As any 20 something having lived in the 2010s would concur, financial planning and money management is a critical skill to have in today’s day and age, perhaps more than in any period before. It’s a common belief that your late 20s are the most financially stressful years of your life. Which is partially true. There’s something that can be done by everyone to reduce financial stresses with good money management.
Over the years, increased population, inflation, and economy, it has become increasingly difficult to achieve, let alone maintain, financial stability. This is especially true for people in their late 20s as they are at the beginning of their careers. Many also take education loans for advanced studies or starting their own businesses. This is the first time people in their lives are earning a decent amount of money and are responsible for it, so it’s expected that they are naturally careless about it.
Another reason that these years are especially difficult financially is the rate of inflation and rising prices rarely ever matches the rate at which people’s salaries or paychecks are increased. A major portion of the newly graduated work in large corporations based in expensive metropolitan areas, which tend to increase their living and operating expenses by significant amounts, then say living in small towns where expenses tend to be frugal. An important factor here is also peer pressure and the burdens of social media. In today’s digital world, people are in a constant race to indulge in consumerism, often for the sake of perceptions. This lifestyle is especially appealing to the youth, but it doesn’t mean it’s financially responsible.
Credit cards also enable many to live beyond their means. They lead to unexpected debts though, and it’s important to remember that credit card debts are no joke. We’ve even done a dedicated post on their perils here. Interest rates on credit cards can be ridiculously high.
Another critical issue that merits a mention is the rising prices in the housing sector. The rates of properties have been on a one-way trajectory in almost all urban and metropolitan areas – again, the areas where a majority of graduated youth work. Buying a house in cities has become practically impossible even for someone with a very well paying job. It’s something on every youth’s mind, as owning a house is a standard by which the success of a person is still judged in society. All of these factors combine to make the late 20s a really stressful period in anyone’s life in today’s economic world.
However, with a little bit of help from a proficient financial planner or accountant, all of these things can be handled pretty easily. Here are some very important steps that people in their 20’s must follow to ensure financial freedom and independence for their future years to come.
- Start living within means: The hard, but most effective way to keep a check on expenses, and maintain savings in today’s economy. And this is just the first step. People should do their best not to spend more they make in a month, or it could trap them in an endless cycle of debt repayment.
- Stop using credit cards: This is one of the best actions you can take to stop wasteful spending – skip credit cards, or even cancel your existing ones. Almost all the stuff you purchase with a credit card, you could with the debit alternative. Or, if you’re short on cash, from instant loan apps that offer far lower interest rates.
- Formulate a financial plan: A clear financial plan with objectives, tabs on expenses, and more is crucial when you start out your career. Define realistic goals based on your spending and saving habits. A financial plan has to include everything from purchasing a house to securing your retirement to monthly expenses. This should ensure you remain financially secure over the long term.
- Generate passive income: Something everyone can do in their spare time to make a bit of money is pick up an interesting hobby that can create a passive income stream. Examples include blogging, photography, or even web development. It doesn’t necessarily have to be related to your job. In addition to being an efficient use of your free time, it also generates extra income that you could perhaps funnel into building a financial portfolio with varied investments.
- Be Smart With Debt: Of course, living within your means may not always work. We may be on the receiving end of insufficient pay, high essential expense, or a combination of both. In such cases, it certainly makes sense to turn to some debt financing for assistance. At the same time, it’s important to be prudent about your choice of debt. Pick the right loans, with the right interest rates, and with the least hassle. EarlySalary, for example, offers instant loans via your smartphone up to Rs 2 lakhs, at interest rates as low as Rs 9/day.
In conclusion, the 20s are financially stressful, turbulent times. It certainly can be a fairly stressful and confusing phase. At the same time, it’s also a time of immense learning and growth, and an opportunity to be financially proficient is not one to be missed. Good luck!