Amid the present slump in economic growth, it might seem absurd to think of building wealth. However, it is the approaching recession that is possibly the best reminder to always be financially independent, especially in times of crisis.
If you are young, you may have been advised to start saving, which is actually good. The sooner you start the better.
However, it may be important to know that simply saving money in a bank account does not help. One needs to find ways to become financially independent by building wealth, which requires looking at ways to generate income for the long term.
1. Pay your debts first
When you are young, you do not have as many responsibilities as an average adult does. You can use this time, that is your 20s, to pay off any education loan or credit card bills on time.
Apart from reducing interest burden in the later years, prompt payments help you build a good credit score which will come handy when you need to take a home loan in the future.
Taking control of your finances early on is key to saving more and efficiently.
2. Don't postpone investing; start small
New earners are often intimidated by the markets or any form of investment as it could feel like a big spend. Whether it is a popular company stock that you read about in the newspaper, an apartment, or even gold. All of these investments appear to be out of reach.
But that is not true.
If you are new to investing in market-linked tools, you can start with mutual funds that have SIPs (systematic investment plans) as small as Rs 100. It is not difficult to set aside Rs 100 or Rs 500 for your future. Moreover, these funds are actively managed by experts, making them safer that picking stocks on your own.
In case of gold, try gold ETFs; for debt-related investments, go for government's small savings schemes.
The point here is that we tend to fear the unknown but to learn and understand what works, we need to try investing, even if that means starting small.
3. Educate yourself
Do not blindly go by recommendations that you get from friends or what you read in the media. A stock may have jumped 160% in 3 months time, but unless you fully understand why that happened, you may lose money chasing these quick profits.
Many Indians lack financial awareness, despite the multiple means to educate oneself. Understand the risks associated with the markets, understand ways to balance these risks and seek advice from professionals as investments can be overwhelmingly time-consuming to some.
There are so many registered investment advisors (RIA) out there, who are licensed to give you advice on what to do with your money to fund future goals. There are also multiple investment vehicles made available to retail investors.
You only make wise choices if you are well informed.
4. Look for ways to create opportunities for yourself
In your younger years, you have the time and the capacity to learn new things.
Become an expert in your field of work or explore other ways to make a living, especially if you are in an obsolete field.
Strive to get higher-paying jobs in your earlier years of employment, as it will be easier than making a switch when you are older and have responsibilities.
When you earn more, you can save more and invest more.
The article is purely informational and is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.
About the author
Olga Robert is an M.Com graduate covering equity markets and personal finance for nearly three years. Her interests include tax planning, equities, DIY personal finance management and government schemes.