Financial Planning in your 20s

Money, if someone would ask what exactly money is for me then I would tell him without hesitation that it is the thing that can either make me or break me.

Pretty daring, right! When you know that without money, you can’t even survive by yourself then why not better manage it carefully. From office workers to comedians, everyone needs to manage their money.

Investing your money as early as possible is what we need in this era. When your money is sitting idle in your banks, there would be person who’ll be multiplying his assets through investment in other corner of the world.

First advice: Don’t take loans hastily

You get bound with liabilities once you take loans. Buying a house is definitely gonna help you in making assets, but buying it with the money from your loan will increase the liabilities. Taking education loan is still fine as the ROI ( Return On Investment ) in this case would not only include the money but also your overall personality . But always ensure to take the education loan under your own name. Avoid taking personal loans or loans to buy bikes or cars etc. At your 20s, it’s necessary for you to reduce and eliminate the loans as much as possible.

Second advice: Insurance

For the planning of unforeseen or any unexpected situation that might occur in your future, Insurance for that time becomes inevitable. There are two types of insurance which are highly recommended and attainable:

First is Life Insurance and

Second is Health Insurance.

In Life Insurance, choose term plan. As a working professional, to get a good idea of cover, 20 to 25 times of your current salary would surely make a good cover. If you have salary of 6 lakhs per annum then a financial cover of 1.5 crores would be a better choice which comes under a term insurance plan. If you are in twenties then you could get this cover in minimum price which is a huge benefit in itself.

Health Insurance should be taken for everyone dear to you. If you work in a company then it is most likely they would have a corporate health insurance on their own which would cover you and your family.

When should you start investing?

In your twenties, when you don’t have to pay large amount of taxes due to low income, you have the potential to invest as much as possible at that rate.

What is the right investment ratio?

Investing at least 20 percent of your income is the best choice. If you are investing 50,000 per month then investing at least 10,000 rupees is an ideal  choice. In 20s, no one expects you to be rich from the beginning of your working life. When no one expects from you then you have the less pressure on you , so why don’t you use that to be focused on doubling your assets as much as possible through investing. Having luxurious food, living in lavish places and hanging out with your friends is not necessary but having financial freedom as soon as possible is the most important thing in the 20s. If you invest 1 rupee from your twenties and if you invest the same 1 rupee from your 30s then it will make a huge difference.

In 10 years, the same rupee would lose half of its value meaning the value of 1 rupee now would be equal to 50 paise in the next ten years and that is how inflation works.

Inflation is the biggest reason for you to start investing as early as possible.

To get a satisfying return through your investment, where should you start to invest exactly?

Firstly, avoid investing in FDs (Fixed Deposits). FD is the worst investment you can make if you are in your in 20s. As you are free to take risks in your 20s then let your money to grow as much as possible than to protect it under the name of FD.

Invest and hold in stocks and equities..

Invest in the stocks of the companies which are doing great in the market but if you don’t have the knowledge of the stocks that much then invest in mutual funds. You can invest in direct stocks, portfolio stocks and in cryptocurrency (though it’s a bit risky)..

Don’t wait for your 40s to invest. Start investing your money in 20s as soon as you begin to earn!!