5 Money Management Tips to Follow in your 20s
An interesting book‘The 100 Year Life by – Living and Working in an Age of Longevity’ offers some disruptive insights on how life is likely to pan out for you.
Based on a lot of reliable research and study, it suggests three defining features (amongst many others) of work life in the 21st century…
- People can be expected to live longer
- Organisations can be expected to have shorter lives
- The concept of retirement will become obsolete
So, what does this mean for the average millennial?
- You are likely to switch careers (different functions, profiles, industries, sectors) more often
- You will need ‘Re-creation’ as much as ‘Recreation’. So, most people will keep going back to school (or rather some form of education) from time to time, even at the age of 70+ probably, to upgrade their knowledge and skills. But fear not; it doesn’t have to be dull and endless drudgery. Education itself may become more fragmented with people picking it up in smaller doses for longer time-frames while grabbing some work-ex in between. But that’s a theme for another day…
- Third and most importantly, Money management is going to be a must!!! With life becoming so changeable – breaks, retakes, remakes – having money when you need it, will ensure that longevity is a ‘gift’ rather some ‘gloomy doom’.
Against that backdrop, here are 5 smart money moves to execute in your 20s; they’re simple and involve minimal effort but the outcome can carry you comfortably, a long way… even till you are a 100 years old, perhaps.
1. Start a step up SIP…and then dip into it to meet future goals
Until now, you’ve heard people say – draw up a financial plan for your goals. But what do you do when your goals keep changing? Well, at least you can save and invest for those fuzzy future fancies. The best way to do this is to put away a reasonable proportion of your income in a systematic plan from a mutual fund house.
Ideally, go for a step up sip. Since you are young and less bogged down with responsibilities at this age, choose to invest around 60-80% of your savings in equity-based schemes and the remaining in debt schemes or other fixed income products (for a FREE booklet on mutual funds write to us at firstname.lastname@example.org). Then, when a goal begins to loom on your life’s horizon, you already have a financial head-start as you have a kitty ready. Of course, your financial advisor can guide you with the details.
2. Buy health insurance …ironically while you’re healthy is the best time to jump in
Did you know that health insurance premiums depend on your age and state of health? So the sooner you purchase a policy, the lower your premium will be. But why would you buy insurance when you don’t need it? Simply because when you do, it will be extremely expensive, if it’s available to you at all.
And remember, we started out by saying that you may live to be a hundred…so you are going to need some healthcare, somewhere along the way. Just look at it as an ongoing investment of a small portion of your money towards ensuring that your future is hassle-free when it comes to medical bills.
There are a number of other benefits you get for starting early – you exhaust the waiting periods, coverage is more comprehensive, tax benefits, bonuses and health check-ups. Your trusty agent will explain all these goodies to you in detail.
3. Create an emergency fund… life can be more adventurous than you imagine
With work-life paradigms changing, there are bound to be times when you are in between jobs. You could run up against a number of other pressing situations that make you take breaks from actively earning money. You’ll have plenty of things to think about during such times; don’t let financial concerns add to them. Just put away enough money to cover your living expenses for about 6 months, in a liquid fund, and keep topping it up whenever you use it or think your lifestyle requires a larger emergency kitty.
4. Pay off your credit cards promptly…it’s the cheapest or most expensive credit available, depending on when you repay
Credit cards are a great financial product. They are super-convenient and could help you build a robust credit rating which will come in handy if you need a future loan. So, of course, get one and use it sensibly.
Just make sure that you pay off the entire billing amount at the end of every month because this sweet little creature has an ugly side to it too – you never want to trigger that monster. If you don’t pay off your dues, you could be charged interest at the rate of up to 48% per annum – that’s like paying 50% more for things you’ve purchased on the card! So the opposite of getting a good deal, right?
5. Spend on upgrading your knowledge…it’s an investment that could pay great returns
Hopefully, in the future, the cost of knowledge and skill upgradation will keep decreasing or even become completely free, eventually. But if there’s a course you need to equip yourself with, don’t let cost ever become a constraint. Keep aside a regular budget for self-upgradation purposes; alternatively, start setting up a hefty corpus for your retirement.
Disclaimer: Ventura Securities Ltd has taken due care and caution in compilation of data for its web blog. Information has been obtained from different sources which it considers reliable. However, Ventura Securities Ltd does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Ventura Securities Ltd especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its web blog. The information provided herein is just for the knowledge purpose and shouldn’t be construed as investment advice under any circumstances.