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Financial Gyan – Your Key To Better Life

Millennials have hard time managing their money most of the times and that’s because they don’t really have a financial plan in place.

Financial insecurity has been a haunting ghost for Indians for quite a long time. Not being aware of money management a large chunk of individuals have ended up in debt trap living the rest of their lives only to repay their debt. Dissecting deep into the problem, the root cause lies in the lack of scope for financial literacy in the Indian education system.

Nightmares of lockdown brought financial literacy to mainstream discussions leading to a widespread awareness of the importance of financial literacy. During the age of government jobs when job security was high, secure life post retirement was a lifetime goal. Driven by career insecurity, the goal, in present era of privatized world, it isn’t limited to secure old age life. Instead the need is to secure life right from the beginning of an individual’s professional career.

The real problem

Millennials have hard time managing their money most of the times and that’s because they don’t really have a financial plan in place. Lack of understanding of future financial needs and lack of savings or investing is the cause and the effect is financial burden, loans and ultimately lack of confidence which undermines their productivity. With the influence of social media getting deeper, spending has taken over savings and financial security for future. In the minds of these youngsters, the urge to buy latest smartphone or trending sneakers on EMIs is masking the need for a financially secure life. As a result they end up in a debt trap forcing them live their life just to pay back their debts. In my observation more than 90% of newly employed students have no emergency fund and they don’t even have one month of living expenses as savings.

Here’s what should you know to understand money management

Money management is an art and can be mastered with only practice and experience. Few most important aspects of money management are:

1) Budgeting – Creating a budget for one’s expenses, lifestyle needs is the most important of all.

2) Savings – One of the most difficult aspect of money management is savings as it requires an individual to have self control which means one needs to choose for delayed gratification. Savings are in some ways a self fulfilling prophecy, because once an individual starts savings, they tend to become much more financially secure, independent and it motivates them to save more which in turn becomes a habit.

3) Investing – The savings that one has accumulated needs to be preserved and grown to fight inflation and purchasing power of their money. Many are now seeing their money compounding after their money started growing. Investing in good ways could become addictive if investents are channelized towards proper avenues because they just increase one’s savings pool for future financial needs.

4) Tax Planning – One needs to efficiently reduce their tax liability by channeling their money or savings in tax advantageous avenues which will lead them to have maximum savings and low tax liabilities, leading to healthier personal finances.

Tips to youngsters who have joined their first job:

a) Money saved is money earned. So keep your lifestyle expenses as low as possible.

b) Set up mandates in your bank account to automatically debit 25% of your salary into either mutual funds, or provident fund or stocks, you will automatically be saving and this way you will automatically end up spending less.

c) Make your credit card a profit making tool rather than creating debt. Use your credit card to get interest free access to funds in order to rotate your cash in hand and at the same time get cashbacks by using credit cards for travel, food etc which will get you discounts

d) A wiseman’s decision would be to buy a car only when there’s enough funds to buy the car by paying upfront cash and still have enough money left for other financial needs. Car being a depreciating asset brings in additional expenses. Adding to it rising prices of fuel too are a burden.

Source: Business World

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