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Learn to Take the Right Decisions Regarding Personal Finance

By Charles Hopkins Published 09/19/2006 | Finance

Just Started Your Professional Career? Learn to Take the Right Decisions Regarding Personal Finance

How long do you think it takes to grow into a middle-aged manager approaching retirement from a carefree young executive in the infancy of his career? It may take 25 to 30 years in theory, but when you reach that stage it seems the time has come too early. It will be probably the time when, for the first time, you will be wondering about the relative swiftness of the journey of time. But do not allow this realization to fall on you when it is too late; when even a financial planner cannot be of much help. Remember it is never too early to start thinking about the retirement days. True it sounds too cynical for a youngster at the starting point of his career to contemplate the finishing line, yet, nothing can be more beneficial than subscribing to a sound financial planning from day one.

It may sound a bit cliché; but you will gain most in personal finance when you start at the earliest. The more time you give your capital to grow, the more it is enhanced in size. Just try to recollect the sums of compound interest rates that you have learned in your school days and you will come to understand the comparative gains from your capital that has been invested during your twenties and those invested when you are in your 40's and 50's. If you can start with a foolproof financial plan at your 20s, you will be able to make a fortune many times bigger than what you start during your 40s.

To start early in the personal financal planning has become even more important in the face of increase in the life expectancy, frugal social security and the ever shrinking size of the company pensions. And today is the best time to get started. Here are some simple tips to guide you through the roads of effective savings, intelligent investments and calculation of the cost of your retirement.

To get started in the path of sound personal finance, you have to set a goal first. This goal will provide you the foundation stone for your financial planning and a workable budget is the tool to help you to reach the goal. On the basis of this goal, figure out what is your position on this date and how long you have to go to meet with this goal.

After setting up your financial goal, your motto will be to strictly stick to it. For that you have to make savings consistently and in a planned manner. At the core, make a target of saving 15-20% of your gross income. Contribute as much as possible to your company's 401K; in addition to what your employer adds to it. If your employer does not provide for a company retirement plan, start contributing to an IRA. At this stage of your career you should opt for investing your money in the plans with higher growth potential even though they come with greater risks. Make a habit of putting all the extra earnings in forms of tax returns, bonuses, perks, etc. in a kind of flexible spending account.

Keeping a clean credit record is also important to attain your financial goals. Make loans and credit card purchases as little as possible. Even if you incur debts, pay off the highest cost debts first. Always make sure you pay off credit card bills within the grace period.

Also develop interest in the financial matters. Take the help of the internet and read about the stock markets, investment options and other aspects of Market and economy.

Prepare yourself step-by-step on the basis of the above mentioned guideline and you will soon be able to take control on your financial health.