10 Things To Manage Your Finances Before You Turn 30, Make yourself debt free, Create at least 3 income sources, Build an emergency fund, Track your expenses, Increase savings and invest 50% of monthly income, Start planning for retirement
As you approach the milestone of turning 30s, it becomes extremely important to manage your finances. Setting yourself up for early financial success can have a significant impact not only on yourself but also on your kids.
Financial freedom is desired by every youngster. It doesn’t mean leading a lazy life after gathering a significant amount of money, but having financial security even if there is a temporary halt to a few of the income sources.
The recent covid-19 pandemic was a major example of when people had to experience a financial crunch. Many people were laid off while others were temporarily unemployed. If people would have income sources where they would have got regular income without working then the situation would have been very different. In this article, we will explore the 10 things to manage your finances before you turn 30.
1. Make yourself debt free
Debt or loan is the major reason youngsters don’t have financial freedom. They are fascinated with luxurious life and prefers buying things on credit card or EMIs. If you have sufficient cash in the bank account only then I would recommend using credit cards.
If you don’t have sufficient money then at least keep yourself free from any type of financial burden.
2. Create at least 3 income sources
These income sources should be passive income for which you need not work and still get a return. One of the examples can be dividend income which you get on the stock investment. The second example can be affiliate income through Amazon affiliates, Amway distributorship, etc.
You have to identify the most desirable income sources that you are comfortable with. The passive income method desired by old people is fixed deposits. On an FD of Rs 10 lakhs, you will get a monthly interest of Rs 6,000 or more.
3. Build an emergency fund
Life is full of surprises and uncertainties. Having an emergency fund can give a safety net during difficult days.
You should have an emergency fund in your savings account to fulfill the expense for at least a year. This means you should have funds to fulfill the household expenses even if you are unemployed or laid off.
If it is difficult to maintain funds for a year, then target at least 6 months’ worth of living expenses which will help to cover unexpected medical bills, car repairs, or job loss without affecting your long-term financial goals.
4. Track your expenses
Tracking your expenses can be essential for your financial management. You can install budgeting apps on your smartphone to identify where your money goes. Once you understand your spending patterns, you can focus on identifying unnecessary expenses and decide where to invest the money.
5. Have insurance
Soon you get the insurance the lesser will be the premium of the insurance policy. This means if you buy insurance at the age of 25, the insurance premium will be less if you buy the same insurance policy at the age of 30.
6. Assess the return you are getting on your investment
You should regularly assess all the investments to identify those that are not giving you significant returns. With this, you will be able to switch the funds from the investment giving less return to the investment giving a higher return.
7. Build dividend income
The dividend is earned on stocks and bonds. Every registered company gives a portion of its profit to its stockholders in the form of a dividend.
8. Increase savings and invest 50% of monthly income
Try to save more and invest at least 50% of your monthly income in various modes of investment like stock, mutual funds, bonds, etc. As you earn more, try to save and invest more.
9. Have money in liquid funds
Liquid funds mean funds that can be easily converted to cash. For example, fixed deposits, stocks, mutual funds, etc. Maintain at least 20% of your net worth in the form of cash or liquid funds.
10. Start planning for retirement
The sooner you plan to retire the more you will be able to multiply your money. This happens due to the power of compounding. If you start within SIP at the age of 25 you would have to invest Rs 6,000 estimating a 12% return to give you a retirement amount of Rs 4 crores at the age of 60. If you start at the age of 40, you would have to start with a SIP of Rs 40,000.
Financial management is an ongoing process, so it is essential to review your financial situation on a regular basis and make necessary adjustments. You should also update the budget with the change in income or expenses. You should rebalance your investment portfolio according to your risk appetite. For example, if someone consider investing nowadays (mid-2023), then they should go with fixed deposit schemes of small finance banks which give a guaranteed 8% or more return on investment.
Frequently asked questions
How can I be financially stable before 30?
You can be financially stable before 30 if you consider all the above-discussed points while managing your finances.
How do I manage my finances at 30?
Make yourself debt free
Create at least 3 income sources
Assess the return you are getting on your investment
Build dividend income
What should be ideal saving at age of 30?
The ideal saving at the age of 30 is based on your monthly or yearly income. You must focus on saving double the amount you saved per year before turning 30.
Is 30 too late to start saving?
It is never too late to start saving, however, you should start investing as soon as possible.
Should I consult a financial advisor?
Consulting of a financial advisor can be advantageous if you have complex financial goals and requires assistance in making investment decisions. The financial advisor can provide valuable insights and create customized financial plans.
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