Edition: July 21st, 2021
Curated by the Knowledge Team of ICS Career GPS
- Excerpts from article by Kayezad E Adajania, published in money control.com
The first salary is always special. In your 20s, the thrill of having a loaded purse and being able to spend your money any way you want is unmatched. Spend you must, but this is also the best time to start saving.
Here’s how those in their 20s should start building their savings:
1. Control your spends
- When we get our first jobs, our starting salaries are generally low.
- Experts strongly advise controlling expenses.
- Create two categories. One category should be of expenses you cannot avoid – your education loan repayments, monthly groceries and rent.
- The other category comprises your voluntary expenses – entertainment, movie streaming and subscriptions.
- Live within your means. If you must, rent an affordable place, even if you have to travel a bit.
- Transfer a fixed sum, say around 30 percent of your income, to another bank account. Do not touch this other bank account. This amount should be out of bounds for your spending and should be saved.
2. Invest in mutual funds
- Most of us in our 20’s feel it’s tough to set aside money for investments.
- To those who tell us that they don’t have money to invest, all you have to set aside is Rs 1,000 every month.
- With Rs 1,000 you can start a systematic investment plan (SIP; where you invest a fixed sum every month).
- You can also invest in small saving schemes such as postal time deposits and the National Saving Certificate for as little as Rs 1,000.
- It’s not very easy to set aside money to invest every month at that age. But after a few years, when you see your money grow, you’ll be glad you started early.
- Financial planners advise you must top up or increase your SIP contributions, at least once a year.
3. Invest in health insurance
- Most companies offer health insurance benefits to their employees. It’s possible that your first job might also offer you insurance.
- But that is not enough. Buy your own health insurance plan.
- Medical costs rise more than other costs. Everybody needs a health insurance plan.
- This year, with the spread of COVID-19, many people lost their jobs. When that happens, your company-provided insurance cover goes away in an instant.
- That’s why you need your own health insurance, which is always there with you.
- In your 20’s, health insurance premiums are the cheapest since you are typically healthy. Most insurance companies don’t even insist on a medical check-up at that age.
4. Keep only one credit card
- When first-time employees open their salary accounts with banks, they are often persuaded to take credit cards.
- Easy credit by paying just the minimum balance month after month can easily lead you into a debt trap.
- A credit card is not a tool to shop endlessly on things you cannot afford.
- It should only be used as a convenience in lieu of carrying cash.
- Make sure you pay your full monthly bills on time.
- Do not roll over your credit card debt. It is the most expensive of all debts, with card companies charging as much as 40 percent annually on your outstanding!
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(Disclaimer: The opinions expressed in the article mentioned above are those of the author(s). They do not purport to reflect the opinions or views of ICS Career GPS or its staff.)
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