Are you in your 20s or 30s and wondering how to navigate the complex world of personal finance? Managing your money wisely during these crucial decades can set you up for a secure financial future. To help you make the most of your financial journey.
Here are some essential financial rules to follow:
1. Avoid Buying a New Car
Hey there! Let’s talk about cars. I know that new car smell is tempting, but hear me out. Buying a new car isn’t always the smartest financial move. Here’s why:
- New cars lose value fast. Like, really fast. The moment you drive it off the lot, it’s worth less than what you paid.
- Used cars can be just as reliable and much cheaper.
- You’ll save on insurance costs with a used car too.
I remember when I was tempted to buy a shiny new SUV. Instead, I got a 3-year-old model. It runs great, and I saved enough to take a nice vacation!
2. Take Risks
Now, don’t get scared by the word “risks.” I’m not talking about gambling here. It’s about smart risks that can pay off big time:
- Start that side business you’ve been dreaming about.
- Consider investing in stocks or mutual funds for long-term growth.
- Learn a new skill that could boost your career.
I took a risk by switching careers a few years ago. It was scary, but it led to better pay and job satisfaction. Sometimes, you’ve got to step out of your comfort zone!
3. Pay Credit Card Bills in Full
This one’s super important, folks. Paying the minimum on your credit card is like treading water in a sea of debt. Here’s what you should do:
- Always pay your full balance each month.
- If you can’t pay in full, pay as much as possible above the minimum.
- Use your card for things you can afford to pay off right away.
Trust me, I learned this the hard way. Those interest charges add up fast!
Also Read: Mastering the Art of Managing Your Debt : Say Goodbye to Financial Stress
4. Invest in ELSS for 80C
For my Indian friends out there, here’s a tax-saving tip:
- ELSS (Equity Linked Savings Scheme) funds can help you save taxes under Section 80C.
- They often give better returns than traditional tax-saving options.
- The lock-in period is only 3 years, shorter than many other options.
I started investing in ELSS a few years ago, and it’s been a game-changer for my tax planning.
5. Don’t Buy a House (Yet)
Whoa, hold up! Isn’t buying a house the “adult” thing to do? Not always. Here’s why you might want to hold off:
- Renting can be cheaper and more flexible, especially if you’re young or your career might require moving.
- Homeownership comes with lots of hidden costs like maintenance and property taxes.
- Your money might grow faster in other investments.
I’m glad I waited to buy. Renting allowed me to save more and invest in my career first.
6. Build Credit Score Using Credit Card
A good credit score is like a VIP pass to better financial deals. Here’s how to use your credit card to boost your score:
- Use your card regularly for small purchases.
- Always pay on time (set up auto-pay if you’re forgetful like me!).
- Keep your credit utilization low (try to use less than 30% of your limit).
My credit score jumped 100 points in a year just by following these tips!
7. Create 3 Streams of Income
Don’t put all your eggs in one basket. Having multiple income streams can provide security and growth:
- Your main job
- A side hustle (like freelancing or consulting)
- Passive income (like rental property or dividends from investments)
I started a small online business on the side, and it’s grown to be a significant part of my income. Plus, it’s fun!
Also Read: π° Don’t Let These Money Traps Ruin Your Finances! Act Now!
8. Buy Health Insurance
Life is unpredictable, and medical bills can be scary. Health insurance is a must:
- Get coverage while you’re young and healthy – it’s cheaper.
- Don’t just rely on employer-provided insurance.
- Consider a high-deductible plan paired with a Health Savings Account for tax benefits.
A friend of mine avoided getting insurance and ended up with a huge hospital bill. Don’t make the same mistake!
9. Invest 25%+ of Income
This might sound tough, but it’s doable with some planning:
- Start small if you need to, even 10% is a good beginning.
- Increase your savings rate gradually.
- Use automatic transfers to your investment accounts.
I started at 15% and worked my way up. Now, I’m saving 30% without feeling pinched.
Also Read : How to Build a Corpus of 1 Crore: A Step-by-Step Guide to Wealth Accumulationο»Ώ
10. Build a 6 Month Emergency Fund
Life throws curveballs. Be ready with an emergency fund:
- Aim for 3-6 months of living expenses.
- Keep it in a easily accessible savings account.
- Don’t touch it unless it’s a real emergency!
My emergency fund saved me when I lost my job during a company restructure. It gave me peace of mind while I job hunted.
