How Does Financial Planning Help You at a Younger Age Like Your 20s?
The 20s is the age where we come into this different world of responsibilities. The best part is that the twenties are considered the best decade to start with investment.
This is the age where some of us might still be students, and some of us have started with our jobs. Also, this is a crucial time for getting habitual in financial discipline.
In today’s blog, we’ll be talking about financial planning in the 20s. We’ll be covering the basic queries that every 20s might be having-
- How early investment can benefit us?
- Where to invest?
How can making an investment this early benefit us?
Investment works wonders when the time horizon is a lot. And, the 20s is the right time.
The right investment ratio, as per me is at least 20% of your income. So for instance, if your salary is 30,000 per month then 6,000 should go for your investment.
Let me state a simple example with you that too with a minimal amount of investment. Did you know, that just by investing 2000rs per month straight till the age of 60 years, you could become a Crore Pati, with an estimated amount of 2.38 crores? Think about it, in between the span of the entire 40 years you definitely won’t stick up with investing only 2000rs per month. You will eventually enhance your investment amount increment happens.
By 20s you invested 2000rs, maybe by 25 years of age you double your investment amount and so on. You will end up with more than 2.38 crores then! This is the power of compounding and investment during your early years.
Just with a minimal amount, that today you might spend over one dinner, can do so much for your future!
We end up spending so much on unnecessary or say expensive things, that we could use that money for growing our own money.
Where can we invest?
The options for investment are huge when it comes to financial products. But choosing the best investment is what matters the most.
- If you have apt knowledge figuring the best performing company, you could invest in stocks and equities. As the risk here is high, but again the returns are enormous too.
- 2nd best option is a mutual fund. A mutual fund is the best investment form, giving excellent returns over the past years. The best thing about a mutual fund, you can start a SIP with a minimum amount of 1000rs.
- You can also opt for a sovereign gold bond. In this, you don’t have physical access to gold. You get 100% secure and free gold storage.
What about other financial products like loans, insurance should someone in their 20s have?
The best thing a person in his 20s can do is reduce or eliminate their loans if they have any. Especially loans like the personal loan are a big NO! And even if due to any uncertainty you got into a personal loan, then try to eliminate that as soon as possible, as the interest rates bank charges for a personal loan are too high.
This is because in a personal loan there is no collateral involved and banks feel less secure without collateral, and thus they charge higher interest rates for the same.
Insurance is a great financial instrument for people in their 20s to buy. Buying health and term insurance is best when it comes to your family’s safety and yours. Health insurance is a must for you and your family, as medical emergencies can happen anytime. And thus, one should be prepped for that. Make sure to get a health insurance cover of a minimum of 1lakh each for you and your family. The early you get the insurance cover the lower premiums you’ll be paying.
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