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Monday, 19 September 2016

Tips to Start Saving Money in your 20s

Finally, you have graduated from college, bagged a job you always wanted and more importantly, you are getting salary credited into your account regularly. It is the time when you have a lesser amount of responsibilities as compared to your 30s and 40s, so you can spend your hard-earned money on clubbing, shopping and luxury dining. But what if I say that these are the most crucial years for deciding the fate of your future financial stability? Yes, the biggest supporting factor here is the theory of compounding which affects your investments to a great extent; in short, you have time in your hand.

Image credit: thesimpledollar.com

While it is difficult to control the urge of spending money on things that you have always wanted right since your schooling days but could not afford it, the golden rule of finance is that it does not run on emotions. Imagine meeting an accident or losing your job to the recession, forget about luxuries but you would be striving hard just to survive. Having an emergency personal fund becomes absolutely necessary to have money in spare with you when you need it the most. 

The following tips may come handy for you in planning and create an emergency fund www.investopedia.com/articles/pf/05/emergencyfund.asp

One of the most common excuses that people usually give is that they do not earn much, so they cannot save any money. Remember, saving money is never about how much you earn but it is a habit. I have seen various people whose income falls in the top 10% bracket of their respective occupation and years of experience, but they are always in debt, surprising? Yes, it is a very common phenomenon for people whose spending are more than their earnings. You do not even need to know about hardcore finance to understand this, it is simple arithmetic. Financial experts all over the world have been advocating the 50-30-20 rule. The rule implies that 50% of your income should go the basic and necessary expenses like Rents, Groceries, and other monthly bills. 30 % should go to your luxury and recreational activities like going to movies, vacations, and dining out etc. 20% should be strictly your savings which can be invested in short and long term plans. The following resource would be helpful for you to understand it better www.thebalance.com/the-50-30-20-rule-of-thumb-453922. Basic practices like creating Recurring Deposits and finally converting them to Fixed Deposits can build upon substantial savings over time.

Also, if you find it difficult to manage and track your expenses, there are numerous Mobile Apps which can come to your rescue www.androidauthority.com/best-android-budget-apps-for-money-management-586807/. Looking at the figures, you would be surprised to know the cumulative amounts that you were wasting on unnecessary things and several expenses which went unnoticed.

While credit cards have always been considered a risky affair, it certainly adds up to your feeling of security. It can come really handy in times of emergency, getting specific promotional offers plus the ease of purchases. The only thing you need to practice is to pay you credit card bills on time and your life would be much simpler. Usually, in the early 20s, many of us overspend on our credit cards, do not pay bills on time and ultimately develop a bad credit score. Well, if you too, have a bad credit score and think that now you would not be able another credit card without any collateral, you might like to check out some handpicked credit cards www.elitepersonalfinance.com/best-credit-cards-for-bad-credit/ . But, make sure that you do not repeat your mistakes and live a peaceful life by balancing your finances accordingly. 

Your dream home, vacations, a fancy car, and an extravagant honeymoon are not going to be possible if you do not start saving correctly now. Apart from the various luxuries and a desired lifestyle, savings can offer you one of the most important things in life, Peace of Mind!



Written by Rohit Jha


 
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