Tag Archives: investing

Life today is expensive and getting costlier. Education, housing and other costs of living are certainly not getting any cheaper. Your savings will only take you so far and thus, financial planning and investment have become a necessity today. Education planning in India is getting popular, especially for parents looking to send their kids to study abroad without taking out education loans. If you are a beginner investor, and thinking about child investment plans or other strategies, here are some things you should know. 1. Invest with a plan You should always invest with a plan. It is very important to be clear from the get-go about what your financial goals are. Investments in a house, investments for buying a car, investments for retirement, and investments for child education are all very different financial goals. Some financial goals require short-term planning while others require planning long-term.  For example, buying a car is a short-term goal, while creating a proper education plan for your child or planning for retirement are long-term goals. A diversified short-term investment plan is much more suitable for the former and a long-term investment scheme will be more useful for your long-term goals. If you are a beginner, it can be a good idea to invest with a financial service that manages your investments for you. A personalized and customized financial plan created by experts is useful when you are short on time or expertise yourself. If you want to create a solid education plan for your children, you can invest your money in mutual funds and ETFs through EduFund.  2. Educate yourself about the stock market While it may be tempting to leave everything to the experts and rest stress-free, that is not a very good attitude to have. You should educate yourself about what you are investing in and why. A lot of beginner investors follow trends and invest in whatever is being talked about the most. There is a chance of this being profitable in the short term but this definitely not a good long-term strategy. For that, you will need to educate yourself on the stock market. You need to understand how the stock market works and what it means when a stock rises or falls. What is a stock and what does it mean when you buy a stock? You should also educate yourself on the jargon. What is BSE, NSE, Sensex, Nifty, etc? What is the difference between investing and trading? First-time investors also need to specifically look at what they are investing in and learn as much as possible about it. If you are investing in ETFs, it is important to first understand what an ETF is and why they are so popular with beginner investors.  Sometimes, the experience can also be a teacher. When you enter the market as a rookie, you may make mistakes and suffer losses. Take these losses as a learning experience to understand what to do and what not to do. Knowledge is your friend when you are an investor and not all of this knowledge needs to be bookish. 3. Understand market risk When you invest your money into the market, you can either make a profit or suffer a loss. The more money you have invested, the more your exposure and consequent risk.  Volatile or trendy stocks and options can be risky. Balanced mutual funds, real estate, and high-income bonds are relatively low risk. Bank savings deposits, fixed deposits, and government bonds are the lowest-risk investments. As an investor, what you need to do is determine how much risk you are willing to take. It is always a good idea to start slow. Do not speculate too much too quickly. Rather, plan things out and invest according to your goals. Your risk tolerance will also differ depending on your financial goals. If you are investing to fund your child’s education plan, which is an expensive, long-term investment, you should not take unnecessary risks.  Diversification is a great idea to lower risk as this ensures that your invested principal is not tied up in only one thing. This balances out your risk. Investing in ETFs and mutual funds is a great way to do this. These funds are already diversified and their investment portfolio is structured and balanced to ensure relatively lower risk. 4. Invest in what you know We have recently seen big booms and falls in the prices of certain stocks like GameStop. A lot of people invested in these stocks due to the hype and media attention. While many of them made huge profits, when the stocks eventually fell, many investors ended up losing a lot of money as well.  This is a great example of what happens when you invest out of herd mentality, without fully understanding what you are investing in and why. While these types of investments can be good for a quick and sudden cash fall, they are completely inappropriate as a long-term investment strategy.  When you invest in a stock, you purchase yourself a stake in the company. As a stakeholder, you should do your due diligence about the company and its stocks. Understand how the company makes its money and stays profitable. If you don’t do this, you will not be able to predict or understand when a company’s stock may fall and put you in a financial crisis. If you don’t understand how or why a particular stock shot up, it's not a good investment. 5. Stay calm This is perhaps the most important aspect of investing. The stock market with its highs and lows can lure you into making impulsive, emotion-driven decisions. It is important to have self-control in these matters and stick to proven investment strategies rather than variable market trends. It is also equally important to understand that short-term market fluctuations, by and large, don’t affect your long-term investments in the long run. With financial goals like education plans and home ownership, any rise and fall in stock prices can make you nervous. But it is important to have faith in your long-term investments. If you have done your due diligence and research in picking the right plans and strategies for yourself, the only thing you need to do is relax and keep faith in your investments. Conclusion Investment is a strategy for creating wealth in the long term and requires patience, faith, knowledge, and planning. It is important to educate yourself as much as possible about all relevant issues and keep in touch with experienced advisors and analysts. With good advice, planning, and a solid portfolio, investing can help you achieve your life goals and dreams.

College teaches you a great many lessons and gives a guide to budgeting. Not all of those lessons, as it happens, are learned in the classroom. As a young college student, budgeting and good financial planning are lessons you will learn to appreciate sooner rather than later. This is especially true if you are planning on moving abroad for your studies.  The expenses of a global education may have you worried and asking “Is studying abroad worth it?” Well, there is no doubt that going to study abroad has a great many benefits, both for your career as well as your personal growth and development. In fact, learning how to live on a tight budget can be a life lesson on its own. In this blog post, we try to understand how to get started in creating your first personal budget.  Image by Andrea Piacquadio on Pexels Basics of financial planning When you are preparing for your college applications, it is likely that you have an education plan in place. This ensures that you are more organized with your applications and aren’t surprised or thrown into a tizzy due to unexpected circumstances. In the same way, to ensure that you are organized with your money and to avoid being beset by financial emergencies, you need a financial plan. What is Financial planning? Financial planning is basically a method to plan and manage your income, expenses, investment, and other finances to ensure that you can achieve your life goals. A good financial plan also anticipates and makes room for emergencies that may otherwise drain your savings or cause you to incur debt.  The first step in creating a financial plan? The first step in creating a good financial plan is the same as the first step in creating a good education plan - identify your goals. You need to figure out what your financial goals are. They can be as simple as being able to save a certain amount at the end of the year. Be realistic with your goals. Keep in mind that you are still young and do not have too many responsibilities right now. Therefore, you can treat your college life as a growing and earning period. You don't have to put too much pressure on yourself. image by Karolina Gabrowska on Pexels Understanding & tracking your finances Once you have your financial goals in place, you can start sketching out your plans. Understand your finances. Figure out how much money is coming in each month, (through education loans, scholarships, part-time jobs, or your parents) and how much of it you are spending. Figure out which expenses are reasonable or non-negotiable and which ones you can cut down. You should also maintain a personal balance sheet to record how much you have, how much you spend, and how much you owe. Collect all bills, invoices, and bank statements to accurately record all your transactions. This will enable you to understand and track where your money comes from and where it goes. How to create your first budget? Once you have a financial plan in place, creating a budget will be easy. A budget is a summary of estimated income, and discretionary & non-discretionary expenses. Budgets help you figure out where your money is coming from and where it should be going. This enables you to spend and save money more wisely. Budgets are especially important when you study abroad and are away from family support during emergencies. If you have done your financial planning and tracking properly, your personal balance sheet will be your first step to creating your first monthly budget. Next, follow these simple steps - Calculate your monthly income based on this balance sheet. Your income will include all money that you earn through part-time jobs and scholarships as well as any allowances you get from your parents or through an education loan. Make a list of your monthly expenses. This list should include all your fixed as well as variable expenses including tuition, rent, utility bills, food, transport, entertainment, etc. Next, separate the non-discretionary expenses like rent and utility bills from discretionary expenses like entertainment.  Set aside money for non-discretionary expenses as a priority. This is money you are not allowed to touch for anything other than its designated purpose.  Set aside money for savings and emergency funds. You don’t have to save a huge amount but do try to keep aside at least some money for this every month.  Make any adjustments that may be required. Cut expenses where possible and adjust savings where no other options are left. And voila! Just like that, you have your first budget! Good monetary habits Good monetary habits teach you financial responsibility and maturity. When you study abroad, you do not always have your family to rely on during emergencies. By practicing these, you ensure that you do not end up in sudden financial emergencies that cause you to incur debt.  Image by Maithree Rimthong on Pexels Financial planning and budgeting are some good monetary habits. Another important habit is avoiding unnecessary expenses. Avoid buying expensive clothes or gadgets that you don’t need. Avail of student discounts wherever possible. Use the library. Use public transport. Save money wherever you can.  Pay off your debts. Try not to buy anything on credit or borrow money unnecessarily from your friends. Only buy what you can reasonably afford. S Saving money may involve sacrifices. You may have to cancel a trip with your friends or miss out on going to an expensive restaurant. Keep in mind there will always be time for those things. By planning for the long term instead of focusing on short-term pleasures, you are making sure that you enter your working life on solid financial ground.  Pay your bills early and on time. Not being prompt with your payments causes you to accumulate late fees which can easily drain your resources and unbalance your budget.  Another important monetary habit to build when you study abroad is to always have an emergency fund. This fund can help you pay sudden expenses, like if you lose your phone or if your laptop needs repair.  Image by Liza Summers on Pexels FAQs What is financial planning? Financial planning is basically a method to plan and manage your income, expenses, investment, and other finances to ensure that you can achieve your life goals. A good financial plan also anticipates and makes room for emergencies that may otherwise drain your savings or cause you to incur debt. What is the 50 30 20 rule? The 50-30-20 rule states that 50% of your income should go towards needs, 30% towards wants and 20% towards savings. How should a student plan a budget? To create a budget, first understand what your monthly income/pocket money is, figure out your daily and monthly spends like rent, food, transport. Compartmentalise your spends into necessary spending and miscellaneous spending. Once you have all the information, figure out where you are spending excessively and try to save the money to create an emergency fund for yourself. Conclusion Financial planning is the first step towards financial responsibility and eventual financial independence. Your parents were able to send you to your dream college because they were fiscally responsible, saved money, and invested in child investment schemes to ensure the best future for you. The best way you can pay them back is by learning to be financially responsible yourself.  Your attitude matters. If you are not resolute about sticking to your budget, your financial planning will be futile. No financial goal is as difficult as it seems once you have your personal balance sheets and budgets in place. Welcome to adulthood!