Growing up, do you remember thinking you can’t wait to be an adult and doing whatever it is you want in life, imagining living life on your own terms-no rules, no school?
Well, frankly, all I can remember is the disillusionment that slowly sinks in with each passing year. Being an adult is not everything it was cut up to be while growing up. You may not have school or homework anymore, but frankly, tax time can be so much more overwhelming.
Experience will also teach that being an adult isn’t necessarily only about fun and freedom, mainly because it is unsustainable. It sounds boring and simple, but it’s really about doing what needs to be done and doing it on time.
A huge part of enjoying being an adult is about having the time and resources to live life on one’s own terms, which is possible with financial freedom. No matter how much or how little you earn, achieving financial independence is not unattainable. In fact, it can be as simple and straightforward as we want it to be.
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Best Financial Moves Before Turning 30:
Live Frugally (spend less than you earn)
Sounds simplistic, but nothing spells financial ruin like racking up debt faster than one’s ability to earn. Credit cards are a great fix in an emergency, but living life on credit every month is unsustainable.
The most responsible thing one can do as an adult, or at least one without a trust fund at their disposal, is to live within their means.
Save Regularly (slow and steady wins the race)
Financial discipline is about living within one’s means and setting aside money for future financial goals. These goals vary among individuals—some may want to save for further education or buy a vehicle or a house, or for wedding expenses or set aside for their folks or their own retirement.
Goals vary, but what is universal is that not everyone earns well when they start their careers. This is where it becomes essential to set money aside, however little, regularly as soon as one starts earning.
The younger you are when you start saving, the larger the corpus as the years go. Saving from a young age helps achieve financial goals faster.
Building an Emergency Fund (no one can predict the future)
As young adults, we are all guilty of thinking we are ‘bulletproof’. We have our whole lives ahead, and we are energetic and passionate and want to take life by the horns.
However, as far as clichés go, here’s another for you, life is unpredictable.
Job loss, accident, sudden hospitalisation, unexpected expense that hadn’t been accounted for–none of these situations comes with fair warning.
However, planning for these can help take off some of the stings when any of these situations arise. Building an emergency fund should be done on priority when one starts earning. This fund should help you cover roughly four to six months’ worth of expenses.
Also, this fund needs to be liquid, i.e. quick to access. It can either be saved in the form of a fixed deposit or set aside in an ultra-short-term debt mutual fund.
Insurance (be prepared)
One of the most common financial planning errors we make as a layperson is meeting our financial goals through insurance products. A majority of us look at insurance schemes as money-making schemes. In doing so, we lose the opportunity to cover ourselves effectively. We fail to choose a financial product most suitable to meet our financial goals effectively.
Insurance products that you should purchase are medical and life insurance. You could buy term life insurance for more effective coverage where the plan cover is at least ten times your annual income. A good thing to remember when purchasing life insurance is that money from the insurance policy benefits your dependents upon your death. It’s not to help you meet any financial goals or save taxes.
Another thumb rule to keep in mind is premiums will be less prohibitive if you were to lock them in at a young age when there are usually lesser health problems to pencil into the premium mathematics.
Public Provident Fund(cause it’s never too early to start planning for retirement)
Wondering why we skipped other sensible investment avenues, including mutual funds? Well, the reason is the magical concept of compound interest, which is what investing money in a PPF account earns. Not to mention the sovereign guarantee it carries and its tax-deductible status. PPF is essentially a retirement tool. The money you deposit there gets locked up for 15-years with the opportunity to extend the lock-in period in blocks of years.
Financial planning may seem overwhelming on the face of it, but the truth is, the sooner you develop financial discipline, the smoother, more carefree life one can afford going ahead.
The beauty of imbibing financial discipline early in life is that one can afford to take bigger financial risks, which comes with better returns than traditional products and financial instruments.
Over recent years, interesting financial products such as cryptocurrencies have been gaining popularity. Provided one has a substantial risk appetite, investors can explore them as they have emerged as one of the highest yielding asset classes.
P.S. KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing.