7 Financial Lessons to Learn in Your Twenties

How often have we heard that, ‘the sooner you start saving, the better it will be’? Early savings will only bear sweet fruits, it will never cause any harm.

                   

People, who are unable to save early, often wish they had. They share their experiences that saving early would have helped them avoid the mounting of the credit card debt, as well as help them be wiser with their expenses.

Let us share with you, a few imperative money lessons. These would be largely helpful for the readers, currently into their 20s.

1. Keep a check and control over credit card expenses

Credit card – a magic card that lets you pay for everything you want with just a single swipe. Credit card purchases may be intriguing. However, before piling up things with this wonder card, you must actually decide whether you need what you are buying by swiping that magnetic strip.

The sooner you come out of your dream world to realize that nothing comes for free, the easier and better it will be.

2. Never make a comparison

Comparison is never the smartest thing to do. Rather than comparing, one should lay his entire focus onto setting his own goals, and live up to the same. For this, you will have to prepare your own way, and patiently follow it.

Many times, this comparison leads to peer pressure. Peer pressure leads to not so smart money decisions like costly phones, accessories, extravagant outing…

3. Best time to begin saving is now

Saving may sound a painful process, and we often tend to delay it. However, procrastinating to save can prove to be even more painful in the longer run. Therefore never wait to make a start, rather make an early start, to this fruit-bearing activity. In place of squandering up any of your extra cash at month-end, think over putting the same aside.

An SIP, can be a perfect way to start your financial journey with. You may even put aside 10-15% of your pay as emergency fund accumulation for an unexpected urgency. You may even start with your retirement fund, just to be sure of the time of skimpy salaries.

4. Invest for yourself

Twenties is the best time to enhance your knowledge levels. Rather than investing all your time in a job that does not pay as much as you deserve, you must invest the same time doing a professional course and earning a masters’ or a doctoral degree. This is something that will truly bear results down the road.

Remember that 20s is the best time to learn and upgrade your resume. Make the maximum utilization of this time.

5. Be prepared for life’s big changes

20s are undoubtedly that decade of everyone’s life, where you will be witnessing the maximum number and levels of changes. This may include getting married, owning your own home, and having children.

Therefore, it is important to think over these aspects of life while planning your finances.

6. Live Basic

There is no harm in living a basic and economical lifestyle. Being conscious of your expenditures is and will, never be a bad idea. You can cut on a few expenses such as a PG accommodation, cooking and cleaning for yourself, shopping at the local stores, etc. These little things will help you cut down on your extra costs.

7. Free yourself from all debts

It is impossible to survive for the first couple of decades, in our life, without any kind of debt, whether that may be from our parents initially. As expenses are an inevitable part of survival, the only option one can turn to is borrowing money.

Getting completely out of debts that may also include bigger debt like repaying loans or mortgages may take two or three decades. However, you must ensure not to add more debts, and do your best to free yourself from the existing ones as soon as possible.

20s are the most significant years of everyone’s life. Make the most of it, along with planning well so that you do not have to anguish later in life. For becoming a well disciplined investor and achieve your financial goals, you need to focus of creating a financial plan.

Author Bio:

The author is Ramalingam.K an MBA (Finance) and certified financial planner. He is the Director & Chief Financial Planner of holistic investment planners

(www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at  ramalingam@holisticinvestment.in

Financial Lessons from the Festival of Lights - Diwali

Happy Diwali; let us discuss fireworks, Diwali and great financial planning.

As we wind up our festivities of Diwali 2011, my mind went to the powerful lessons that Diwali taught us all. These thoughts gathered momentum when I started thinking about the similarities of Diwali and financial planning. It made me realize that financial planning lessons were so simple, yet enlightening that even a 12-year-old could master its principles and start financial planning for a lifetime.

Fireworks and Diwali 

I have always enjoyed fireworks, both as a child as well as a parent and found that mine as well as my children’s safety and comfort lay in obeyed certain rules while handling fireworks. This included avoiding loose and flowing clothes and wearing appropriate footwear, goggles and protection for the ears. Next noisy crackers caused hearing, ENT and nervous problems, with smoke causing ENT and allergic problems. This made me come to the conclusion that we need to enjoy crackers and fireworks, but were excesses were to be avoided.

Safety applies to all Diwali, as it does to other aspects of life with our requiring reading and following instructions on the boxes. Next keeping of a bucket of water handy to put off fires and keeping numbers of fire stations proves handy. In addition vigilance and safety of children while using fireworks is to be adhered to, with keeping fireworks out of reach from children when not in use.   My dear friends now is the right time to view the great co-relation between crackers/fireworks and financial planning.

Grasp the financial planning lessons Diwali teaches us:

Ø  Modern science with its developments have been able to render us some very useful lessons like noise pollution that could affect not only infants, the old, and those with nervous, heart and psychiatric problems, but also cause slow declining abilities in many others.  

      

This applies to noisy stocks also; this noise pollution in the form of everyone talking about hot stocks and best next issue. This information could also affect us with its full impact. This inside information may at times prove very dangerous if acted upon. We have observed many investors not only being be charged with fines and/jail, but it has been harmful to financial professionals as well.  Next if they are rumors the financial harm could be too large to recoup and rejuvenate easily and quickly. It is worth understanding also that some information could be stale and if acted upon cause indigestions of the worst order.

Ø  The next most close and interesting co-relation of fireworks and the colorful nature of the festival Diwali are being prepared for emergencies, with this meaning keeping water and the numbers of the nearby fire stations handy. This applies to also using long sparklers and incense sticks, avoiding the use of metal and glass containers and using fireworks in open grounds.

It is true that emergencies and contingencies are a part of everyone’s life and being a wise and smart financial planner requires not only planning for emergencies, but also for contingencies in the form of death. Finances in the form of term insurance could provide for the stable lifestyle of your loving family on death. Health insurance and critical health insurance plans would provide for health and critical illness coverage and stable lifestyle in such contingencies. The youth could benefit also with investing surplus funds on land in remote places and allow it to appreciate. Creating contingency funds could act as emergency fire extinguishers.  

Ø   I appreciate those who have listened to the experienced regarding wearing appropriate clothing, footwear and other safety accessories while enjoying fireworks. Financial planning for a lifetime also requires certain measures.

Understand that investing is different from financial planning for a lifetime. Financial planning requires clear understanding of the risks and returns available on the different investments like shares, mutual funds and fixed deposits in companies and banks So you need to draft a clear risk management strategies in while constructing your portfolio.

Ø  Storing of fireworks out of reach of children properly requires as much innovation as children are very smart to fool parents now-a-days and get into accidents and dangers. Parents need to be smart and creative to find out what works and what doesn’t. The same thing dear chums apply to safety and security of our investments.

Safety and appropriate storage of our precious investments in the form of shares, mutual funds, land and flat documents, gold and gold ETF, insurance and other investments lies in storing them in separate places in lockers at home/banks and other places. 

In addition to storage, the information regarding where we have stored these documents should be a family information and secret for safety.

Finally, we were taught by wise parents to not make our own fireworks, as it is not our expertise. Similarly a financial expert is the best person to advice us on financial planning for a lifetime. Finding and engaging a financial planner would be best to create and make changes in your financial planning according to your life’s changing circumstances.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in