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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 30, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Vanakkam on Jul 07, 2025Hindi

i am 21 year old and i got job salary is 20k but in hand is 18000 then how to manage the money and get a early retirement planning

Ans: You’ve taken the first step early, and that itself is a big achievement.
Starting at 21 gives you a rare advantage. Even small efforts now can lead to big gains later.
Let's walk through how you can create financial discipline and aim for early retirement.

? Build your foundation with expenses tracking

Track every rupee for the next 3 months.

Categorise into needs, wants, and wasteful spends.

You must know where your Rs 18,000 goes monthly.

Use apps or a notebook, whichever is easier.

Cut anything not essential. Small leaks drain big ships.

? Control lifestyle inflation from day one

Don’t upgrade lifestyle just because you have income.

Stay frugal while you are building habits.

Learn to say no to peer pressure spends.

Delay big expenses like phone upgrades or gadgets.

Budget before every spend, especially weekends.

? Maintain a simple budget: 50:30:20 structure

Keep 50% for needs – food, transport, mobile, etc.

Limit 30% to wants – entertainment, dine-outs, gifts.

Allocate 20% towards savings and investments.

At Rs 18,000 take-home, aim to save Rs 3,600 monthly.

The earlier you fix this ratio, the smoother your path.

? Build an emergency fund before you start investing

First, save up Rs 25,000 to Rs 30,000 as emergency buffer.

Keep it in a high-interest FD or savings account.

Don’t invest until you build this cushion.

This prevents you from withdrawing investments in emergencies.

? Don’t rush to real estate or flat purchases

Real estate is costly, illiquid, and not ideal for beginners.

Maintenance, property tax, paperwork, all add pressure.

Better to rent in early years and invest savings for compounding.

Owning flat too early can block your future choices.

? Learn to say no to investment-cum-insurance policies

ULIPs and endowments will tempt you with big returns.

But they lock money, give poor returns, and have high costs.

Avoid LIC or any insurance policies with investment parts.

If already taken, plan to surrender and shift to mutual funds.

? Start a SIP in mutual funds (regular plan via MFD with CFP)

Begin with Rs 1,000 to Rs 2,000 per month in equity mutual funds.

Go for regular plans through an MFD who holds CFP credentials.

Avoid direct plans unless you are trained to track and rebalance.

Regular plans offer tracking, reviews, and human support.

? Avoid index funds and ETFs

Index funds are passive. They copy market without beating it.

In long run, actively managed funds can beat index returns.

Skilled fund managers adapt to market changes faster.

Index funds do not suit early-stage investors needing handholding.

? Invest through SIPs for long term

Continue monthly SIPs for next 15 to 20 years.

Never stop SIPs during market down cycles.

SIPs use volatility to your benefit.

Invest consistently, not occasionally.

? Don’t forget to increase your SIP each year

When your salary grows, increase SIP too.

Aim to raise SIP by 10% every year.

Start small but stay regular and scalable.

Early start + increasing SIP = powerful wealth creation.

? Invest in equity for long term, not short term

Early retirement needs wealth, not just income.

Only equity mutual funds can beat inflation long-term.

Bank FDs or gold won’t create enough growth.

Stay invested for 15+ years for true compounding.

? Track tax implications when you grow

As income increases, use tax-saving options wisely.

ELSS funds are good if locked for 3 years.

PPF is safe and tax-free but long-term locked.

Use 80C deductions smartly, not emotionally.

? Learn financial literacy step-by-step

Read beginner books on personal finance.

Watch YouTube content by certified planners (not random influencers).

Avoid shortcuts and get-rich schemes.

Learn about risk before choosing any product.

? Focus more on skill growth than salary jumps

Improve communication, software, and team skills.

Your income decides your saving capacity.

Build side income with your passion over time.

Use any freelance, blog, or course skill to earn more.

? Say no to credit cards and EMIs

Don’t use credit cards in early years.

Avoid EMIs for gadgets, bikes, or personal loans.

Live below your means, not just within means.

Save before you spend. Don’t spend before saving.

? Review finances yearly with professional guidance

Once you hit Rs 25,000+ monthly salary, review plan with CFP.

A certified financial planner gives you a holistic view.

They adjust asset allocation, goal planning, and retirement routes.

Don’t trust friends or social media advice blindly.

? Prepare mental habits for early retirement

Early retirement means high self-discipline.

Practice goal-setting and money journaling.

Stay consistent even if results are slow.

Wealth builds slowly, then all at once.

Keep health and learning as parallel goals.

? Stay away from FOMO and peer pressure

Avoid FOMO when friends buy bikes, travel, or upgrade phones.

You are building future freedom, not weekend enjoyment.

Peace later is better than thrills now.

Patience is the biggest investing tool.

? Your progress over next 5 years

Emergency fund built within 6 months.

SIPs continue and increase with salary.

Equity mutual funds cross Rs 1 lakh in 3 years.

Financial literacy goes up with practice.

No loans, no debts, no regrets.

? Don’t stop learning about money

Read financial blogs or trusted YouTube channels.

Keep tracking your net worth every 6 months.

Share your learning with family members too.

Money habits become stronger with awareness.

? Build long term goals with time

Create a goal list: retirement, home, car, kids, travel.

Assign timelines and amount needed for each.

Discuss with a CFP to align investments to each goal.

Don't mix goals. Keep buckets separate for clarity.

? Avoid risky trends like crypto and trading

Crypto, day trading, or forex trading are not wealth creators.

They are addictive and full of losses for beginners.

No CFP will recommend those for long-term growth.

Stick to regulated, long-term trusted assets.

? Use automation to avoid missing SIPs

Set ECS or auto-debit for SIPs.

This prevents emotional decisions every month.

Automate savings, not just expenses.

Discipline gives results, not emotions.

? Consider health insurance by age 25

As salary improves, get a base health insurance.

This prevents wealth from getting wiped in emergencies.

Don’t depend only on employer coverage.

Individual policy is future-proof and tax-efficient.

? Enjoy the process, don’t rush outcomes

Wealth creation is slow and steady.

Consistency beats intensity in personal finance.

Early retirement is realistic if you stay focused.

Keep learning, saving, investing, reviewing every year.

? Finally

You have made a very smart start.

Most people realise this in their 30s.

Stay consistent with small actions.

Avoid bad financial products and hype.

Aim for freedom, not only money.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.