10 Things To Manage Your Finances Before You Turn 30
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 wart to 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, I will identify 10 things to be done by every youth in our country before they turn 30.
Table of Contents
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 Amway distributorship.
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 5,000 or more.
3. Build an emergency fund for 1 year
You should have an emergency fund in your savings account to fulfill the expense of at least a year. This means you should have funds to fulfill the household expenses even if you are unemployed or laid off.
4. Learn to invest in real estate
Real estate is probably the costliest mode of investment. Sometimes, people have to buy a house for personal residence instead of investment. In both cases, you should have sufficient liquidity to pay for the EMI and a down payment on the house. You can also invest in commercial real estate to earn a higher return in the form of rent.
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 fun 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.
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