Give your adulthood a good dose of financial literacy. In your 20s, your finances can completely transform. To know how, check out this article!
Your 20s are a vital stage in your life. This is when you get the fresh taste of financial independence with your first job. Your salary is perhaps entry-level but the enthusiasm is off-limits! This is why you need to follow a few money saving rules in your 20s to manage your finances.
No wonder why your 20s should definitely be your experimental stage. Not just to find your passion and the right career, but also to make wise use of your money.
While traveling and night-outs are no less important, you can also try giving your finances the right amount of attention.
That being said, your 20s are definitely the right time to take risks and start investing. This can be justified for two reasons.
First, you are young and have a lot of time to experiment and second, there are usually less financial responsibilities on you.
You are basically busy putting pieces of your career together and have a lot of time to think about your finances.
5 Rules to Establish a solid Financial Portfolio right in your 20s:
1. Set aside a Saving Target of 10-20% of your Income every Month
The first step to any financial planning is to save. Since you can’t invest or grow your money without saving it first, in your 20s, your prime focus must be on eliminating any unnecessary expenditure.
Whenever you plan to lay out your expenditure, take your income 10 to 20% less- making it clear for you to put that money in a savings account.
You may even set up an automated system for savings by coordinating with your bank to transfer some part of your income into your separate savings account every month.
Also, for a good start, you can start putting money in provident funds.
Once you put this money aside, you can think of ways to invest it!
2. Focus on Educating yourself- Financial Literacy
The honest and harsh truth of the world is that school doesn’t teach you about personal finance.
That is, you are basically on your own when you first start managing your money.
If you are looking for a reliable companion in yourself to manage your money correctly, educate yourself.
As a beginner, you will be reluctant to hire anyone else to invest on your behalf. Plus, it is not always easy to make good speculation about the market.
Things become tougher when the basics are not even handy- therefore, while you start saving, hustle a little more and, in the meantime, educate yourself about basic and advanced financial literacy.
This knowledge will bring in more confidence in you and any gaps in your knowledge will get automatically fixed through practical examples!
3. Invest Progressively
We cannot emphasise enough the need to invest. A financial portfolio is nothing but a careful mix of your different investments and savings strategies that grow your money.
In your 20s, you must experiment with risky ventures- even if you fail, you will still have plenty of time to rebounce.
However, one must always have a little cushion to their risk. Do not forget to create this backup for rainy days.
Expand your investments- take up mutual funds, provident funds, RBI securities, National Pension Scheme, gold, digital gold, post office savings funds, etc.
If you are bold enough, you may even consider investing in risky equities, stocks, shares and bonds but always make sure to check market conditions precisely and keep some money aside for backup.
In case you love to own some real estate, you may also do that. Investing makes it easier to create wealth for the future. Plus, it takes away the negative impacts of inflation from your financial life.
Investments of gold, and nowadays digital gold, are a nice option to earn stable returns with no high fluctuations.
You may even consider FDs but they have a very long maturity period and their returns aren’t that profitable.
Instead, you must ensure to invest in a good life insurance (or if possible, a term insurance plan).
Plus, never restrain from investing in a health insurance plan- it is a must-to-do.
4. Focus on Goal-Based Saving Plans
The best way to keep your focus on saving and investing is to either reward yourself occasionally or set a goal based savings plan. Both will keep you motivated to save and invest regularly.
In addition, in the beginning, when you aren’t very clear about what and what not to do with your money, a good financial goal will give direction to your money.
This goal can vary from buying a piece of land to starting your own business- whatever it is, to save for it, you will definitely work even harder.
5. Balance out the Risk in your Portfolio - Bring in Variety
Even though your 20s can be the right age to experiment with risky investments, you perhaps won’t like a major financial setback.
As a beginner, we often refrain from taking huge leaps when it comes to finances. Therefore, the key to the right investment plan is to balance out the risk.
Especially if you are a hardcore risk averse person, it will be difficult for you to invest in anything that involves risk.
But in order to expand the base of your money, you are bound to do so.
Therefore, keep your digital gold, post office funds, etc. investments handy while you make speculations in, say, the stock market.
Money saving is an interesting task. While you enter your 20s, the world is open to test out new ventures.
Since you were probably a student recently, you already know how to sustain frugally.
The key is to maintain that lifestyle and focus on a good investment plan- even if you just begin with the simplest one.
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