5 must-follow financial tips to set your millennial self up for success | Mint

We are living in rapidly changing times and in today’s fast paced world, millennials in India are facing unprecedented challenges along with unique opportunities to excel in their financial lives.

That is why with ever rising living expenses, taxes and evolving economic conditions, mastering indispensable skills to take control of your personal finances can definitely put in the foundation of a secure financial future. This article is dedicated towards discussing five critical rules every millennial should consider and follow to build wealth and achieve financial prosperity.

Think, create and stick to a budget

Sound financial planning begins with a well-structured budget. This kind of systematic planning helps you in keeping track of income, expenses, tax implications thus ensuring that you live within your means. Now, for doing the same the 50-30-20 rule is an extremely popular budgeting tool. In this investment plan:

• 50% of your income is for your essential daily needs (housing, groceries, utilities)
• 30% for the income goes for wants and aspirations (dining, entertainment, travel)
• 20% of the income is kept for savings or debt repayment.

There are several financial management and tracking applications freely available on Google Play store for android users and App Store for Apple users to keep track of their daily expenses and assist in crisp financial management. It is important to always acknowledge that savings, keeping a tab on finances is a soft skill.

Warren Buffett once famously advised, “Do not save what is left after spending; instead spend what is left after saving.”

This simply means that you should prioritise savings and never fall into the trap of debt and overspending.

2. Read and build an emergency fund

Life today is extremely difficult and unpredictable, that is why having an emergency fund provides a crucial safety net. Financial experts recommend collecting and saving at least three to six months worth of living expenses in a separate, easily available savings account. This amount can come in handy during rainy days and emergencies such as: job losses, medical procedures along with similar unplanned expenses. This simple looking planning can easily save you from forced high interest loans and credit cards.

Elaborating on the same concept, Charlie Munger has stressed the importance of consistent planning and financial preparedness: “The big money is not in the buying and selling, but in the waiting.” That is why automating monthly contributions, even if small, helps you build this emergency fund steadily over time.

3. Prioritising and focusing on debt repayment

Debt can very easily spiral out of control due to compounded interest rates on repayments if not managed carefully. That is why first you should always focus on paying off high-interest debts, such as credit card debt, that can erode your credit score and hamper your financial prosperity. Prominent strategies like the debt snowball method i.e., paying off smaller and less significant debts first for motivation can be an effective method in reducing overall debt rapidly.

Dave Ramsey, an American personal finance expert’s famous quote subtly sums up this idea perfectly: “Debt is not a tool; it is a method to make banks wealthy, not you.” That is why focus and avoid accumulating unnecessary debt and aim at becoming debt-free as early as possible

4. Begin with investing early and regularly

Consistent investing is the key behind long term wealth creation. Focus should be on investing in appreciating assets such as: stocks, gold, silver, mutual funds etc and avoiding depreciating assets such as: expensive cars, watches, clothes etc.

Starting investing early allows you to leverage and make the most of the power of compounding. Millennials should diversify their investments across the above discussed appreciating asset classes such as: equities, mutual funds, fixed-income securities etc.

For example: Systematic Investment Plans (SIPs), in mutual funds through the direct mode, help in building a disciplined approach to investing while also managing risk effectively. The power of compounding stands out as the years roll. Even according to Albert Einstein compound interest is the “eighth wonder of the world.” That is why, the earlier you start, the more you stand to gain over time.

5. Continuously educate yourself

With the introduction of artificial intelligence tools such as: Chat GPT, DeepAI among others, has resulted in the rapid expansion and evolution of the financial landscape. Things have not been easy for even leading financial institutions and banks.

That is why it is extremely important to be updated on market trends, investment strategies and personal finance best practices. For the same, consider following credible financial news sources and always reach out to certified financial advisors to learn and align strategies with your long term goals and aspirations.

Benjamin Franklin has perfectly highlighted the importance of knowledge when he once famously stated that, “An investment in knowledge pays the best interest.” That is why understanding how different financial market instruments work and adapting to changing economic conditions can give you a significant edge over peers.

Conclusion

Hence, by following these five simple yet essential personal finance rules, millennials can navigate their financial journeys with confidence, humility and security. Thus, establishing good habits early on will not only help achieve immediate goals but also set the foundation for long-term financial success.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Readers are encouraged to consult with a certified financial advisor before making any financial decisions.