Tips for Millennials to fix their Financial Woes
Financial management isn’t something that comes naturally one needs to learn and in today’s time, people care more about quality of life rather than just supporting it. Millenials are more aware and proactive about their finances, and know how crucial it is to retain financial stability.
Although the outside world is still unpredictable and ever-changing, they strive for financial freedom. Millennials have demonstrated a stronger desire to live a life filled with travel and enjoyment. This pursuit has, in some ways, evolved into the defining characteristic of how they understand financial independence.
The fact that 59% of urban Indians' income is spent on current needs, according to a 2020 PGIM India Mutual Fund survey, means that 51% of them have not formed retirement plans. It is, therefore, not surprising that savings and financial assets are put on the back shelf.
The Deloitte 2020 Millennial Survey states that 80% of millennials expressed anxiety or stress about their financial situation.
Financial planning and Financial Freedom
Financial planning includes the decision-making as to how you want to spend your money to achieve all of your financial objectives. It enables you to methodically and effectively accomplish your long- and short-term goals while taking into account your assets and resources. These objectives may range from setting up a fund for emergencies to planning for retirement, purchasing a home or car, saving for a vacation, and everything in between.
Enjoying your life and living within your nurtured space often requires financial freedom. It occurs when you are entirely in control of your money and are not anxious regarding how to pay your payments or under the weight of loans. Financial independence prioritizes your solid future by investing in mutual funds, expanding your education, and setting up a contingency savings bank account for unforeseen costs.
What Is the Importance of Financial Planning for Millennials?
It's essential to recognize that everyone needs to organize their finances. A solid financial strategy enables you to address issues that cannot be resolved by merely saving money. Consider inflation, the gradual but constant rise in the price of products and services as the economy develops and evolves. Five years from now, the same INR10,000 will be worth more than today. All age groups need to prepare their finances, but millennials have to manage their financial affairs more than any other generation.
Millennials grew up with limited to no exposure to financial education, even after witnessing the globe implement the web and technology at a lightning pace. As a result, even the fundamentals of personal finance, such as tax filing or opening savings accounts, may be challenging to understand. A relatively unstable financial position is created when you combine easily accessible lines of credit with hazy expenses with inexperience in regulating your bills and debt payments.
The economy will keep evolving, whether a shift occurs gradually over time or suddenly. One such instance is the Covid-19 outbreak, which affected millions of Indians and resulted in a significant drop in GDP, employment, the suspension of production, and social chaos. It demonstrated the need for better preparation on everyone's part because even things that seem inevitable, like our money flow, can alter at any time.
Millennials must abide by specific standards to accomplish this.
Create a financial strategy
It's perfect to start by analyzing your current financial position before creating a financial strategy. Making a budget and taking note of your spending and income is the easiest way to accomplish this. This will enable a much more accurate representation of your financial situation and assist you in determining what needs to happen to attain financial independence.
Additionally, you can evaluate the types of investment opportunities offered on the market to see whether they suit you. To build lucrative capital over the longer - term, you must seek to invest in a good mutual fund program; merely storing funds will not be enough.
Attend to the essentials: Insurance is necessary
India had very little use of insurance goods up until very recently. Most Indians viewed them as a novelty or didn't understand they were important, opting to pay on their own because the premium was too expensive. As to the justification, we all have discovered how dangerous playing the game without insurance can be. In unexpected situations, properly controlling yourself and your family members isn't a privilege; it is a must.
In addition to preventing risk, insurance can help save your money over the long term if you choose a sufficient cover. This is because extra costs may deplete your finances, pushing you several months behind.
Cut back on impulsive purchases
Millennials beginning their careers or who have managed to attain financial freedom must cut back on unnecessary spending to start saving. Spending should be divided into necessary and non-essential categories. These costs, if out of hand, might rapidly burn out one's salary and leave no possibility of money remaining for use in the future.
Understand the fundamentals of the stock market
Since the fundamentals are progressively included in many courses, numerous millennials are familiar with them. Nowadays, everyone has quick access to essential information on stock markets. Allocating a set amount of your entire income to investments can be made more accessible by researching investment possibilities on the share market. Knowing about the stock markets will assist in safeguarding your asset from volatility since they are constantly altering.
Avoid making merely the minimal credit card payment
Credit card users frequently delay paying the total amount owed and utilize the same cash for several other purposes because credit cards enable customers to pay the minimum amount required on the specified deadline.
Making complete credit card payments should be your first step to saving money. This will be advantageous in two ways. Your credit report will benefit significantly, and your ability to manage your spending and income will improve.
Make retirement plans as early as possible
One of the fundamental goals of financial planning is to prepare for retirement. Your retirement depends on your current savings, assets, and economic choices. No one will be able to work indefinitely, and since most of us won't have the protection of a pension when we stop working, it's critical to have a means of income to provide for our needs and keep us self-sufficient.
Due to India's changing demographics, younger Indians save less than their parents. Young individuals may splurge due to their immediate necessities, but it's also essential to consider future wants, like a house, car, etc., and set aside sufficient funds.
We have entered a period when everyone has easy accessibility to knowledge and the skills required to grasp and make the most of their money and resources. We have grown significantly, from smartphone travel and expense applications to services that let you explicitly sell in the share market with no intermediary, so it is up to us to maximize our financial resources for our benefit.