3 financial habits every person in his 20’s must have

There is a famous proverb: “Life is a marathon and not a sprint”. This saying is very apt in money matters too. One must not ignore the importance of saving for the future. In our 20’s we have lesser responsibilities. This is the time to start investing for the future to be able to make most of the long term investments. Time is the best investment and the longer you remain invested; the greater are the gains. One can benefit greatly from the power of compounding. Your financial decisions in your 20's are going to affect the quality of your golden retirement years too. Quicker you realize this, the healthier your financial statement will look. Here are three essential habits every person must have in their 20s.

 

Start investing

Don’t just save. Invest! In our youth, we all want to enjoy our life. We experience financial freedom, and the urge to splurge is very high. That is what all young people do. So you too want to follow suit. But hold on, think a little about the future. You have plans of marriage, owning a home, higher education and the like. You do have options of taking loans, but that is a bad money decision. It is important to be able to fund your plans instead of relying on loans. It might not be possible to support it completely, but even if you fund it partially, it translates into a lot of savings.

The stock market offers a great way of saving and growing your income. There are instruments called mutual funds that allow you to invest small amounts every month. Even if you start a withRs. 1000 every month and continue spending you will be able to plan your upcoming endeavors correctly. Moreover, your money will be safe as the risk associated with managed securities is moderate. As a rule, one must invest 30% of his income. The remaining can be used up for expenses and spending. This way you are not completely deprived of the splurging.

Retirement Corpus

You have to think about your retirement early. It seems far off, and in your 20s you feel you will always be young. But by investing for your retirement from now, you will be able to spend those golden years without any worries. By planning your retirement and allocating funds you deem necessary, you can breathe easy of a peaceful and joyous old age. You can put out a percentage of your paycheck into a retirement fund and invest it in an aggressive instrument like equity initially. Later on, you can move this fund into a low-risk instrument. With every increment in your salary, you can increase the contribution to your retirement fund.

Emergency Fund

As a thumb rule, one must have six months of income ready under an emergency fund. You must save up this fund from your monthly paycheck and keep it as a backup in case of emergencies. You should be able to liquidate this fund easily. Ideally, you can save this in a debt instrument like a fixed deposit or recurring deposit or post office savings scheme. Initially, you can start by saving up one month’s income and then gradually build it up to a six months emergency fund.

Apart from these savvy money steps, one must ALWAYS have their life insurance and medical insurance in place. This two insurance should be a priority and are as important as these financial habits.