‘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 with.
Table of Contents
Here are the smart financial planning steps 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. So, start with something that you can manage and choose little investments plans.
Save for Retirement
Start with just Rs 5,000 per month and you will be a billionaire when you will retire. For example, if you invest Rs 60,000/- a year in RD (Recurring Deposit)–only Rs 5,000/- per month–starting at the age of 25, by 65 you’ll have Rs 1,30,51,230/- (assuming a 7% return compounding quarterly).
But say you delay by 10 years and start investing Rs 60,000/- in RD from age 35 to 65, earning the same 7% return. You will make 50% less money – Rs 60,86,499/-.
Take advantage of your company’s 401(k) plan
Sign up for your company’s 401(k) plan and get free money! Yes, you heard it right because most of the companies offer 401(k) plan which is a type of retirement account that gives you large tax advantages along with the chance to earn compound money. This is the foremost mantra to pay yourself before anyone else.
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.
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 20s is not that much difficult provided we manage everything in a more definitive manner.