Pay yourself first
This is the first principle of personal finance. The first thing that you do when you get your income is to pay yourself, i.e. save some money. This should go towards your retirement corpus, your insurance and the investment towards your dream. All your expenses should come after you have made your investments. You do not save what is left after your monthly expenses have been taken care of. Rather, you expend what is left after meeting your monthly investment goals. Therefore, practice Income – (Savings and Investments) = Expenses and not Income – Expenses = Savings and Investments. To begin with, start by investing at least 20% of your monthly income in a SIP. Remember that regular investments will build wealth for you. Not wanting to make that one big investment someday.

Don't forget to invest in your health. You need to be in good health to enjoy the wealth you build. Get an appropriate health insurance policy and go for regular preventive checkups – most insurance plans would cover that. And, exercise regularly.

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Set goals to fulfill your dreams
Setting goals gives you clarity and lets you decide what comes first. For example, you may want to get the latest mobile phone before the year ends, go on a Euro trip in the next five years and save enough for you kid's higher education in the next 15 years. Learn to distinguish goals as long term and short term goals. Your investment strategy for each of these goals will be different as they have a different timeframe and amount associated with them. Further, you know that while the Euro trip can wait longer, if required, the savings for higher education cannot. Some goals have hard deadlines and therefore may take precedence over others in case of a crisis.

Invest systematically to achieve these goals
For long term goals, you should create an equity SIP. This is because equity gives the best returns in the long-term and SIP ensures that you don’t have to worry about timing the market. Longer the horizon you work with, lower is the risk in equity. That said, as you start nearing your goal you should start transferring the corpus equity to debt funds. This way you will be able to avoid any unnecessary risks when within a touching distance
of your goals.

Avoid falling into debt traps
There will be times when you may have to take on some loans. If this happens, make sure you pay off the debt as soon as you can. Personal and credit card loans give you an option to just pay the 'minimum amount due'. Do not fall into this trap as they prolong the payment period and charge high-interest rates. Settle all your loans as soon as you can.

You should be well educated about investing
Another investment that you should make in yourself is by educating yourself on the basics of finance. Lean how to invest and how the share markets work. Do not fall for 'get rich overnight' schemes, and remember that you will have to evaluate each investment opportunity yourself. Always dream big. They may look impossible to some. But with proper financial planning, you will be able to achieve all your goals.

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