Your Money, Your Future: Here Is The Ultimate Wealth Guide For Gen Z And Millennials

Financial planning is nothing but a skill that is often ignored by young professionals in favour of short-term desires over long-term financial security.

Retirement planning at the age of 20 or 30 guarantees a comfortable life after retirement.

Source : Freepik

By Sagar Sinha

If you are in your 20s and 30s and taking life too easy to be serious at this age, you must reconsider. You may wonder why you should sacrifice the fun of life while trying to make time for financial planning at this age, when you have no big obligations. However, you must know that your financial planning is your future plan to live a life with no crisis.

Financial planning is nothing but a skill that is often ignored by young professionals in favour of short-term desires over long-term financial security. It is an art that can lead to a lifetime of prosperity, leading to financial independence even after retirement. Now, how do we secure the future at such a young age? 

Set Clear Financial Goals

You must begin by identifying the short-term and long-term financial objectives. For example, saving for a trip or an automobile could be short-term goals, while owning a home, beginning a business, or planning for retirement could be long-term goals. Do you have well-defined objectives to give direction and incentive to a strong financial plan that can secure the future, or are you relying on the time to come? 

Make And Adhere To A Budget

Budgeting is the key to achieving financial success. Spend income wisely by dividing expenses into essentials (rent, utilities, groceries), savings, investments, and discretionary spending (entertainment, eating out). Adhering to the 50/30/20 rule—50 per cent for necessities, 30 per cent for wants, and 20 per cent for savings and paying off debt—can ensure financial equilibrium.

Build An Emergency Fund

An emergency fund is a rainy-day fund used for unforeseen expenses like hospital bills, termination of employment, or sudden fixes to the house. Try saving three to six months' value of living cost in a savings account with higher interest. Best of all would be to maintain this fund worth six months of salary to weather job loss and career changes in terms of cash flow.

Allocate Part Of Your Salary To Saving and Investing

Regardless of how little, a part of your salary must be allocated to savings and investments. A good principle is to invest at least 20 per cent, split equally between savings and investments. As your salary grows over time, your investment contributions should also increase.

Invest Early

Compound interest is a game-changer when invested early. Look at the following possibilities:

• Stock Market: Direct investment in stocks or exchange-traded funds (ETFs) can provide long-term growth.
• Mutual Funds: Funds that are professionally managed provide diversification and stability.
• Retirement Accounts: Investing in retirement accounts such as 401(k)s, IRAs, or the National Pension System (NPS) can secure one's future in their old age.

Invest Debt Wisely

Student loans, personal loans, and credit cards may turn into money burdens if poorly managed. Paying methods that help one get on top of debt include:

• Pay off higher-interest debt first (avalanche method) or pay off the smaller debts first (snowball method) for motivation.
• Eliminate unnecessary use of credit card debt and always pay on time to have good credit standing.
• Refinance or consolidate loans for lower interest charges.

Establish, Maintain A Healthy Credit Score

Having a good credit score is crucial in obtaining loans, leasing apartments, and even getting jobs at times. Maintain and achieve a high score by:

• Pay bills on time.
• Having less than 30 per cent utilisation of credit.
• Limiting unnecessary credit applications.

Augment Income via Skill Development

Upskilling and engaging in continuous education may result in a promotion and improved income. Enroll in online courses, become certified, or build side jobs to expand streams of income.

Get Proper Insurance Coverage

Insurance saves against financial downturns. Major kinds include:

• Health Insurance: Provides coverage against medical costs and against financial strain resulting from ailments.
• Life Insurance: Particularly for those with dependents, term insurance guarantees loved ones' financial security.
• Disability Insurance: Offers financial assistance in the event of premature disability or illness.

Plan Retirement Early

Retirement planning at the age of 20 or 30 guarantees a comfortable life after retirement. Employer-sponsored retirement schemes (such as EPF, 401(k)) or individual retirement schemes (such as IRAs) accumulate wealth in a tax-efficient manner.

Get Professional Financial Advice

Though self-education is valuable, seeking the advice of a financial advisor can give tailored advice specific to individual financial goals and circumstances.

No matter what your age is, you ought to be smart enough to secure your future, and financial planning isn't about limiting expenses but making intelligent, well-informed decisions that open the door to long-term fiscal stability. The earlier one begins, the longer time they have to take advantage of the compounding and fiscal responsibility magic.

(The author is a Finance Educator, Corporate Trainer, and Business Coach)

[Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP News Network Pvt Ltd.]