“Life is a game; and money is how we keep the score”

There is a very popular ad by MasterCard, wherein a young man's parents visit him,

The cost of business class tickets is Rs 110,000,

He rents a luxury car, cost is Rs. 8,000,

He takes them to an amusement park, cost Rs 5,600.

And the old couple is on a ride laughing their heart out,the ad says “ watching your parents become children again, 'Priceless'. ”

If someone told you, “Money can't buy happiness”. He probably wasn't entirely speaking the truth. The ad clearly highlighted that the young man had spent Rs.123,600 as cost to have that priceless expression on his parent's face. The underlying universal truth today is simply this - there are only a very few things that money can't buy and for everything else, there is money!

One can easily imagine doing many small things that gives happiness but doesn't cost us like spending quality time with family, watching favorite TV shows, waking up late on Sundays, chilling out with favourite buddies, going for a mountain trek, sitting on a beach on a beautiful evening and so on... True these things do not cost us but can we imagine us doing all these activities in absence of any money? The truth is that we all would fail to see and appreciate life's small moments and wonders if we don't have any wealth. We can live a normal, peaceful life absent of any worries only if we feel that we have financial security and well-being. In absence of same, we will see ourselves toiling day and night to earn money to fulfill our basic needs and our life's primary goals.

We all want financial freedom in our lives to do the things we like most but yet, most of us often spend a life time running a rat race to reach there. And when we reach that state, if at all we do, we would have become old to do any of that.

So what's the answer?

There is no magic wand, but all we can say is that we need to commit ourselves with all our will to aggressively save and be strict in observing wealth creation and management principles which we have so often iterated.

We need to start with basic money management skill of controlling expenses – a very important need today. We need to realise that spending money will grant satisfaction, it may however not last forever but spending money wisely will grant satisfaction that may last a lifetime. What you do with your money, matters more than how much you have. If you spend on things that give you satisfaction, it is really worth it. But if you spend on things that give you immediate pleasure but lose its lustre after some time, will not give you happiness. The idea is not to compromise on your needs or desires or to not follow your passion. It is about managing your expenses intelligently, so that you have a surplus which you can invest for your future.

It is wise to buy experiences and not articles.

You like cycling, plus its good for your health. Now there are three cycles to choose from, A,B and C, costing Rs 5,000, Rs 25,000 and Rs 100,000 respectively. Cycle A may not be very comfortable, so you might want to choose between B and C. A smart investor would always choose B because; Cycle B would maintain it's quality and comfort, it would have all features which are required for a comfortable cycling experience. It might not however be a big brand as C, it might have 2 lesser gears than C, Cycle C would be made of carbon, so you can lift the cycle with one finger. But does this really matter? Will it at all impact his cycling? No. So, he would rather buy Cycle B, save Rs. 75,000 and invest the money for his future. And there are hundreds of instances, where we have to make a choice between similar products but with different prices, or between buying or not buying at all. It depends on how wise we are and how effectively we follow money management techniques in each purchase; it will be a significant sum at the end of the year.

This first step is most critical as it will enable you to save money which can then be invested in avenues which help grow your wealth. Remember a rupee saved is a rupee earned. For some even such small savings can give happiness when they believe in their hearts that these savings will bring many smiles in future …

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Prerna has been working for 5 years now. The reason behind her slender investments is saving some tax, and some, she is generous enough to give away to the government for the economic development of the country. As far as her economics are concerned, she believes travelling and shopping in the mall till her last breath, are the only possible avenues where her hard earned money should go.

Prerna's investment summary:
2011 – Company EPF – Rs. 16,000 (She wasn't falling under a tax slab)
2012 – Company EPF – Rs. 24,000 (She joined the 10% league and paid some tax after the EPF)
2013 – Rs. 25,000 Bank FD in XYZ bank; Company EPF Rs. 24,000 (She paid Rs 9,000 in taxes)
2014 – Rs. 40,000 Bank FD in XYZ bank; Company EPF Rs. 24,000(She still paid Rs 16,000 in taxes)
2015 – Company EPF Rs. 24,000 (Since she got married, she had nothing left to invest; She paid Rs. 37,000 in taxes, as she entered the 20% slab this year)

Prerna could have saved her entire tax liability over these five years by investing smartly. Prerna after 5 years of employment has negligible bank balance, Bank FD's totaling Rs. 65,000 and EPF which she can't withdraw. She has entered into a new phase of life and is witnessing responsibilities falling one after the other on her head. She has realized that it is high time, she must get her act together and do something about her savings and investment. In fact, she has been thinking about this since 2013, but never took the pains to plan her finances. Prerna must follow these basic steps to step out of her dilemma:

• Educate yourself: The first step to investing is learning. There are various websites and journals, which host a powerhouse of information. Subject books on finance and government websites can also be referred. Prerna should familiarize herself with the basics of importance of saving, various investment options available and pros and cons of each. The advantage of acquiring knowledge is she won't be totally boggled when she takes the first step, there would be lesser chances of her falling into the trap of frauds, and her homework will be done when she seeks professional advice.
• Find your style: Though there are idol investment portfolios on the basis of age, income, family demographics, etc., but every individual has a different approach to life. Some may have the adventurous spirit and the aptitude to take risk, while others may be conservative and don't want to risk their money at all. So, Prerna should analyse her style, whether she wants to experience the thrill of equities or want to first build a safe harbour and then start exploring other options.
• Ice Breaker: Prerna has to shake herself up, since she is too comfortable with not bothering much for her future. She has been wondering that she wants to invest but kept on postponing. Procrastinating investments is delaying her financial security, all she needs is a "Start" button, she needs to lay the first stone in her investment plan.
• Start early: If Prerna would have started saving in 2011, she would have saved Rs 62,000 of taxes, that she paid, she would have saved at least Rs 3 – 4 Lac by now for saving these Rs 62,000, and if she directed small portions in monthly SIP's or RD's, she would have saved another Rs 1 – 2 Lac. She would have had a strong financial cushion for her now. However, better late than never, she should immediately start investing and make up for what she never did.
• Don't pay tax when you can save them: Prerna's taxes are equivalent to her total savings. The government has given us the benefit to not pay tax by saving for us. It has two benefits; one, we can save money by not paying tax and two, we are saving for our future in order to not pay tax. Rs. 150,000 can totally be saved under Section 80 C by investing the same amount and there are other sections as well, which can be used if applicable.
• Advice: Since Prerna is an amateur, she can make mistakes. She tends to get carried away, she may start doing, what her smarter friends are doing. She may start following what the anchor of the business news channel is saying without any research. Since she lacks exposure, she must seek professional advice. She may look up to an experienced family member, who is into savings and investments, or she may seek help from a professional financial advisor.

The advisor will help Prerna choose the right fit according to her profile and requirements. And all she needs is dedication, a control over her emotions and keep her basic necessities and investment commitments at the top. Let's bring a smile on Prerna's cute face by assuring her that she can continue shopping and traveling after providing for the above.

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Young adults are perhaps the richest amongst all of us. They have something more than all of us - "time", they are at an age when the possibilities are unlimited. In case you are a young adult in 30s or a parent / guardian with children approaching or are in their 20s, this article is for you. The article tells us few things which perhaps we were never told when we were young. We bring to you six valuable investment guidelines that can literally make a huge impact in lives of young adults.

1. Learn about Personal Finance & Investing :
Knowledge about personal Finance topics and investing at an early age is a great asset. Young adults must know about different asset classes, investment products, insurance, loans & credit, time value of money, inflation, savings, taxation, ¬financial planning, etc. Such knowledge, especially during early years of your career can really help you take great decisions for future. If you are a guardian, be sure to involve the young adults in your own investment decisions. There are many ways in which young adults can gain financial knowledge. Some of the ways are reading good investment books, reading ¬finance magazines, interacting with financial advisors, accountants, successful investors in family/friends, and so on.

2. Control Your Spendings :
Young adults are perhaps the most valued consumers hunted by every big brand ranging from cars to shoes to laptops to even holiday packages. With the newly gained earning power and lack of big responsibilities, it is natural that spendings on entertainment, gadgets, accessories, hanging out / parties, etc. form a big chunk of the spendings. Surely it is the time to enjoy life but young adults are advised to control their urge to spurge and not make impulsive decisions. It would be great if one can budget such spendings and avoid taking big decisions like buying motorbikes, cars, laptops, etc. without adequate thinking and research.

3. Start Investing Immediately
We have often spoken on this topic. The benefits of saving early can never be under estimated. Even if the savings is small, due to the power of compounding, the wealth created by you can be enormous. This may easily surpass the wealth created even with increased savings but started after a few years. You may be surprised how much difference will be there in the end value just by starting early.

4. Get PAN & Start Filing Tax Returns:
Filling of ITR has many advantages as they are considered standard income proofs globally and they help you while applying for loans, visa applications for jobs abroad, requesting tax refunds, etc. The PAN issued by IT authority is a prerequisite for filling ITR and is also mandatory for many financial ¬transactions. There is a perception that if the taxes are paid, there is no need to file ITR. This is a misconception and it is essential to know that it is our obligation to file the ITR when you are required to do so. Further, still many believe that their incomes are too small to attract the attention of IT authorities and get tax scrutiny and hence may indulge in non filing of returns or understating income. You may note that IT authorities uses a system whereby cases are picked up randomly on certain criteria. You may never like to be the one to get short-listed and invite unnecessary hassles. Remember that you are permitted to save taxes, but not evade taxes.

5. Get Health & Life Cover:
Getting adequate protection at a young age, where people tend to be more adventurous, is highly advised, even if there aren't any dependents on you. Buying health or life cover at a younger age is also considerably cheaper than buying the same after few years. Such protection can really help one in case there is any unforeseen emergency and financial burden on parents will be avoided.

6. Start Thinking About Home:
The average age of home & car buyers has decreased drastically in the last 20 years. Powered by easy availability of loans, fat pay packages & growing aspirations, the first time home buyer today is often around the age of 30. The first time car buyers are even younger. It would thus be best advised that young adults keep these goals in mind and start saving as much as possible for home & car goals, if any, from now onwards. It would really benefit you a lot when the time comes for purchase in near future. Often young adults delay saving for the goal and end up paying lesser down-payments and taking higher amount of loans which should be avoided. Lastly, even if you have a home of your own, it is advisable to think of buying a home as an investment for future and also enjoy tax benefits on same. Having time on your side is a great advantage and never to be missed. Few young adults may choose to ignore & not act on 6 guidelines shared above at their own peril. Experience has shown that wise decisions, actions and discipline in these formative years go a long way in securing a better ¬financial future down the line. Simple actions taken today can help you avoid taking tough decisions at times when you have family to support and lot of responsibilities on your hands. So go ahead and make the best that this time has be offer, smartly.

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