Millennials are a money-conscious generation that likes to be financially sound. They have a keen interest in saving, investing and insurance. To meet future financial commitments, it’s important to have a clear idea of financial planning.
Young adults in India are keen to learn new approaches to personal finance and to inculcate responsible financial behaviour. This can provide a framework for systematically achieving goals, help them become more prudent with their funds and avoid shocks and surprises at a later stage. This also makes you more resilient in the face of unforeseen events. So here are a few tips to help you deal with your money even better and succeed in your financial life.
Build Your Credit Score
A credit score is key to qualifying for personal, student, home or car loans. It helps your eligibility and power to negotiate better interest rates and more favourable loan terms. An easy way to improve your credit score is by regularly using LazyCard by LazyPay. It is a digital card with which you can enjoy both online and offline shopping across 50 merchants in the food, travel and OTT streaming segments. The repayment period is 30 days. Being regular with the repayments can help you increase your credit score and boost your creditworthiness.
It’s a good idea to invest 20% of your income in financial tools like FD and mutual funds. Buy health insurance to avoid paying hefty medical bills from your pocket. For this, you may need to have better control of your cash flows. Investing a part of your income can ensure that your golden years are spent more comfortably.
Saving for a Rainy Day
You can set aside 10%-20% of your salary in an emergency fund. This can cover unexpected financial burdens like a home repair, job loss, business needs, immediate travel or medical purposes. This way you do not have to touch your savings or break your investments.
Clear Your Debts
Carrying a number of different debts into your retirement is a bad idea. Consolidating your debts will help you keep better track of them and not miss due dates. To ensure you have sufficient funds available when the EMIs are due, you can consider shopping for your daily essentials using LazyCard by LazyPay. Check out their Facebook page to know how this works.
Starting early in life has numerous benefits. For instance, buying a health cover at a young age will lower the monthly premiums. Consider comprehensive insurance that covers all aspects of medical expenses, including diagnostic tests, hospital stay, surgery, etc. When you invest early, you enjoy the power of compounding, where the interest earned is reinvested. All of these can grow your funds and help you remain prepared in the face of unexpected events.
Stick to a Budget
Figure out the amount you can spend each month without falling into a debt trap. Now stick to it instead of living a lavish lifestyle and deviating from the budget. You can make the most of apps like Goodbudget or Monefy to create a practical budget as per your current financial status. Splurge once in a while and save the rest. Avoid continuous luxuries like high-end shopping, fancy dining, expensive salon sessions or personal cabs. This will help you spend comfortably on necessities like food, internet or rent.
Track Your Expenditure
This will help you avoid biting more than you can chew. Keep a check on your spending and try to avoid unnecessary ones. Make sure you are spending no more than 50% on daily essentials and 30% on everything else. Consider creating an excel sheet or taking the help of budgeting apps like Mint to manage your cash sustainably.
Learn About Taxes
Know how income tax works even before receiving your first paycheque. It will help you get an idea of the salary left after deductions and whether it can support a comfortable lifestyle. Learn a few tax-saving techniques as well to lower your taxable income. For instance, apply for a home loan where you can claim deductions on the interest under Section 24. Deductions are also available on the principal loan amount under Income Tax Act, 1961.
Review Insurance Policies
You should not be talked into paying a high premium for insurance. Compare the covers available in the market for car, health or home, understand their features well and pick the ones that offer the best value for your money. Make sure it is able to fulfil your financial needs accurately and update them to accommodate life changes. It is necessary to get an idea of the pricing beforehand to be able to avoid huge instalments.
A few best investment plans for millennials are PPF, NPS, ULIPS and ELSS. You can also consider the stock market if you have a high-risk appetite. For instance, equities can ensure significant returns and are known as growth assets. But there is a fair chance of losing a part of your money if not the whole. So, talk to a financial expert and invest in the one that best suits your current financial obligations.
Try to be financially literate. Gather all the basic information required to be able to make informed choices and take sensible decisions. Further, practise self-control when it comes to spending and try to incorporate monetary discipline too. A fair mix of all the strategies can help you achieve financial freedom smoothly.