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While you are new to your own finances and are already overwhelmed with the joy of earning, one thing you are most likely to miss out on is planning your financials. While it may seem too early, it is as important so that the money you earn gets channelized in the right direction and is at the right place working itself out so as to build wealth for you.

Here are some pro tips for you to make a sustainable financial plan;

  1. Make a list of your assets and liabilities

You must make a list of your assets and liabilities. These are the things that you own and owe. For example, your car is an asset and your car loan is a liability. The basic fundamental of knowing so is to find out your net financial worth, positive or negative. Positive means your assets are greater than liabilities. This will give you an insight into your present financial future.

  1. List down your total income or revenue

Be it your salary or rental income or any other form of passive income, whatever flows in is your revenue. You must know all your sources of income.

  1. List down all your expenses

Segregate your expenses in two different categories: fixed and variable. List down all your expenses which must fall under these two categories. Fixed expenses are like rent, loan EMI, cable bill, internet bill, payment to the maid, etc. variable expenses are like dining out bill, shopping, gifting expenses, etc.

If need be, you can chuck down on your variable expenses and try and reduce your fixed expenses.

  1. Plan your savings

Once you know your total income and expenses, you must look forward to savings. do not go for the number, it can be tiny as Rs. 500 but start saving. Ideally, savings must be total income minus fixed expenses. Then whatever is left can be spent at variable expenses.

  1. Build up your emergency fund

The next big thing to do is to save a considerable amount of corpus which must be equal to your 6 months salary or be able to feed you for the next six months if need be. This fund will help you in case of emergencies like medical aid, job lay off, etc.

Note: Emergency fund must be used in times of emergencies only and not for buying the latest smartphone.

  1. List down your financial goals

The basic step to financial planning is to have financial goals. You cannot plan for something which does not exist. Your first goal should be an emergency fund then you can plan further. List down your goals under the heads short-term, mid-term and long-term goals. Make investments according to these heads.

  1. Invest in mutual funds

Now that you are earning and wish to create wealth, mutual funds are your go-to instruments. They are considered to be the most rewarding instruments for investing in the stock market. Base your investments on your goals head: short to mid-term, long-term and fixed return funds.

  1. Get yourself insured

The priority of this step depends on your status. If you are independent, you can delay this but if you have dependents, you must get yourself insured. Given how unpredictable life is, you must secure the future of ones relying on you.

Go for both life and health insurance. Healthcare these days is quite expensive and can eat up all your savings if the day comes.

  1. Be a smart investor

Now that you know what your financial goals are, invest smartly. Align your financial goals with your life goals and invest in a mixed portfolio taking care of your needs based on the tenure of investment. Make sure you save for your retirement under the long-term goals, a house can be considered under short-mid-term goals etc. equity funds are best for long-term as they will deliver returns that are quite high and inflation-beating. For short term goals, go for debt-funds or FDs.

  1. Review your portfolio, periodically

All said and done, do not forget reviewing your portfolio periodically. Monitoring your investments is quite important. This will let you know which way your investments are moving and if there is a need for any change.