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The twenties are an exciting decade. You get your first job, you become financially independent and the world seems rife with possibilities. Everything from living on your own, making your own decisions to paying your bills becomes an important part of your life. This phase of your life brings new adventures. It also brings you face-to-face with responsibilities. While you enjoy this newfound freedom, it becomes essential that you take some time to start planning your personal finances.
Here are a few tips that will help you manage your finances better:
1. Budget and track your expenses
After the excitement of the first few months of your salary and unaccounted spending, you will soon realise the need and importance of budgeting. Budgeting is knowing how much money you have at your disposal and how much you are spending and where. This can be done simply by:
- Noting your monthly income
- Tracking all your expenses
- Understanding your expenses
- Checking for unnecessary expenses
- Making adjustments to your budget
- Sticking to your budget
2. Save before you spend
Saving should be among your priorities. It is a simple and fruit-bearing activity that will serve you well in the long run. At the start of the month, before making any purchases, set aside a certain amount and use the remaining for your expenses. This way you will always have a provision and build good money habits in the process.
3. Build up an emergency fund
Life is uncertain and you ever know what surprise or unforeseen circumstances you may encounter. You thus need to build up an emergency fund that can not only come to your rescue in unfavourable times but also ensure you enjoy peace of mind knowing you have a contingency plan.
4. Invest in health insurance
Health insurance today is a necessity. It is a good idea to buy health insurance in your twenties for two reasons – first, you stand to get a good plan at a much lower rate when you are young and fit. Second, you can opt for the lifelong renewability option and stay covered for as long as you live.
5. Invest in SIPs
Investing is an essential component of money management. Start investing as early on in life as possible. New to the concept of investing, you may want to explore SIP as an option. SIPs allow you to invest small amounts of money at regular intervals. This allows you to build a regular investing habit too.
6. Understand credit
You may require credit at some point in your life. You may need a student loan for higher studies, or a home loan, or even a vehicle loan. You may also start using credit cards. Understand the concept of credit and how it works. Pick a credit option that is best suited to your financial position.
7. Spend responsibly
The taste of your very own earning is something special. And we may have a dozen things we’d want to do with our money. While it is good for you to indulge sometimes, you must also take responsibility for your finances. Therefore, make and stick to your budget when it comes to spending.
8. Plan for your retirement
Retirement may seem like a very far fetched notion to you in your 20s. But it is also true that starting early ensures you have a far better retirement plan because you have a lot more time to save. Thus, start your retirement planning while you’re still young and see your corpus grow.
9. Consider a second source of income
This may seem unnecessary to many. However, having a second source of income isn’t that uncommon. This can especially be useful if you find your expenses rising or intend to undertake a big purchase. It also helps in making sure you stick to your investments even in rough times by taking on a second job or assignment.
10. Keep a track of your progress & celebrate the milestones
The thing about budgeting is that it requires constant attention. It needs to be reviewed and revised as you progress in your financial journey. So revisit your budget and make the changes as and when needed. And when you achieve some of your goals, big or small, don’t forget to celebrate
Try these simple steps and they’ll help you set up a strong foundation for a healthy money habit.