People who are in the age group of 20’s often fall prey to carelessness towards their personal finance.
Personal finance is one area where mistakes prove very costly in future. But for people who are in their 20’s, personal finance doesn’t seem to be in their priority list.
Young people in their 20’s acknowledge that saving and investing is necessary. But due to their other priorities, they cannot give much attention to their personal finance.
It is good to spend on lifestyle and entertainment. But this cannot be done by compromising ones personal finance goals.
Young people in 20’s are not able to save money sufficiently. In fact by the end of each month they often resort to lending money from their peers to meet their necessary expenses. But this way they are not only hampering their present but they are also pushing themselves into darker future.
In this post, I will highlight five personal finance mistakes of people in 20’s:
#1. They spend impulsively
Young people find it hard to spend their money in a justified way. Their thought process is not as mature to understand the priority of saving and investing money.
As a result they end up spending almost everything that they earn. This becomes possible only because they spend impulsively. At times, they buy things that they do not require in their life.
Yound people in 20s are very energetic and bold. But it is also necessary for them to channelize their aggression so that their money-matters do not get disturbed.
Presently they may not have lot of financial obligations, but with passage of time, the pressure will start to build. To be prepared for those tough times, spending wisely today, is a must.
Impulsive spending habits must be stopped. Suggestion is to save at least 25% of ones monthly take home salary. This saving must be invested in a good mutual fund through a SIP route.
#2. They indulge in loans too easily
Young people in 20s do not save enough in first place. To top it all, they also indulge themselves in loans too easily.
It is important to realize that when people need loan? People need loans to buy things that their income & spending habits cannot support.
In order to avoid loan, there are 2 solutions. First, save money for a thing, and when money gets accumulated, then buy it. Second, increase your income level.
For a young person in their 20’s both the things are tough. Hence they choose the option of indulging in debt.
These days, starting from mobile phones, laptops, TV, music system, bikes, cars, homes etc, everything is available on loan.
Even credit card companies offer the facility of converting ones large value purchases into monthly EMI’s.
In short we can say that availing loans has become too easy for young people.
This temptation to buy those things which one cannot afford, using easy loans, must be prevented.
#3. They do not give enough importance to their physical health
When I go to gym, I often find it filled with young people in their 20’s. At the outset, this looks very encouraging. But over time the matters becomes more clear.
Every day I see a new face in my Gym. Young men who were present yesterday are replaced by new faces today.
There are only handful of disciplined young men who are regular in Gymming their way to good health.
When people are in their 20’s, health is never their priority. But by the time they cross 40s, health issues start to creep in.
These health issues prove very costly in later years. The best option is to give necessary attention to ones health right from the very early age (20’s).
Doing regular medical check-ups, eating healthy food, regular gymming are few things which is essential to maintain as good habits.
These are not just good habits, they will also save you a fortune in your old age.
#4. They do not keep track of expenses
Young people in their 20’s consider tracking expense as an exercise which is completely unnecessary. Leading a carefree life is their guru mantra.
It is true that keeping record of all expenses is a cumbersome task. But this is one habit that must be build very early in life.
The benefits of this habit is so immense that people who do it regularly have become millionaires.
A school going kid cannot practice this habit. The best age to start tracking expenses is the time when an individual get his first paycheck.
These days there are excellent mobile apps available which makes expense tracking nearly automatic. Even if automatic data collection is not possible, still data entry into mobile apps is fairly easy.
It is also possible to build ones own expense tracking software in MS excel. I know some affluent people who do not use any mobile app for their expense tracking. They still use excel sheets. Idea is to build the habit of expense recording and tracking. Do not allow even one Rupee to get spent without being tracked.
I also do my ecpense tracking a simple excel sheet with some embedded formulas. It works for me very fine.
$5. They do not invest money
The priority of young men are different. As a result they often have no spare money to start an investment.
To understand the importance of starting to invest early, while one is in his/her 20’s, let me give you an example.
Suppose you are 24 years of age. You would like to consider retirement at the age of 60. It means, you have nearly 36 years ahead of you before retirement.
Check the below table to understand how much you can accumulate in 36 years by investing just Rs.500 per month.
It is possible to accumulate a crore by investing just Rs.500 per month. The only criteria is to start investing money as early as possible. If you are not very conversant with stock analysis, chose a decent equity based mutual fund and start investing today.
If all young men in their 20s start saving and investing regularly, this one act has powers to transform India to become the strongest economy of this world.
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