1. Maintain a separate emergency fund
Salaried ? You should have minimum 6 months worth expenses saved aside for those rainy days. To calculate the monthly expenses, take in account EMIs also.
If you’re self employed or a freelancer – top up the 6 month expenses with the fixed cost of running your business for a year.
Where to keep it ? Remember returns are not important here. Immediate accessibility is the priority. Park it in savings account (3.5% p.a. interest) or even better – in liquid funds (7% p.a. interest) (some mutual fund schemes have started offering debit cards to provide the the dual advantage of better returns and immediate liquidity).
2. Start investing as early as you can
Investing is like the story of hare and tortoise. The sooner you start the better you are off.
3. Expenses = Income – Savings
Always set aside the sum of savings first and then spend the remaining amount (Never the other way round).
Generally, people tend to spend first and then save the remaining amount. This always tends to over spending. It is a simple yet very effective rule.