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10 financial tips for youth – article through which the author gives practical advice, tips for youth to attract wealth and manage finance well.  How do you define when you come across certain financial terms like “financial planning, early retirement planning, investment products, market trading”?etc. In simple perspective…how much importance will you give when you think about SAVINGS for future especially when you are @20’s… it’s quite natural that we depend on search engine “GOOGLE” and find the proper definitions and guidelines related to the same and after will sometimes forget it and that definition will remain sticking on the notebook for knowledge purpose, unfortunately that knowledge doesn’t come to practicality until and unless when we have the proper awareness about “HOW TO IMPLEMENT FINANCIAL TERMS” through our savings and increase the potentiality to save more to secure future. I’m very sure that only a few people would have thought about and implemented it properly and achieved success in their early 40s.

HOW’S THAT POSSIBLE? HOW COULD THEY ACHIEVE IT AND SECURE FUTURE SMARTLY? DID THAT HAPPEN VERY INSTANTLY? ……always need to remember that there is no shortcut to making money. If you search for shortcuts like instant formulas, then the end result will be hazardous. There is no rocket science behind it. When you plan your savings properly at an early age by taking proper financial advice, everything will be possible on your own hand.

It’s all in the mind how you plan it and execute it. You can find two colleagues working in the same office who started work on the same day right out of university, earning roughly the same income but ending up differently financially. If you dig deeper, you will find out that they have different mindsets when it comes to money and savings. Two people can earn exactly the same wages-one saves, one doesn’t. If you ask a non – saver, he tells you the salary is hardly enough to make ends meet, hence saving is out of the question. He is right, his salary in his mind is not enough, and he goes ahead to prove it. If you ask the saver, he tells you he saves no matter what. He would be grateful for increased pay, but he believes he has no excuses not to save. He decides to save and finds a way to do just that. What is the difference between the two? It’s all in the mind. No two people’s financial plans can ever be the same. Our income, expenses, goals, aspirations and financial obligations differ. 

10 FINANCIAL TIPS FOR YOUTH: The influence on young people’s saving behavior:

When you move from student life into employee life, one of the first big changes for most is responsibility for money management. Do it well, and freedom will be fun, but if you do it badly. Both your work life and personal life will suffer. Earning a paycheck can be a great experience, but knowing what to do with it can either make or break you. That’s when basic knowledge about finance plays a vital role. 

The first salary is always special. In your 20s, the thrill of having a loaded purse and being able to spend your money any way you want is unmatched. Spend what you must, but this is also the best time to start saving. 

10 FINANCIAL TIPS FOR YOUTH: The factors influence young people’s saving behavior:

The Factors Influence on Young People's Saving Behaviour
  1. AFFORDABILITY: The rising cost of living has made it difficult to put money aside. 
  2. SPENDING AND SAVING PRIORITIES: Young people often want to save but feel pressured to take on debt and to spend.
  3. FAMILY: Parents can ingrain good saving habits in their children from a very young age and are the main source of financial advice for young adults.
  4. PRODUCTS: savings vehicles can be designed in ways that encourage savings.
  5. FINANCIAL ISSUES AND LITERACY: Young people’s understanding of financial issues -their financial literacy-has on how much they save. 

How to manage money in your 20s

Good finance management can change the way we lead life and decide how secure our future is. The COVID-19 pandemic has not only endangered millions of lives around the globe but has also plunged many people into a financial crisis. One of the critical lessons that the coronavirus has taught us is the importance of being financially prepared. As dreams these days, come with a high price tag. A car for Rs. 5 lakhs, a house for 50 lakhs, several lakhs for a decent education for kids and a crore for a cushy retirement. In fact, seemingly simple needs have been elevated to dreams due to the high cost associated with them. You require either a large income or a strategic plan to meet these basic life goals. Basics like money management, savings, investing and debt will lay a strong foundation for money habits if imparted from a young age. 

People who understand how money works can start earning and investing from an early age and avoid lifelong money struggles. Schools might not teach you to make financially responsible decisions. However, it is an essential part of everyone’s life. 

Here are 10 important pieces of financial advice you need to understand at a young age. Let’s start with financial planning. 

What exactly does it mean? Financial planning is a process which provides you a framework for achieving your life goals in a systematic and planned way by avoiding shocks and surprises.

It comes with objectives such as determining capital requirements, framing financial policies and ensuring that the scarce financial resources are utilized in the best possible way. Instilling the habit of financial planning in young adults is a tough job. However, when they volunteer to plan their finances, one wouldn’t know where and how to begin. 

10 FINANCIAL TIPS FOR YOUTH – Here are the 10 financial tips that one must follow to plan their money well.

10 Financial tips one must follow to plan money well

1. Manage your money: 

Managing one’s money need not be boring. It’s not rocket science, and you require not be from a financial background. You only need to show a bit of commitment. You may have many financial goals on your mind. Like buying a vehicle or the latest smartphone or wealth accumulation. In all these situations, you require money. But where will it come from? You have to have savings. Now you might be wondering how to save? moneymoney.Money And even more important, how much to save? As soon as you get your salary, start putting it under various heads. These can be expenses, EMIs, investments and savings. Ensure that you save a minimum of 10% of your income every month. You may invest this amount in a liquid fund. It is a type of debt mutual fund which invests money in fixed-income generating instruments like FD’s, commercial paper, certificates of deposits etc. invests your savings every month over a long term and see the magic it can do for you!

2. Regulate your expenses wisely:

 If you are living paycheck to paycheck and finding yourself struggling for money even before the month ends, then chances are you are living way beyond your means. Maybe there are a lot of unplanned expenses… These might be leaving you with no money for the necessities. There is a way out of this. Try preparing a BUDGET. Unless you have a budget, you won’t be able to control your cash flows. A budget simply shows how much money you have coming in and how those funds are spent. Start categorizing your expenses into fixed and variable; urgent and non-urgent; necessities and luxury. In this way, you will create a full inventory of expenses in front of you. The more you convert things from abstract to physical, the better you will get a hold of them. Make sure you commit to your budget.

3. Maintain a personal balance sheet:

 Having a personal balance sheet helps to know what you own and what you owe! It’s a pretty powerful tool to take your finances to the next level. It’s a statement where you can jot down your assets and liabilities. The difference between your assets and liabilities shows your personal net worth. Ideally your net worth needs to be positive, which means the money you own is greater than the money you owe. Yet another critical thing in asset management is what kind of assets you need to own. Simply accumulating things which you don’t need leads to blocking money in unproductive stuff. It will be wise to be aware of what you actually use and what you can get rid of.

4. Dealing with surplus cash judiciously: 

How you deal with surplus cash determines your future. When you don’t have a plan, you are likely to overspend. This money could have been used to make you financially self-sufficient. In the backdrop of inflation, everything is going to be costlier with each passing year. If you don’t invest, your money won’t grow to bridge the inflation gap. Start with identifying goals like buying a car or planning for retirement. Categorize those goals into short term and long term. Identify your risk appetite i.e. the degree to which you are comfortable with a fall in the value of your investment. Once you identify your goals and risk appetite, you can conveniently select the investment haven. Mutual funds have come up as the most versatile investment plan. You can start SIP at a nominal sum per month.

5.Create your personal investment portfolio: 

Constructing your first investment portfolio is an achievement in itself. After all, it is your first step towards wealth accumulation. Building a portfolio involves distributing your investment amongst asset classes like equity, debt, and cash. It is known as asset allocation. Your investment horizon would ideally be around 10-15 years. Once you have constructed a portfolio, you need to rebalance it periodically to keep the portfolio’s risk within expected limits due to market fluctuations.

6. Planning for retirement: 

Planning for retirement is important for everybody. Owing to a sedentary lifestyle, you are more vulnerable to ailments such as diabetes, hypertension and heart attacks. Health care costs are increasing with each passing year. In the absence of a social security net, you need to have your own funds to fund for all these expenses. Like many others, you might be thinking that’s too early to start planning now. At this rate, you begin retirement planning late and accumulate a smaller amount as compared to what you could accumulate given that you started early. This is due to the “magic of compounding” ; it enables you to even retire early and lead a hassle-free life. 

7. Manage your debt wisely: 

Lack of debt management may eat up a major part of your paycheck. You may end up borrowing fresh loans to pay off older loans. If it gets out of control, then you may fall in a vicious debt trap. Your critical life goals may get sidelined and even your retirement may get delayed. Always keep debt as the last resort. As far as possible, make down payments for your purchases. Credit cards are the most expensive form of debt. As soon as your salary gets credited each month, pay off credit card balances in full. Don’t fall for the lure of paying off the minimum balance. Make it a point to use the credit card only in case of emergency. Never borrow for assets which are depreciating. Additionally, tax-inefficient loans like personal loans should be avoided as much as possible. 

8. Get your risks covered: 

human life and property are vulnerable to risks. These risks can lead to loss of income and put you and your dependents in a financial jeopardy. Buying a ULIP is not all. You end up paying more and remain inadequately insured. Instead of this, a term insurance plan will be a wiser proposition to buy. Term insurance plans provide you higher risk coverage at a reasonable price. Before buying life insurance, you can compare policies online to select the one which satisfies your requirement at affordable prices. Apart from life insurance, you may need health insurance as well. It will enable you to access high quality healthcare at reasonable prices. 

9. Planning your estate: 

believe it or not! Each one of us has an estate. Whether it’s your vehicle or your home; the cash lying in your savings and current account, every asset constitutes an estate. It’s your responsibility to decide what happens to these when the time comes. Most of us might have never thought of doing estate planning. Some of us might be putting it off to a later date. But this is the wrong approach. You can start off estate planning as soon as you begin accumulating assets. Start by preparing an inventory of assets that you own. Create a list of beneficiaries and proportion of assets that you want to allocate to each one of them.

10.Planning your taxes:

Iis necessary for you to analyze your finances from a tax efficiency point of view. You are free to claim various tax exemptions, deductions and benefits so as to reduce your tax liability at the end of the financial year. Even though tax planning is very much legitimate in nature, you need to ensure that you don’t indulge in tax evasion or tax avoidance. There are a number of deductions available under sections 80C through to 80U that are given in the income tax act. 

How to find free financial advice:

How to find free financial advice

Who doesn’t want expert guidance on how to best manage their money? One of the biggest barriers to hiring a financial planner is the cost, but there are a handful of ways to get advice for free.

  1. Sign up with a robo-adviser: A number of online tools offer various forms of financial advice-in some cases a substantial portion of that advice is free. Some so-called Robo-advisers manage your investment portfolio for you, usually including guidance on the best investments to meet your goals, automated rebalancing and tax loss harvesting. Some Robo-advisers go beyond investment management and delve into retirement planning and advice on reaching short-long term financial goals, often by linking all of your financial accounts in one place.
  2. Meet with a financial planner: every year, a group of NGO’S hosts a “financial planning day” where anyone can meet with a financial planner. Such initiatives help the younger generation to know more about financial planning and get one-on-one advice tailored to your situation. 
  3. Visit your retirement plan or brokerage website: Are you making the most of the retirement plan advice available to you online? According to the latest survey, 60% of employers who offer defined-contribution plans offer online guidance and 53% of plans have online advice. If you’re investing through an independent brokerage, take a look at the portfolio management tools offered online. While not necessarily advice tailored to your specific information, you’ll do a better job managing your own money if you educate yourself on financial concepts.
  4. Look for local financial services programs: There are numerous community-based programs nationwide that offer various forms of financial advice for free. Government institutions like RBI, financial institutions release monthly circulars related to financial advice and changes happening around the banking world to educate the common people so that they would invest carefully.
  5. Read a reputable source: Whether or not you get advice for free or pay for it, doing your own research on products and strategies can help you be a better judge of whether the advice is right for you. There are plenty of reputable online resources available.

Indians are well-known for their astute thinking when it comes to money. However, when it comes to understanding investment and financial diversification, there is a distinct lack of knowledge and investment appetite. One of the biggest disadvantages of the current education system is its apathy to financial knowledge. Young professionals find it hard to file their taxes, understand the equity markets, or practice trading and investment because not enough emphasis is given to teaching students about managing money. Early training in stock trading and investment, share market, portfolio diversification and other aspects that can help them be financially savvy as adults. So, why should educational institutions and parents be teaching investment and trading to children? The simple answer is time. College students are young, dynamic and have time on their side. Combined with compound interest, this can help them reap greater profits than adults who start investing in their 30’s. 

Other suggested Reads: 6 smart money moves to make in your 20s that can help you save money

How to be financially savvy and have fun in your 20s

8 Financial Tips for Young Adults

-Sowmya Hosabettu

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