If Millennials were to choose the best stage of their lives, they would say Twenties is the best age to be! Why? Because you are freshly out of college, have joined a job that pays you well, you do not have home loan or a car loan on your head, nor do you have a wife or children to take care of financially. Why wouldn’t Twenties be the most exciting phase then? In a way, this reflects the care-free stage of your life, the last decade before you take on the mantle of family responsibilities akin to India families, like your parents.
However, millennials should keep in mind some of the below when it comes to their finances that would augur them well for the rest of their life:
Power of compounding
There have been many articles written about power of compounding. But it doesn’t hurt to say it again that the earlier you start the more the power of compounding. Let us admit it, millennials are in a lot better position to become millionaires if they start investing now than in their 30s or 40s since age is on their side and the rest is taken care of by the power of compounding. A simple calculation is that if you’re 25 years of age, start investing in financial instrument that gives you an average return of 10% per annum, and you invest only INR 4000 per month, and even though youdo not increase the amount being invested at a later point of time in your career, at the time of retirement, you would be left with a cool INR 1.54 crores!
Increase your savings as you grow
It is a known fact that appraisals happen every year and every year your take-home salary gets bumped up a little. If a portion of the bumped salary is religiously set aside to be added to the savings, this would be best gift you have given to yourself. An annual increase in savings can do wonders to the power of compounding as it gives an opportunity for all your goals to be achievable sooner than the time horizon you had planned for.
Don’t succumb to facebook/instagram peer pressure
It is common to get sucked into the vacuum of pressure exerted by your peers who look ‘oh so classy’ on Facebook and Instagram. A lot of that charm has to do with filters. Yes, filters. It is one thing to like their pics and quite another to blow up your savings on shopping to ape them! Yes, peer pressure can be a killer in this age and the constant social media attention can kill your budgets. Be smart, and don’t budge from your budget. After all, the gloss of filters will wean away in real life, but your savings are for real! Just imagine all that money you would have spent on peer pressure working for you as investment. Now, that’s being cool, isn’t it?
You’re your best investment
Difficult to believe, right? No, it is a fact that the more you invest in acquiring skills and comptencies in this age, the more brighter your future will be. It would be a good idea to invest in a specialization course, or attend those conference that will help you broaden your perspectives about a particular topic of interest. Or just do a hobby class. Who knows? Maybe one day in future it will be your entrepreneural venture!
If you’re a millennial in your 20s, enjoy your life. This is the best phase of your life. At the same time, the above 4 investing tips should help you lead a financially secure life and prepare you well for taking additional responsibilities that life has in store for you in future.