It could irk you when elders say that you need not spend thousands on that foreign holiday or the new iPhone
You could begin by saving as little as 15-20% of your monthly take-home pay
NEW DELHI :
Millennials form about 47% of India’s working population, making them the largest demographic group in the country. Mint takes a look at how millennials can strike a balance between spending and saving and make the most of their money.
1) Should you be saving or splurging?
It could irk you when elders say that you need not spend thousands on that foreign holiday or the new iPhone. Millennials and the younger Gen Z are often criticized for spending on things and experiences the previous generations kept away from. However, what gets ignored is that, over time, lifestyles have evolved. Still, does this mean you blow all your money to achieve that perfect Instagram-worthy click? The answer is to spend but only after you have saved for the things that you would certainly need later. You could begin by saving as little as 15-20% of your monthly take-home pay.
2) Is it ever too late to start investing?
If you’ve just started working, you may feel you have several years ahead of you and investing doesn’t have to start immediately. However, what you should understand is that the earlier you start investing, the better your returns will be. For example, you start investing ₹2,000 every month for the next 25 years. The final value of your investment would be around ₹20 lakh, assuming an 8% annual return. Besides, your investments will only increase as your income goes up, adding to the total pie of investments and also giving that much more scope for compounding to work its magic.
3) Are credit cards and easy loans a good option?
As there’s so much to indulge in, you could fall short of money. Swiping your credit card could mitigate that situation. As long as you are disciplined and are repaying the outstanding amount on time, using a credit card can help you build a credit score. Payday loans, on the other hand, come at a high interest rate and can trap you in debt.
4) Is debt a sign of confidence?
Access to credit cards and loans could help boost your financial confidence and make it easier for you to spend. You may take some loans expecting a salary hike or an awaited bonus. The problem arises when the money does not come in. Such fears are more justified at times when the economic outlook is grim as organizations are not liberal with salary hikes or bonuses in such times. Studies have found that while debt gives a boost and sense of self-confidence to people in the 18-27 age group, the feeling fades as people enter their 30s.
5) How should you strike a balance?
You could be the “cool" one among your peers with your fancy gadgets and branded clothes. But if you are fuelling these expenses through loans, you are not really being “cool". Getting habituated to credit can land you in a debt trap and you may then have to give up the façade you’ve built. You should instead secure your future while enjoying the small pleasures of life. Financial planners suggest the 30:30:40 rule: Direct 30% of your income towards expenses, 30% towards EMIs and 40% into the savings kitty.