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Are you in your Twenties? You’re Guide to make money Work! Get a Financial Life!


Last week my post was regarding how one must manage personal finance and funds.

With the views I received for my post, I realized the one in twenties have lately been feeling the Debt burden.

Young people often find it difficult to save in the initial years of their careers. Studies reveal that discretionary spending can be as high as 18-20 % of the income for young people.

So if you are in your twenties have graduated from college and landed a job. Planning for retirement may seem like a distant concern, and paying off your debts may feel like a monumental task. But now is the time to make some crucial financial moves that could pay off handsomely in years to come in order to overcome the present situation.

Before we jump into the statistics, it is important to stress why you must have a detailed financial plan and the benefits you can get from it. For this purpose,i would like to share the Forbes’ contributor Laura Shins amazing article on the “10 Reasons Why Financial Plans Aren’t Just for the 1%”

You can check the 10 reasons on the info-graphic above.

I think that learning about money, is wise for the beginning of your journey into the world of income and responsibilities of life. The 20s are a crucial time to start building wealth, because the compounding power of time is on your side. Your 20s are also a time when you can afford to invest aggressively—and take on a little more risk in order to earn better returns.

Discipline and self-regulation are the cornerstones of a successful investment plan. We know it is difficult to stay away money when everyone around you is spending as if there is no tomorrow. There is tremendous peer pressure and even the most level-headed youngsters can stumble.

It’s Difficult but is important to make your Financial Future!

Financial Planning appears to be a difficult task for many, sometimes even the ones with strong financial background do. But that doesn’t mean finances can’t be planned; if you are ready and determined towards your goal you definitely can change your financial life.

Firstly today having single source of income is not sufficed. Generate alternate source of income to support your financial needs.

There are financial risks which that may come relying on only one source of Income like your job. Additional source forms the tributaries towards the main stream; hence they may be active, passive or rather a combination of both.

Like we say ‘Do not put all your Eggs in one basket’ same way rather than relying on a single stream of income just like in our investment portfolio one must diversify.

Once you start earning what is required is that one must first save and then spend the rest. If there's no emergency, let it stay in the savings account. The feeling of not having any money enhances your unknown abilities; explore them! Investing in your self will open unexpected doors for you.

Earning power may be limited in twenties what you have in hand in your twenties is time this asset when used smartly even small savings amount in the beginning will generate interest the generated interest will as well generate interest in coming time. The pace in the beginning might be slow but as you continue saving the pace accelerates.

Moving ahead next defense to apply is to Plan. When you begin to plan your finances it’s most important to make goals that are achievable when you start so that down the road when you start achieving your goals your self-motivation will take you every time higher.

You can even motivate your plan with your wishlist or dream bord; to have a way to keep them vital and alive for you, and to constantly remind yourself where you want to be.

Because

"If you don't know where you are going, you might not reach where you want to."

Tracking & reviewing is important from time to time which helps you to modify and improvise whenever required.

Other than monitoring your income and expenses managing your debt is also required. If you hold any student loan debt or any other mortgage loan you must try and be free of it as early as possible and try and avoid any new debts for some initial time period.

Paying off any high-interest debt should be your higher priority.

Once you pay off your debt you can move back your attention to saving and taking it to the next level i.e. Investing. Saving is not the same as investing. Saving is for emergencies and should be kept in a risk free bank account.

While Investing is sowing seeds to harvest fruits in timely manner; savings can be taken as frozen food which can be used in emergency situation.

In India based on the risk taken one can invest in:

Liquid Funds (Least risk/Debt funds)

Liquid funds are a type of mutual funds that invest in securities with a residual maturity of up to 91 days. Assets invested are not tied up for a long time as liquid funds do not have a lock-in period.

Equity Linked Savings Scheme (ELSS/Mid Risk-High risk)

An ELSS is a diversified equity mutual fund which has a majority of the corpus invested in equities. Since it is an equity fund, returns from an ELSS fund reflect returns from the equity markets.

Stock Market (Most Risky)

Investing in stock market requires lot of effort in terms of understanding how is company working, what are projects it is handling, what is the future; though the returns are really high and lucrative. There is huge risk involved in this and if you invest without understanding how it works your money is likely to incur loses than profit.

With increased savings you will further have a variety of choices for making short term as well as long term investments. Build a balanced Financial Portfolio based on your preferences, risk profile and investment period.

You can also invest in Simple Investment Plans (SIP). Systematic Investment Plan is an investment strategy wherein an investor needs to invest the same amount of money in a particular mutual fund at every stipulated time period.

You can even start self-educating yourself, research on personal finance and aim to know as much as you can.

Dana Twight, CFP, the Founder of Twight Financial Education in Seattle, suggests one simple way that 20-somethings can educate themselves beyond research:

"Consider your upbringing and try to connect things your parents did (or didn't do) with your current ideas and behaviors around money."

For example you can recall from your child hood like your parents saving money using cooking at home as dining out can be expensive or did they blow out money on restaurants.

As we do say

“Learn from the mistakes of others. You can never live long enough to make them all yourself.”

Learning and gaining knowledge becomes easy when you have a mentor.

Look for someone who will not just tell you about finance or teach you how to invest; look for someone who will involve you in their ongoing decisions and discuss past ones, someone who will explain and make you understand personal finance planning.

You’ve heard it before, but listen up and remember:

When you’re in your 20s, time is truly your ally. The power of compounding can help your cash grow in a way that it never will again—because right now you’ve got decades on your side.

So, how many of you really follow a rigorous written-down financial plan to help you control expenses and increase quality of life?

As expected, exact numbers are extremely hard to estimate.

Hoping this helps the young guns!

Feel free to ask questions, if any!

Also if you start following and planning share the results with us!

Don't wait for your circumstances to change plan execute and change it!

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