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5 ingredients for a delicious financial recipe

The formula to success for young professionals consists of five ingredients. Find out what those ingredients are in this article.

Everyone is always trying to find out what the recipe is to become rich. There is no one way to achieve the perfect recipe when it comes to finance and becoming rich. Remember when you are cooking, you know what you want at the end of all the work. If it is a Paneer Tikka Masala recipe you are following, you know your end product should be Paneer Tikka Masala. Thus, there is a target you have set in your mind. In 5 years, I want to purchase a car. Then find out what are the ingredients required. It might be opening a fixed deposit with banks that give the highest rate or making a fixed deposit which will give you guaranteed returns.

Now, what is the recipe to become financially proof for young professionals?


  • Open a savings account and keep all your money in any bank that gives you a high interest rate
  • Insure yourself
  • Choose your goal and invest accordingly
  • Establish a retirement fund
  • Build your credit.


Have a Savings Account

When it comes to opening a Bank account there are two different ways to open a savings account. You can open it online or offline. For opening an account online, you can open it from the Bank’s app or the website. This is much quicker than visiting a branch. The interface is easy to navigate. We would suggest making all your banking services through the online route rather than an offline route.

A major benefit of a savings account is that at a nominal cost, an account holder can make payments through the Debit Card and also derive major benefits from it.

It is especially great for working professionals for whom it is impossible to visit a Branch on a working day. Rather than waiting for the next Saturday when Banks are open, just take a few minutes out from your day and open an account on your phone.In terms of documents, you only require your PAN Card and an Aadhar Card and you start saving through the account.

A savings account is like salt, all dishes require it. Similarly, everyone should have a Savings Account

Insure yourself

The first process of your dish is insuring yourself and your family members. Life insurance and health insurance are the two insurances that are a must for everyone. Life insurance or term insurance will financially safeguard the dependents in times of an unfortunate event. With term insurance, you can avail the benefits of higher life cover by paying less premium.

The cost of healthcare is very expensive and it is increasing at fast pace. A major operation can wipe out the decades of savings. Taking health insurance will help you to during hospitalization and other health related expenses.   

Invest as per your risk taking capacity

You have just started working at your new office. You feel liberated with the thought that this is what you have earned based on your talent and hard work. Now, your decision is to choose whether to invest or not. If you should invest, where should you invest? The first process that must happen when you invest is gauging what your risk profile is?

Take your time while understanding what your risk profile is. The three concepts associated with your risk profile is: risk appetite, risk tolerance and risk capacity

Risk appetite is the level of risk any individual is prepared to accept.

Risk tolerance is the amount of variability an investor is able to withstand in an investment.

Risk capacity is the maximum risk you can take.

Risk tolerance acts as a safety net that dictates how much your risk appetite (or the ability to take risks is). Risk capacity is the amount of risk one can take without losing your sleep.

Now if your risk appetite is high, it would be advisable to invest in equity instruments rather than debt instruments. This is a good opportunity for you to grow your money. Investments made in stable companies tend to make profits for investors. Investing in stock is frequently risky, which draws the attention of potential investors to the huge gains and losses you make. If you manage the risks, you can take advantage of the stock market to secure your financial position and earn some money.

If you do not possess the financial knowledge of the market, it would be suitable to invest through a mutual fund. The mutual fund collects capital from all the investors who want to invest in similar instruments and passes on the benefit of the profit made to the investors.

When it comes to investing if you want to make sure that some portion of your investments is parked in instruments that gives guaranteed returns such as fixed deposit. A fixed deposit lets you get better returns than a regular Savings Account. Make sure that you chose the right tenure as you also have to consider the lock-in period and make sure that not being able to withdraw the money during that tenure does not pose a problem.

Have a retirement fund in place

According to a survey conducted in 2014, 70% of Indians feel that their children should be able to cover their expenses when they retire. But there is no surety that your children will take care of you once you retire. Hence the right way would be to invest for retirement and have a retirement fund in place.  It is important to have a retirement corpus in place as you can’t borrow money for your retirement.

Select a goal and invest accordingly

Financial goals act as anchors in our financial life. Automate your investments and save a fixed amount every month towards your various goals. Increase your investment amount by at least 10% every financial year.

You may have short term goals and long terms as well. For short term goals, a fixed deposit and recurring account can be a good saving option as it does not carry any risk. For short term goals, the objective should be capital protection and not earning high returns. However, for a goal that is 10 years away, you can invest in high yielding assets such as equity which also carries high risk. However, in the long term, the risk is evened out. Hence, it is important to invest in financial products that are attuned to the goals and investment horizon.  

Build credit history

When you first start working as a young adult, the focus is money. This includes making it, saving it, and learning to budget it appropriately. One thing that many young professionals forget is credit score that can have just as lasting impact on your life. A credit score helps banks to understand your credit worthiness and a favourable credit score can help you to get prompt loans at lower interest rate.

 Applying for a credit card is the first step towards building a credit history. Choose credit cards that suit your purpose and pay your dues on time.

Here are some of the factors determine your credit score:

  1. Payment History: The payment history refers to the repayments made by you whether in the form of credit card or in the form of an EMI.
  2. Loan Amount/ Credit Card Limit: The loan amount helps credit card companies to understand what your financial capability is and how easily will you be able to pay it back.
  3. Credit History / Length: Credit rating agencies look at the time period from which you have been building credit.
  4. New credit: The number of recently opened accounts will also be reflected in your CIBIL score. Using a few sources of credit wisely is better than having a large number of credit cards that you can’t keep track of, or that are unnecessary.
  5. Types of credit in use: Having different forms of credit and using them responsibly can be beneficial in demonstrating how efficiently you are able to manage your money in different areas.

With the perfect doses of the different ingredients, you can whip up a recipe that makes your financial life tasty and healthy. So, put on your aprons on already.

Related Articles:

The 5 W’s and 1 H of investing money in 2019

Here’s how you can increase your CIBIL score


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