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Young and Single

Client's Case

Ashok Rana, 25 years, unmarried, works at call centre, Rs 3 Lakh income, lives with parents, changes jobs frequently

Our Recommendations

• Create monthly budget, start saving from a young age: As you live with your parents and do not contribute to household or kitchen expenses, you should have good monthly cash surplus. You are probably spending your money on entertainment and shopping etc. To get a better understanding of your expenses, please make a monthly budget to see where you spend your money. If you are spending most of your money on discretionary items, then change your spending pattern and start saving money. Start young and you will be better prepared for your life if you start building your assets from a young age

• 80c benefits: Your tax liability would be around Rs.40,000 per year without taking any tax benefits. You must ensure that you are taking 80c benefits to reduce your tax liability. We would suggest that you use this through a mutual fund Equity Linked Saving Scheme (ELSS) investment. You should consider investing about Rs.100,000, given that your expenses are low that would reduce you tax burden by about Rs. 25,000.

• Long-term investments: You are young and because you have no dependants, take advantage of both these characteristics. Investing in equity investments, like the above recommended ELSS, for the long-term will provide you with advantage of compounding of capital. Invest regularly through SIPs and do not worry too much about short-term volatility.

• No need for life insurance: You have no dependants. Therefore, you do not have any need for insurance as no one is dependant upon your income. However, as you grow older and maybe your parents become more dependant upon you after they retire and you get married and have children you should consider taking some life insurance.

• Stay away from credit card debt: Lots of young people are having problems with credit debt. Outstanding balances get charged at 20% - 40% interest rates, which are very expensive.

• Health insurance: You are probably in a very fit and healthy state. However, it is useful to get health insurance, especially because you do not have insurance from work. You can buy a plan just for yourself rather than a family plan. Many companies sell such plans and one years coverage of upto Rs. 100,000 will not cost you more than Rs. 1,000. You can take a benefit under 80d for this.

• Career development plan: You should also take some time to think about your career development. What are your long-term goals and ambitions, what would you like to achieve in your career. What are the professional skills and personal skills you need to develop. Changing jobs every 6-7 months is not going to help you in the long-run. Build stability into your career and think of a career plan. If you want to study further, then you might need to start saving for your tuition fees.

(A complete financial plan involves more detailed analysis and recommendations. The Financial Planning page has two free sample financial plans, financial plan1 and financial plan 2  for you to download. Names and other personal details have been changed in above story and sample plans to maintain confidentiality of our clients)