Money is one of the primary causes of mental stress and related problems for a considerable number of young adults. This is especially true for people in their 20s – the phase of life where most folks are inexperienced at managing their finances. But even experienced adults who’ve been at it for quite some time find this equally challenging. Most people regret not following and mastering specific financial lessons early in their lives and having to work arguably twice as hard to make up for the lost time. Don’t let this cause panic though. Instead, let it serve as motivation to start now and master these 8 basic lessons before you are 30:
#1 Build an Emergency Buffer
Emergency buffers are cornerstones of an evolved personal finance strategy. Once we secure our income or get any revenue stream going, we have the tendency to relax just a little. Complacency creeps in and we tend to forget about planning for unexpected emergencies. It can happen to the best of us. Which is why it’s important to start building an emergency buffer, to be put to use only when absolutely needed, with no other options to fall back on. An encouraging proportion of Indian millennials have already begun saving part of their income, as LiveMint reported in a survey. Usually, it is a good practice to save three to six months worth of your expenditure, in a separate savings account. This will assist you survive in case something unforeseen or sudden happens. (We all know of the disruptions caused by the pandemic!)
#2 Invest Regularly
Typically, a lifestyle upgrade, or any long term financial goals require considerable planning and foresight. Anything from a brand new home to your retirement can be accomplished easily with some foresight to start investing early in our lives. By beginning early, the benefits of compounding interests kick in and could see you doubling your investment by starting out just a few years earlier. The markets may seem like an intimidating place for beginners and can definitely be overwhelming. There is an element of risk involved in any investments, and you have to ensure thorough diligence before making one.
#3 Secret Tip For the Biggest Savings!
Conventional financial wisdom suggests that a 10% return on your investments is a daily health amount of returns. What about saving an average of 40% though? You may think that this might be a super risky venture, (since higher risk = higher rewards), but it isn’.t It’s simply a straightforward tip.
Pay off your credit card bills in full whenever they’re due.
Usually, young adults are prone to pay just the minimum amount due and not the full amount due, causing them to pay up a whopping 41% addition in credit card interest rate (industry average). That is a significant outflow in the wrong direction.
Budgeting: The Ultimate Tool
It is easy to lose track of our long term financial goals, and it is easier to overspend and have it impact our finances in the long run. This problem is unlikely to occur, however, if you inculcate the habit of budgeting and strictly adhering to it at all costs. Even on the rare occasion that you do overspend, it can be compensated for during the rest of the current budgeted period, or in the next budget. Make sure that your budget reflects your long term goals and any amount of money that needs to be set off for every month for your goals should always be the first priority.
Alternative Income Streams
Side hustles and part-time work are absolutely essential, even if your main source of income is abundant. A few extra bucks never hurt and can be strictly used to achieve certain financial goals that you might not be normally able to achieve. It also serves as a distraction from your primary income source, relieving some mental stress and in the long run, your health. Side hustles can be anything which you are passionate about and are skilled at, which can be monetised without putting excessive amounts of time into it.
Save for Retirement
Physically, we’re capable of working hard and earning sustainably for only so long. As we grow older, our efficiency starts to dip, and if we don’t have any funds saved up for our retirement, we know the consequences won’t be comfortable. Many begin to realise that they haven’t been saving up enough for their retirement fairly late into their careers, and end up having to invest a lot more into their future sustenance. This could all be avoided by planning ahead for retirement, and by starting early in our lives
Plan Ahead! Set Your Financial Goals
Setting your financial goals is absolutely important. Like we just said, any major upgrade requires a lot of planning and effort on your behalf. This may seem like an obvious tip, but the number of people not having a set financial goal with clear intentions within a reasonable time frame will shock you. It is important that the goals are S.M.A.R.T. Your goals should be Specific, they should be Manageable, Actionable, Realistic and Time-Bound. It becomes infinitely easier to work on your goals, once you clearly define what you want to do and how you plan to achieve them
Trim Unnecessary Costs
It is easy to be sucked into purchasing an unnecessary item just because it is on sale. We’re only human. However, it is equally important to be on the lookout for legitimate sales and offers on products that you need or use regularly. If you are making a major purchase, unless it’s absolutely urgent, take your time and shop around for a while to make sure you get your money’s worth.
There you go folks. These were the top 8 tips that everyone should master before their 30s. For every other financial need, we at Salt.pe are your one-stop solution. Maintaining a healthy financial life will be exponentially easier if you can take care of everything under one roof. Join our waitlist now!