quarterly. 

Then; CI = 10000 [(1+0.05)20 -1]

= Rs. 16532 (rounded off).

How does it work?

The frequency of compounding plays the primary role in accumulating your money over time.

The compounding frequency is directly proportional to the growth of interest. If the frequency of compounding is more, then the interest would grow fast and you can accumulate more wealth.

Let’s see an example – 

Suppose, you invested Rs. 15000 at an interest rate of 5% p.a. for a period of 5 years. Now, let us look at the table below which will show how your wealth will grow with different compounding frequency – 

Compounding Frequency No. of Compounding Periods Values for Interest (i) and Number of periods (n) Total Interest Amount (INR)
Annually 1 i =5%, n = 5 4144
Semi-Annually 2 i = 2.5%, n = 10 4201
Quarterly 4 i= 1.25%, n = 20 4230
Monthly 12 i= 0.4167%, n = 60 4250


So, from the above, table you can understand how interest amount changes along with the change in the frequency of compounding.

When the frequency increases, the interest amount grows faster.

Relation between early investments and compounding

The relation between investing early and compounding is based on the above concept. If you invest early, then your money can be compounded more times. This will eventually help you accumulate more wealth. 

Who doesn’t want to earn money on his or her own money, isn’t it? Compounding gives the platform to do so. You earn interest on your previous interest.

So, the early you start investing, you can reap higher profits. So, with your first salary, try to invest in some investment vehicle that provides compound interest on the investment.


The second basic concept of finance and investment is inflation. It is the rise in the general price level over a period of time.

While compounding interest help your money to grow faster, inflation does the opposite. It tries not to grow your money or the value of money.

So, inflation and the growth of your investment have an inverse relationship. When inflation is on the rise, the growth of your investment falls and vice versa.

Suppose, you invested in an instrument that provides a 5% return. However, the inflation rate is also 5% in the country. So, the actual growth in your investment is nil. It is because the money you accumulate from your savings will have the same value as it had when you invested it.

To combat inflation, you need to understand “why you should invest early”.



Finally, we have ‘risk’ which is one of the primary factors on which your choice of investment depends. When you are just starting your investment journey, you can take more risk, and eventually when you grow and the level of risk should start decreasing.

The reason behind this is, at an early age, you have multiple opportunities, time by your side to make up for any losses. However, with passing time, the opportunities decreases, and your risk appetite as well.

So, all these three components play a vital role in determining your investments and the growth of it.

So, keeping all these three in mind you need to find out how to start your investment journey and here we can help you to plan the same. 


1) Prepare a financial plan


The first step to invest is to plan. Planning your investments and finances is crucial before you take any step.

There are multiple steps involved in making a financial plan so that you can invest properly. In fact, this is the ideal way to start your journey of investment for beginners. Let us take a look at all of them. 


  • Create a contingency fund

With your first salary, not just buy gifts for your parents, create a contingency fund as well. A contingency fund will help you survive in a time of crisis or emergency.

Since, life is uncertain and money is required for almost everything in this world, keep an emergency fund is inevitable. So, with the first salary, you must promise yourself and keep aside a part of your salary that you will not use without any major crisis.

This will not only help you in an emergency but will also develop your savings habit.


  • Set your financial goal

Step 2 for investment planning is to pen down your financial goals. Financial Goals are nothing but determining the amount you would need to fulfil your financial aspirations like buying a house, wedding, higher education, and others.

Take a pen and paper and write down all your short-term, long-term, and even ultra-short and ultra-long term goals.

This will give you clarity of what kind of investment you would need for fulfilling these dreams in the future.

This is a very important aspect of financial planning to understand “how to invest properly”.


  • Make a savings Budget

    The next step is very vital for savings and that saving is going to get invested.


  • Assess your income:

    Firstly, you need to assess all your earnings.

    The primary source of income for you is your salary from the job you just joined, apart from that if you have any other source of income like rent, interest income, or others, you need to evaluate and calculate them all.


  • List down expenses:

    After income, assess all the expenses that you cannot do without. Check where you are spending the most. Try to chalk out plans to cut down certain expenses.

    This can be done by making a proper budget for a period – say a week or month. You can list all the essentials and necessary things where you need to spend.

    Then stick to the budget and at the end, evaluate whether you spent more than your budget or not and accordingly plan the next.


  • Save at least a minimum part of your income:

    Once you start budgeting, your expenses can be curtailed. This will give you a provision for saving at least a part of your income every month.

    Many eminent finance experts say that you must save 50% of your income and consume the rest.

    However, in real life, that seems a little impractical given the average salary and the growing inflation but you must save at least 10% to 25% of your income and make it a habit.


2) Evaluate your assets and liabilities

The next step is to assess your assets and liabilities. Assets are your possessions that generate an income while liabilities are the debts that you need to pay off.

If you have availed of loans, assess them and manage them efficiently. Loans like personal loans and credit card debts are high-interest debts that also impact your credit score severely in case of repayment default.

So, pay off these high-cost loans. Good loans like home loans, car loans, etc. can be continued since they build your credit history and home loans also save taxes.

Know the value of your assets so that you can estimate the additional funds needed for meeting your financial goals.


3) Assess your risk-taking ability

Your savings should be invested in lucrative avenues for wealth maximization. However, the choice of the avenues depends on your risk profile.

Assess your risk appetite, i.e. your risk-taking ability. Find out if you are comfortable with market-related risks or you prefer playing it safe. If you are a risk-taker, you can invest a primary part of your savings in equity to get attractive returns.

On the other hand, if you are risk-averse, you should minimize your equity exposure and invest in debt instruments that give stable returns.

So, assess your risk appetite before making investment decisions so that you can pick the right investment tools if you wish to understand “how to start your investment journey”.


4) Invest in health insurance

Even though you are young and might be healthy, the need for a health insurance policy cannot be ignored. Accidental injuries or illnesses might strike anytime and they incur considerable medical costs.

So, after you become financially responsible, ensure that you invest in a suitable health insurance policy for coverage against medical contingencies.

You can buy an individual health insurance policy covering yourself only or you can opt for a family floater plan and cover yourself and your parents under the same policy for wider coverage.

Opt for an optimal sum insured, i.e. Rs.5 lakhs or above, for sufficient coverage against expensive medical costs.


5) Invest as per your risk appetite

If your query is “how to invest my salary in India?”, you need to estimate your risk appetite and then invest accordingly. Now that you have taken care of the preliminary steps, it is time to invest your savings into suitable avenues.

When it comes to investment avenues, there are various alternatives. However, you should keep your risk appetite in mind when investing.

If you have a high-risk tolerance and want to invest in equity, you can choose stocks, equity mutual funds, futures or options.

On the other hand, if you have low tolerance, opt for fixed deposits, PPF investments, etc. that have a fixed rate of return. Try and start a Systematic Investment Plan (SIP) in a mutual fund scheme, equity or debt.

SIPs would ensure regular investments without pinching your pockets and provide attractive returns which would compound over time to create a sufficient corpus for your financial goals.


6) Review, monitor and track your investments regularly

Investing is not a one-time task. You should invest in a disciplined manner, regularly, so that you can create a considerable corpus over time through the miracle of compounding.

Also, monitor your investments regularly. This would serve two purposes –

  1. You can check if your investments are performing as expected
  2. You can assess their sufficiency in fulfilling your financial goals

If your investments are not performing as expected, you can switch around or churn your portfolio to get the right asset allocation.

On the other hand, if your investments are falling short of creating a desirable corpus, you should step them up to accumulate the desired funds.

Make it a habit to track your investments once every 6 months or so so that you can take necessary measures to correct any deviations.


7) Plan your taxes

The last step is to plan your taxes. Tax planning helps you utilize the tax-saving sections of the Income Tax Act, 1961 so that you can reduce your tax liability.

Tax planning allows you to pick the right investment avenues that not only match your risk tolerance but also give you the added benefit of tax saving.

When you plan your taxes, you can reduce your tax outgo and increase your disposable income.

An increased disposable income can, then, be used to upgrade your lifestyle as well as your investments so that you can save more.


These are some of the basic principles of investment for beginners. They are also the stepping stones to financial independence and should not be ignored.

So, if you are wondering, ‘how to invest my salary in India’, wonder no more. Follow these tips and plan your finances effectively.

These principles would give you financial literacy and also equip you with the knowledge of how to start your investment journey. While the latest mobile phone might be tempting you to splurge your first salary in one go, resist the temptation. Make the phone your goal, save for it for a few months and then get your hands on it.

The pleasure of planning your finances for the phone would motivate you to plan for your financial goals too.

So, don’t be frivolous with your first salary. Know how to invest properly and make your first salary the first instalment towards your financial independence.