In your 20s, life is actually not too burdened with responsibilities and other complexities that come later. You have started earning (well), have very few burdens and responsibilities and are full of energy. It’s when you cross from the 20s to the 30s that life actually arrives, in a manner of speaking.
In your 20s, life is actually not too burdened with responsibilities and other complexities that come later. You have started earning (well), have very few burdens and responsibilities and are full of energy. Its when you cross from 20s to the 30s that life actually arrives, in a manner of speaking.
Let’s discuss how to plan your finances when you enter your 30s.
In the 30s (or very late 20s), many youngsters get married, start planning their families and explore the option of purchasing a house. Some of them also have to take care of their parents who too might have retired by then. So suddenly, tons of responsibilities come your way. And it’s not just the responsibilities. It is also the expectations of family members that you need to pay heed to. They depend on you and they want you to know that. More importantly, they want you to do something about that.
And a good financial plan can help you do this. A well-made plan is like a road map for your financial future. It provides a structure and solid foundation for all your goals until you eventually attain the financial freedom you always desire. Also, a solid financial plan helps you measure the progress you make and identify any areas that you need to improve for a better financial state.
But if you don’t want to get into the full financial planning mode immediately, then here are a few important things that you can start doing immediately
Install Emergency Fund Quickly without Delay
You may have been delaying it thinking that ‘nothing can happen to you’. But now, throw out that mindset and put this in order. It is said that one should have an emergency fund worth at least 6 months’ worth of living expenses.
So try to put this in place at first.
If it’s not possible to do it in one go, then here is what you can do – start a recurring deposit to gradually increase savings for this, sell random low-quality investments and use that money to pump up emergency savings. If you get a bonus or incentives, then use a part of it to push up your emergency cushion.
Buy Family Floater Health Insurance
Do this quick. Even if your employer provides you with group health coverage. Your office coverage may not be enough and also, if you lose your job, then office cover with go away with it. So better have one health insurance which is not dependent on your employment.
Also, try having your parents added to your employer’s health coverage. If that is not possible, then see the feasibility of buying a senior citizen health cover for them as it’s possible their existing coverage may not be enough.
Buy a plain Term Life Plan
If you still haven’t bought it, then that’s not right on your part. Go and buy a large term insurance cover for yourself immediately. How much? Use this insurance calculator to find out. If not that, then take at least 15 times annual income as an approximate size of the required life coverage.
Don’t be in a Hurry to Buy a House
This is one of the biggest questions in your 30s – to buy a house or not. Family and peer pressure can push people into buying a house even when they might not need it.
Don’t get me wrong. I think everyone should have at least one house. But I also think that there should not be a hurry to buy it as soon as possible. Though low home loan rates and stagnant real estate prices have made house purchases a lot more affordable, it still makes sense to not burden yourself unnecessarily if your finances don’t allow you to comfortably handle loan EMIs along with expenses.
So check your house purchase readiness first and then decide whether to buy a house now or delay it. Delaying will also help you accumulate higher downpayment which can further reduce the dependency on the home loan.
Start Investing Heavily in Equity Mutual Funds
You need both equity and debt in your portfolio. But since you are in your 30s and have a long way to go before you retire, you can afford to invest aggressively in equities.
The 30s is the time when you can afford to take risks that come with equity investing as there is a sufficiently long time available to justify the risk taken and potential reward (of inflation-beating returns) at stake. And please don’t try to time the markets. Start regular monthly SIPs in equity funds to invest periodically.
If you are into direct stock investing, then you can also consider creating an investment portfolio of your own. But don’t get too aggressive from the start. This requires some time and learning. So set aside a specific amount of money every month to add to your investment portfolio in your budget. And even if you are a beginner, you can use the best investment newsletters to understand how to go about proper investing. And then regularly assess whether you are doing well or not. And be objective and unbiased about this assessment.
If you do these few things, you would be well on your way to taking on your 30s on a solid footing.