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In Your 20s? Here’s Your Secret Guide to Get Rich!
Often, we end up adopting certain traits and characteristics of our parents, and this includes their financial habits as well. The previous generations had an investment approach that was safe and secure but generally fetched lower returns. However, times have changed; with the rise in inflation and the aim to ‘make your money work for you’, the investment outlook is now evolving to meet today’s ambitious financial goals.
If you happen to be in your 20s or know someone who is, here are some tips to take on board or pass on, to help have a better handle on financial matters:
DIVERSIFY YOUR PORTFOLIO
Time tested saving methods like Fixed Deposits have always been safe investment instruments. While they still remain a sound option, often, the post-tax returns from FDs don’t even beat the average rate of inflation. It is very important that you invest in assets that offer different risk exposures and return potentials. This way, you can build your wealth and also have your money hedged against risk.
UTILIZE YOUR IDLE FUNDS MORE EFFICIENTLY
In order to have quick liquidity, a lot of people have fallen into the habit of leaving their money idle in their bank accounts. These idle funds wither earn a pretty low interest or none at all. Underutilizing your funds is something that you need to avoid. As far as liquidity goes, you can invest some money in liquid funds and short-term bond funds that earn a higher rate of return, than leaving your money in the bank.
DON’T DELAY ON INVESTING
Many people opt out of investing in their 20s, thinking that they will have enough time. If you have a financial target and are procrastinating on starting your investments, your compounded returns would be lower, and to reach your target, you might have to take some bigger risks. It is never too early to begin investing, no matter how small the contribution might be.
NO INSURANCE AND UNDERINSURANCE
It took people quite some time to realize the importance of being insured. Mostly, people consider them to be an avoidable expense or at most a tax-saving avenue. However, with the ever increasing costs of healthcare in the country, health insurance has become necessary. Plus, anyone who has dependents should always have life insurance. These two are insurance products that no one should overlook.
INVEST FOR BETTER RETURNS, AND NOT JUST SAVING TAXES
Saving tax is a major concern that people have these days. While it is definitely a necessary part of your investment, make sure that your investment strategy is not driven only by the thought of saving tax. When selecting a new investment plan, you need to consider wealth creation as a primary objective and tax saving as a second.
GET STARTED ON RETIREMENT PLANNING
Isn’t it too early? The way we see it, no, it isn’t.
A lot of people tend to break their investments to fund different things even before they reach their retirement age. One needs to realize that retirement planning is a very important goal in the management of personal finances, and it requires that you start early enough. It should be one of your priorities to invest in a long-term fund for creating a corpus for your retirement years.
While these tips can guide you in creating a substantial investment portfolio, you do need to play your part as well. Keep a tab on the economy, and keep reviewing your portfolio to make the necessary changes based on your own changing priorities.
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