Merely creating a savings fund will not create wealth – at least not at the rate you anticipate. So it's time to inculcate some good financial habits
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The 20s are the best decade of most people’s lives. You start your first job in this decade, and the fact that you have an income to your name is a heady feeling. But this is the time to inculcate some good financial habits, such as –
- Save money every month.
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The first financial lesson to imbibe in your 20s, or indeed the moment you start earning your salary, is to start a savings fund. The savings habit is a difficult one to stick with – it can become challenging to set aside savings in the face of competing and ever-increasing expenses. However, once you start doing it and commit to it, you won’t feel the strain of it. A savings fund bails you out of emergencies, helps pay children’s tuition fees, buy expensive things and even contribute to your future retirement. But you must pay the savings fund the moment you get your salary, and not wait for the end of the month to do it. Saving as little as Rs 2,000 at first and gradually increasing the amount can result in a big corpus in a few years.
- Borrow personal loans instead of exhausting your savings.
Though you have a savings fund at hand, you will admit that it takes a lot of commitment and discipline to stay the course. You must resist all temptation to break into your bank account if another avenue for funding is available for short term needs – such as a personal loan for salaried and self-employed persons. The best instant loan apps offer quick loans online to help you buy expensive items, pay a child’s semester fees, fund a medical procedure, even carry out a small home remodel. Borrowing a quick online loan from an instant loan app and repaying it within tenure builds your credit score, and keeps your savings fund intact. The personal loan is the best financial tool to use when you want to be debt-free soon and need a large sum of money right away.
#3 Invest your money to help it grow faster.
Merely creating a savings fund will not create wealth – at least not at the rate you anticipate. Savings account interest in most banks is quite low, so your money just sits in the account without much appreciation. This is a wasted opportunity to create wealth in a structured and faster manner. Instead, you should opt to invest your savings so that the savings fund grows faster. When the savings fund reaches a certain threshold, you may invest it in suitable shares and/or mutual funds. You may start a PPF account that takes as little as Rs 500 per year, or start a monthly SIP with as little as Rs 1,000 per month. Make a financial roadmap listing all the goals you wish to see come true, with a timeline against each. Equity investments will get faster growth, while debt instruments show slower but more stable growth.
#4 Buy life and health insurance.
Life is unpredictable, and though you enjoy good health today, the picture might be quite different tomorrow. Even in your 20s, you will have dependents on your income. The safety and lives of your loved ones are in jeopardy if you are absent and your income stops. And you might not have savings and investment to the tune of crores of Rupees to safeguard your family after you are gone. We recommend buying life and health insurance policies for yourself, or a family health plan to include all immediate family members. The sum assured can take care of your family’s future needs in your absence.
#5 Start retirement planning.
The 20s are the decade where you make the most of the opportunities life sends your way, but it is also the time to set the groundwork for your future financial life. This decade is make or break as far as creating wealth in the future is concerned. Though the idea of retirement might seem alien right now, planning for it in your 20s and continuing till the time you actually retire will result in a bumper retirement corpus for you.
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