How Gen Z can build wealth starting from first paycheck— expert lists 5 steps for financial planning
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5 steps for rewarding financial planning
Prioritize an emergency fund: Before focusing on wealth creation, set aside money in a liquid mutual fund or an easily accessible fixed deposit to cover three to six months of essential expenses. This protects against emergencies and prevents premature extraction or redemption of long-term investments.
Start investing early: Split savings between building an emergency fund and starting an SIP, even if it's modest. A practical approach is to invest half of the savings in a liquid fund and the rest in a diversified equity MF SIP. This builds both a safety net and financial discipline.
Redirect savings after achieving emergency fund goal: Once the buffer is in place, channel monthly savings into long-term investments. Identify goals and classify them into short-, medium- and long-term objectives, then calculate immediate expenditure and regular instalments to determine asset allocation.
Match goals with right investments: Long-term goals may suit diversified equity MFs, like flexi-cap or multi-cap funds. For near-term needs, lower-risk options like debt funds or fixed deposits are preferable. Goal-based investing helps ride out market cycles.
Increase SIPs as income grows:Raise SIP contributions over time and continue investing even during market volatility.
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