Approaching 30? Here's how to get money savvy

No one holds it against you if you muddled through your 20s in autopilot. But the big '3' approaching signals that it's time to change gears - at least financially. How you manage or mismanage your money at this point in your life can make or break your financial future.

Think we are kidding?

Consider this.

If you are 30 today and save Rs 1 lakh; that amount will accumulate to Rs 31.40 lakh (@9% pa) when you are 70 years old. If you postpone this investment till you are 40, by the time you are 70 it would amount to Rs 13.26 lakh. Pretty meager in comparison to the earlier sum. Every bit of money that you wisely save today, will make your life that much more comfortable later.

We did not throw those figures at you to make you feel bad. Or good. In fact, how you feel is completely irrelevant. We want you to take control of your finances and get started. No more excuses. Just work on results now.

Here's a simple and practical way to get cracking. Cut down on your savings by just Rs 1,000/month and put that money in a mutual fund. Within the next 10 years you would be patting yourself on the back.

Don't take our word for it. See for yourself what the returns would be if we back test our investment suggestion with an equity fund. Let's go with HDFC Equity (G) – this is a good performing equity diversified fund that invests in stocks across sectors.

Amount: Rs 1,000 per month

Years: 10

Period of investment: January 1, 2002 to December 31, 2012

Total amount invested = Rs 1.20 lakh

The worth of it at the end of 10 years = Rs 4.24 lakh

Return: 24 per cent per annum

(Source: iFast Compilations)

So all you have to do is cut back your spending by Rs 1,000 per month as shown in the previous example. In the long run, you will not regret it. And in the short term, trust us, it will barely pinch your wallet. With that money saved, start a systematic investment plan (SIP) so a fixed amount gets credited automatically from your bank account and is invested in the fund of your choice at a particular date every month.

If this is the first time you are venturing in the equity arena and prefer a fund that invests in equity (stocks) and debt (fixed income instruments), then you can try a hybrid fund. If you prefer casting your lot with an equity fund that only invests in stocks across sectors, then go ahead with a pure equity play. The recommended list will give you options across both categories. So start now. Don't linger. Open an account and start investing. The cost of waiting is too high.