10 Money Management Tips for the Beginners in 2021

6 min readJan 4, 2021

Introduction

Private Wealth Management Tips: PC-istockphoto

A New sunrise and a New Year have arrived at our doorstep with 2021. 2020 was full of tantrums and was also a year that exposed how fragile our healthcare and finance handling abilities are. Before the pandemic struck we lived as if nothing in this world can deter us as our belief on technological advancements to face any kind of disaster was mammoth. On the finance front majority of us used to lead paycheck to paycheck lifestyle as if our income will never dry up. 2020 taught us an important lesson that having financial discipline and financial literacy are important to lead a happy and content full life. If you haven’t done any investments and savings till date don’t worry you can start afresh at any point of time. This Zeva Astras post focuses on providing 10 Money Management Tips for the Beginners on the eve of 2021.

Assume you have a surplus amount of money at the moment and are looking to invest in some financial instruments to reap returns in the future.

Some of the factors that have to be considered before investing:

1. Know your Goals: ( Short Term, Medium Term & Long Term Goals)

2. Know the economic value of your goal

3. Know the Risk Appetite or Risk Taking Ability based on your Age & Financial factors.

4. Consult a Financial Advisor to invest wisely for your dream goals.

Investment Goals

Investment Goals come under different categories namely: Short -Term Goals, Medium-Term Goals and Long-Term Goals. Short Term Goals for instance can be identified as buying a House or Car etc. Medium-Term Goals can be identified as planning for your Children educational or wedding needs. The long-term goals can be your Retirement plans or Pension plans.

Know the Economic value of your goals

After the investment goals are in place it is important to know the economic value of your goals. For instance you have Medium-Term plan to educate your child who is currently 2yrs old as an Engineer and you know the current cost of getting an Engineer degree is Rs.20 Lakhs in India.

So what’s the value of Rs 20 Lakhs, 16yrs down the line?? It won’t be same because education inflation will count. Today education inflation is say 15%.

Then the value of Rs 20Lakhs @ 15% after 16 yrs is the Economic Value of your Goal.

Age Factor

As we already mentioned there is no age barrier to start investments. A simple formula suggested by financial experts to identify your risk taking ability based on age factor is:

100 — Your Current Age = the Risk you can take.

For instance your Age is 40 Years, Then 100–40 = 60. Your Risk taking ability is 60%. That means you can invest 40% of your earnings in Debt Instruments which can beat inflation and rest 60% can be invested in Risk Instruments namely Mutual Funds, PMS, Direct Equities.

Influencers Quote:

“You don’t have to start big…small steps over a lifetime really add up. Start funding your emergency fund with $10 a month, start investing with $50 a month. It is more important to get going than to wait for the big amounts of cash!” Andrea Travillian, Lifestyle Transformation Coach, Personal Finance Coach.

Consult a Financial Planners for Help

Merely viewing a YouTube Video will not give us expertise of a surgeon right? Even in financial planning you will not be in a position to understand if you are running with a deficit or surplus of funds for handling your future requirements. So in today’s fast paced lifestyle seeking a professional Finance Planners help is absolutely necessary. A Certified Financial Planners or a Financial Advisor can always guide you on identifying your Goals, determining the Economic value of your goals and, Risks involved in its pursuit. This post has identified 10 important Tips on Financial Planning for all those who would like to have a meaningful New Year resolution.

#1.Use 50–30–20 Rule

To be recognized as a good investor your pay package will not help. To start investing you needn’t have a whopping salary either. Tip-1 is to follow a simple planning of your financials with a 50–30–20 Rule. The Rule says 50% of your earnings should be used for necessities like house maintenance and tax payment. 30% for vacations, entertainment etc. 20% should be savings.

#2.Neighbor’s wealth needn’t be a barometer for your Investment goals

As grownups we needn’t behave like kids isn’t it? It is kids who demand for toys their friends have. You as grown up should never compare with your neighbor’s property and vacation trips. Plan your lifestyle based on your Investment goals.

#3. Diversify Your Investments

Investors who invest in only one kind of investment product are identified with the Sheep symbol in the Stock Market. Never put all your investments in one kind of product. As the saying goes “Putting all eggs in one basket” will never work. Diversify your investments in different kinds of products so that your portfolio is well balanced.

#4. Avoid Debts

Having a house loan or vehicle loan is fine. But having debts in Credit Cards that you are unable to pay at the end of the month proves fatal for your financial health. Simple rule of thumb is if you cannot afford something better not buying it.

#5.Have a Contingency Plan

Financial Planners always come with universal advice to have a contingency plan to meet health and other family emergencies. Usual advice is to have a minimum 6 month salary in savings as an emergency fund.

#6.In Financial Plans ‘Me’ Comes First

Pay to yourself first. Always put yourself at the top of the priority list by having two facts:

· Ensure you pay for your Retirement Plans by contributing to it.

· Save for a traditional savings plan outside your Retirement Plans.

#7.Focus on Advancing your Career

Investing to advance your career and increase your earnings is one obvious way to build a good wealth portfolio. Always invest in building your career through acquiring competencies.

#8.Invest for Long Term

One of the best ways to have financial freedom is to invest with long term strategy and in diversified securities. Committing your savings in long term plans helps your wealth to grow, compound and achieve your financial goals.

#9.Regularly Review your Financial Plans

Sit for a review with your Financial Advisor on a regular basis just to know where you are heading towards from goal perspective. Are your investments on right track? Whether your existing portfolio is good enough to satisfy your goals? Last but not least understanding how your economical conditions change with age.

#10.Taste the Life’s Beauty

Wealth Management is not merely growing wealth. In the process you should not stop enjoying small beauties of life and its essence. Be open to new opportunities, avenues and challenges and taste every bit of it.