Personal Finance395 views
‘A penny saved is a penny earned’
– Benjamin Franklin.
This quotation is not new to us, but how many of us really follow this in our life?–very few. The mistake is not totally ours because we have always been taught to be ready–for exams, for interviews, for marriage, etc. but not to save ourselves from a financial crisis that comes without any notice!
Financial planning might sound like a BIG thing that needs to be done in a particular age or with huge money. No matter how much you are earning, if you have no savings, the trouble is always around. But, the reality is, ‘the sooner you start the farther you will go’ and the 20s is the best time to start planning for your future.
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Here are the smart financial planning tips if you are in your 20s:
Start with Less
Yes, no need to run after making big investments in your 20s because you have your whole life to do it. Just start with something that you can manage and choose little investments plans.
Save through Mutual Fund SIP
Start with just ₹5,000 per month and you will be a billionaire when you will retire. For example, if you invest ₹60,000/- a year in a mutual fund SIP–only ₹5,000/- per month–starting at the age of 25, by 35 you can have ₹10,00,000/-.
Take advantage of EPF and PPF
In India, we have the EPF and PPF where the amount invested is tax-free (up to a pooled limit of ₹1.5 lakh under 80 C). The amount withdrawn is also tax exempt. EPF is similar in some sense in that employers will often match a portion of your investment. PPF is similar to EPF but does not depend on employer administration/contribution. EPF and PPF are very conservative. The rate is fixed by the government (around 8.75% though it changes every year) and the person has no discretion in what it invests in. There are specific rules for withdrawals and loans.
Invest in Stock Market
Stock markets are really a good way to multiply your savings once you know the tricks. The investment is risky, but the 20s is the safest time to take risks as you are not bound to big responsibilities and the whole life to make up for it just in case you loose your money.
Follow a monthly budget plan
Breaking rules might sound fancy but it slowly changes into a damaging habit. In short, make sure you know where is your money going and see which part needs improvement.
It might be tempting to save a little money each year by foregoing insurance, but it definitely is the worst decision in terms of finances. However, the wrong insurance can be more harmful. So, you must choose an insurance that you need instead of going by others’ opinion.
Beware of Credit Cards
You must know that credit card is an addiction that will not affect your present, but the future if you get used to it. If you will use a credit card for small purchasing, it will surely make a hole in your pocket. It is hence better to ignore using credit cards just for the sake of showing off.
We are a youthful nation where almost 65% of our population is under the age of 35. So, the early you realize the benefits of planning your money, the better returns you get and hence the smoother life you live. Hence financial planning in the 20s is not that much difficult provided we manage everything in a more definitive manner.