Here are essential tips for effective savings and investments in the Indian context:
- Pay yourself first: The best way to save money is to save before spending, and not the other way round where you get to save what's left from your expenses. Develop the habit to save before you spend so you will have something to show after all your expenses.
- Emergency fund: Set an account aside, either savings or regular checking accounts, where you get to save for emergencies. The money you save in this account is dependent on your streams of income (the fewer income sources, the more you need in your emergency fund). The whole idea of this tip is that you set aside some money to take care of emergencies.
- Retirement savings: Do not hesitate when it comes to saving for retirement; start as soon as you can. You will be taking advantage of time when you do this as your funds will accumulate over time, and your investments on retirements will grow exponentially, based on the value of your compound interest.
- Investment strategies: After maxing out your retirement accounts, begin to invest in a personal investment account. Do not invest in a personal investment account until you have maxed out your retirement accounts (EPF, PPF, NPS, and so on). Saving for retirement should be your priority at first.
- Know the exact amount you are to pay in fees: You will likely pay in fees in some capacity when you invest in the stock market. You are going to pay fees regardless of the money you invested in, the financial advisor you hire, the brokerage firm you use or a combination of any of this. Just ensure you know the exact amount you will pay in total fees.