March 31st marks the end of the current financial year and there’s going to be some buzz while businesses go through their accounts and analyze their finances. It got us thinking, how many young people (20-30 age group) actually sit down to do some financial planning? If you do it, good work! But otherwise, it is time to start giving some serious thought to your finances. After all, if you look after your money, your money will look after you too!
So here are some things you can do, apart from the obvious lifestyle changes that will help you take better care of your finances.
1. Set a budget and stick to it
This is typically done by older adults but youngsters who just started out with their career often end up saving very little or haven’t approached it as savings per se. They spend for everything they need and whatever cash is left behind is what they have until the next pay check. This needs to change. Ideally, from the first salary, you should have goals and saving strategies.
Assess your income and expected expenses like rent, EMI etc and create a budget for yourself. Be a little broad with it so that you stay within it. Often tight budgets end up with you breaking it all the time. So set a comfortable budget and fight as hard as hell to stay within it. You can take up multiple accounts out of which only one is a spending account. Others can act as a saving account in which you can put in money for emergencies and short term goals.
2. Find suitable instruments to invest in
This could be hard to do. Given that most youngsters do not earn exceptionally high packages and are a bit clueless about savings and investments. You could start by reaching out to your bank and asking them for options. And if you can afford it, consult a financial planner. There should be simple to begin investment instruments which will get you started in no time.
In fact, Guarented has a pretty solid investment scheme which allows customers to get as much as 24% in returns. This is significantly better than other options out there. You can invest anywhere between INR 1 lac to 10 lacs for a period of two years and get around 24% in returns. The scheme has been pretty successful and if you want a low risk, high return investment instrument, the Guarented Returns Plan is ideal for you.
3. Set financial goals for yourself
Both long term and short term financial goals play a big role in the way you manage money. It will not only save up some cash it will also motivate you to do it. To begin with, ask yourself what you want. A house 10 years down the lane? A vehicle around 3 years later? Schooling for future children? That foreign trip on your bucket list? It could be anything. But set your heart on it and keep aside funds to see them to completion.
One thing to keep in mind while planning goals is to account for inflation. What costs 5 lacks today could be 8 lakhs 10 years later.
4. Purchase insurance (if you don’t have it already)
Wondering how a purchase helps you “save money”? Well, think of it this way. Imagine that you are a young individual with no medical insurance. You are in perfect health so to speak. But you meet with an accident that leaves a bone broken. Compound fractures require surgery – expensive affairs and recuperation time in the hospital. If you go to a well equipped private hospital, it could cost you anywhere between INR 50k to INR 1 lakh. This could happen to anyone in your family and if you are the earning member and it happens to you, it could be much worse. Which is why having health insurance or vehicle insurance and even life insurance to support your loves ones after your passing is essential.
5. Clear your dues
It could be loans or products you bought on EMI or even your credit card bills. Never let anything go beyond the due date. Such matters have an accumulating nature and it can affect your credit score badly. This is not something we want. You can set up your account to automatically deduct money to pay towards EMIs and other payments. This should be easy to do if you approach your bank. Sometimes, even company HRs can be requested to direct a certain amount of money to an account of your choice. This is rare though.
6. Maximise tax savings
Even if you do not fall into the taxable income group, tax awareness is essential for every earning individual. Insurance, house loans, retirement funds are some of the instruments where payments will be exempted from tax. You should ideally pick options that suit your goals and not go around investing just for saving up on tax. This is a topic that should be discussed in detail with your financial planner.
7. Live frugally
No savings or investment plans will work unless you as an individual begins approaching your money with caution and wisdom. You can teach yourself to only buy things your income can afford and also by avoiding impulsive purchases. Shopping as a therapy may seem very satisfying, but pretty soon, you’ll end up in trouble because you will no longer have money to keep you secure and provide for yourself. We’re not saying that you quit being a consumer, simply that you practice caution when out shopping.
Negotiate your buys, ask for discounts, make use of offers and coupons, get the best deal that is out that. All of this will reflect on your money in a positive way. At the end of the day, it is about making wise purchases and spending only on what is necessary.
Adopt an asset-light lifestyle
Since this is our area, is it probably hard to skip this. Companies like ours aim at providing millennials with an asset-light, pocket friendly yet comfortable lifestyle. Using services like the ones we provide will help you save up some cash now without making you compromise on comforts. Which is why we encourage our readers to consider the option of renting consumer durables and not buying them. As per the research we did, young adults could save close to INR 80K if they pick an unfurnished house and borrow furniture/appliance from us as opposed to moving into a fully furnished house.
Also, if you use our services, you get to have an asset at the end of it, should you choose to. We recently launched a Rent To Own scheme which allows existing customers to purchase the goods they have been renting. Essentially, they naturally progress to become the owner of the product by simply paying a small sum of money. The longer they’ve been renting that product, the lower will be its purchase price. You should read up on the Rent to Own scheme and its many, many benefits.
So folks, that is pretty much it. If you have more ideas on how we can prepare ourselves for the next financial year, do share them here. Hope you guys a great time. Cheers!