The joy of receiving your first salary is always ecstatic. Everyone has different plans stitched with that feeling. Some put a tick on their wishlist and buy a new laptop, while others shower their parents and loved ones with gifts.

But eventually, once that delight subsides, one should also start thinking about their long-term personal finance goals and how they can achieve them. The first step towards fulfilling your goals is financial planning. Personal financial goals are your wishes that you can fulfil with money. It is a critical part for beginners in achieving long-term wealth. Early investing can help to earn higher returns because of compounding.

Creating a habit of saving and investing at the beginning of your career helps build wealth for the life beyond your career. To build your personal finances, you can start by saving and investing as low as Rs 1,000 per month that would give Rs 14.90 lakh at the end of 30 years at 8 per cent.

While getting your first pay cheque it is very important that you only spend from the money you have on hand and not bank on EMIs which can gulp down your future earnings.

Let’s jump into the basics of personal finance planning. One should start with penning down his goals and setting a timeline for them. On its completion, he should start allocating his assets according to the risk appetite.

Below are some of the golden investment ideas for millennials that can help keep a check on wealth creation along with an increase in income, thereby improving their personal financial health.

Building Emergency Fund

Emergencies in life come without any notice and one should chalk out a strong personal financial plan which can help you sail through the storm. Keeping aside 6 to 9 months of household expenses for contingencies should be one of the goals that you should set. An emergency fund is a safe haven in case of unexpected job loss, major home repair, medical expense. One can consider investing in liquid funds. It is a great option as it is very convenient to redeem your investments whenever needed. Therefore, an emergency fund in personal finance is a safety net set aside for unexpected obstacles.

Allocation towards Equity

One of the fastest ways for wealth creation is equity investing. As millennials have more time in their hands to plan their personal finance, they can allocate towards equities for their long-term goals. One can consider the “100 minus age” rule of thumb for equity allocation. A person who is 25 years, can invest 75 per cent in equities. But this rule only stands true for those who have good experience in equity investing. Otherwise, they should start equity allocation by investing in balanced funds or aggressive hybrid funds first and then diversify towards large cap, mid cap, and small cap funds. As mutual funds are professionally managed, one does not have to worry about where to invest and how much to invest. Direct equity is also a great option for investing. However, if you do not have enough investing experience then take professional guidance while investing in direct stocks. Asset allocation is one of the most critical areas of personal finance.

Tax planning in Personal Finance

Money saved in taxes is equivalent to money earned. Tax planning is an imperative part of personal finance. For example, you can invest in a normal equity fund or tax-saving equity funds. Investing in ELSS is very similar to flexi-cap fund investing. But it has an added advantage of tax deduction under Section 80C. ELSS comes with a 3-year lock-in period. So, one should not consider investing in ELSS if he/she wants to invest in it for less than 3 years. In the debt category, one can consider investing in PPF or other fixed-income options like FD with the benefit of Section 80C. Under this section, a deduction of up to Rs 1,50,000 can be claimed from the total income. This helps to save up to Rs 46,800 a year in taxes.

Being an early bird to personal financial planning will help you become a responsible person and develop financial discipline.

The author is Co-founder, Tarrakki

DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.