Plan your finances in your 30s to enjoy financial freedom later

I would rather enjoy with my money now than save it to enjoy at a later date,” professed Anuj Arora (name changed to protect identity), a few days back.

A young man in his mid-twenties, Anuj has shifted to Mumbai from Delhi after taking up a job. He had approached me for some guidance on admission in B-Schools. Among other things he shared with me how his expenses had increased after he had taken up the job and shifted base. He also told me that whenever he called up his parents, they would invariably advise him to start investing.

I said it was a very sound advice and suggested that he should take it seriously. That is when he told me that he would rather enjoy with his money now than save it for later, and added that most people of his age group think in a similar way. When I further probed on how he would fund for his MBA expense, he retorted with an air of nonchalance that his parents would sponsor him.

For many young people like Anuj, investing may seem like a very uninteresting proposition; so they defer it. But in doing so they tend to miss out on the opportunity to have financial freedom later in life when they would need to incur bigger expenses.

What I said to him goes as follows, and this generally holds good for all young people.

Relationship between Income and Expenses

When you are in your teens or even in your earlier twenties managing expenses is quite simple. All you do is to call up your dad or mom and ask them to send you money. But as you grow up the degree of difficulty in managing expenses also goes up. Your paycheck may get fatter each year, yet your expenses will also somehow always seem to shoot up.  You will need to pay off your bills, rent, etc. EMIs will start from the time you take a loan to purchase a car.

As you take another loan to purchase your house, more EMI gets deducted from your salary. When you get married, your expenses increase further, and when you have children your expenses hit the roof. You first want to send your children to the best school, then to the best college and you want to ensure that your family in good health. You aspire for a bigger house, a bigger car, trendy dressing, vacations, fine dining etc. All of these cost money. And yes, prices also go up each year!

Overall, as your income increases so do your expenses, as you tend to spend more towards improving your standard of living, and you may also have financial contingencies to deal with.

Must Read:  Are you saving enough for your child’s education?

Benefits of Investing Early

Invest Early

A rupee saved is worth more than a rupee spent. When you invest your money, you are making your money work for you. The earlier you start investing, the greater are the potential gains due to compounding.

By the time you are in your 30s, you are settled to a career choice. You should then consider investing in a long-term investment plan to achieve the financial flexibility to fulfil your dreams like travelling or purchasing your house, or a car etc.

If you have made up the mind to invest but are not sure where to invest, you can make use of a Guided Portfolio.

A Guided Portfolio is an advised portfolio by Edelweiss that helps you to decide on an investment strategy based on your age and risk profile. By allocating your investment amount in an optimal manner across asset classes (Equity and Debt). It selects suitable mutual funds for you. Once schemes are selected, you can execute the transaction in one click. You can monitor your portfolio performance on a regular basis.

Remember that the benefits of starting to invest early are enormous. Time proves to be your biggest ally as you have 2- 3 decades to take advantage of market opportunities and you also have the time to recover if something were to go wrong. By taking advantage of time, you can get a head start on saving for your future and take the steps forward towards an improved quality of life in the long run.

 

 

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    By: Somali K Chakrabarti

    Hi there ! I am a management and leadership coach and a ‘çlinical blogger’. Well, that’s what my family & friends call me now ! Here, I tell stories of different brands, how people relate to the brands and the values, beliefs and emotions that they associate with the brands. Hope you enjoy reading my posts.

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29 thoughts on “Plan your finances in your 30s to enjoy financial freedom later

  • July 28, 2017 at 6:30 am
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    A useful guide for the young generation to save for the rainy days and have a secure future.

    Reply
  • July 28, 2017 at 8:25 am
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    I do have mixed feelings on this topic. A person’s attitude to spending / saving is obviously influenced hugely by their personal circumstances, and many, many people simply have no choice in the matter, but have to work hard just to get by on a day to day basis. But for those of us fortunate enough to be able to make choices, it has to be about personal priorities. Personally, I have always felt I would rather make the most of opportunities I either had or could make, such as travel, whilst I was of an age to enjoy them, rather than simply saving for an old age that I might never reach. Even as I begin to approach that time, with a lot less money than I might have had, I don’t regret that decision.

    Reply
    • July 31, 2017 at 8:31 am
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      Thank you, Mick. I appreciate your reasoning that for those who have the choice, it has to be about personal priorities. Surely travelling is easier, and more enjoyable when one is younger and more energetic. At the same time, the wish to travel or to live in a certain way does not really diminish drastically till the time a person remains fit, though the earnings may not always be the same. Then there may be contingencies to take care of. The sentiment here is that it does not to harm to save a bit while one can and invest it in a good scheme to maintain the same or similar standard of living that one is used to all throughout the life. The earlier one starts investing, better are the gains.

      Reply
      • July 31, 2017 at 8:36 am
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        Hi Somali. Indeed, I understand that, and I certainly wasn’t disagreeing with it at all; merely throwing in a thought about people’s different priorities. Some people are more cautious than others, some need to save for specific things, some just live more frugally than others. We are all different.

        Reply
  • July 28, 2017 at 10:40 am
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    I too have mixed feelings on this topic and agree with you, Mick. A very thoughtful piece, Somali. For a long time I didn’t have the money to save. Working on contract work and going from job to job, I saved every bit I earned knowing I might be out of work in a few days. Back then buying things for myself like new clothes and even eating out was not possible. Now that I am in a more stable position with work, I put away some each month. But I have also spent some money on clothes, travel and (better) food – as a treat for myself and also experiencing what is out there.

    But I definitely agree with you sentiments in this post. It’s never too early to save and start investing whenever you can. For me whenever it comes to saving I look at the bigger picture, and think of saving for a place for myself and invest for further investments in the future – and look how to grow what I have 🙂

    Reply
    • July 31, 2017 at 9:10 am
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      Thank you very much, Mabel. Yes, the point that Mick has raised made me think as well. With stable earnings, it is natural to want to spend on yourself in what you wish to. Also there is no urgency for saving.or investing, The problem lies when the younger generation ( I am referring to the young people in a stable job) get too influenced by the consumerist culture and procrastinate when it comes to investing just because they find it boring.
      It is really good to know that you are looking at he bigger picture and are thinking of saving for a place for yourself. Investing to grow your money is better than to leave money on the table and see it lose its value.

      Reply
  • July 28, 2017 at 5:44 pm
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    What a meaningful advice Somali!
    Who cares about a sound advice at 30? That is the time to start the fun, to visit places to indulge in your dream vacations before the children arrive (though mine arrived much earlier) to demand and sneak away all the attention and finances!
    The compulsory schemes of saving money in India are of much help and despite all the groans with which we put the money away into PPF or insurance, we realize their value only in later life. I too believed in ‘enjoying the money’ when the desires and aspirations fly high as the excitement of 30s doesn’t come back!
    Here, in US, there is no such compulsion and even children are expected to take their own loans if they choose to go into higher studies, so those who earn handsomely believe in spending lavishly, especially on themselves and their vacations. 🙂 However, a healthy balance of both is the answer.

    Reply
    • July 31, 2017 at 9:43 am
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      Spot on, Balroop when you say that a healthy balance of both is needed. In twenties people are busy finding their feet, but by thirties most people are in their stable jobs. Though being more disciplined about money and investing or insuring may not be the most exciting thing to do but still it is good to start early considering that the time in hand will allow for the money to grow. Nobody complains when the corpus grows. Also, when one is young the premium for insurance is low.
      Now there is the provision to get money debited from your account, the pain of putting aside money is reduced to a great extent.
      Greatly appreciate your views. Thank you for sharing.

      Reply
  • July 29, 2017 at 4:28 am
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    Early, and wise investment is very important for a happy future. A very informative post, Somali.

    Reply
  • July 29, 2017 at 6:40 am
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    Saving early helps one stay steady and rue not saving for rainy days. I felt the pinch when I was out of job and couldn’t find a single rupee. I now have a piggy bank that I neglected and started saving in an insurance scheme. I also keep two bank accounts, one for salary and the other for savings. The extra money that I earn as a consultant is kept in the alternate bank account.

    Reply
    • July 31, 2017 at 11:21 am
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      Thank you Vishal. Saving and investing is helps to deal with the lean periods. Maybe you could look into some long terms systematic investments as well.

      Reply
  • July 29, 2017 at 3:05 pm
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    Yes Somali, the guy reflects the changing mindset of this generation where they all live for today and now, they have little fear for the future and gone are the days where job security was so vital to our post education career…today they start the career then take a break and are then back in job and soon after again they take a break, and there are jobs for all such nomads and industry is accepting the mindset of the new generation and a society has starting accepting new way of living our life.

    As rightly enumerated whatever be the thought process and whatever may be the outlook of this generation they all need money to take care of their aspirations and the kind of buying they do, and the kind of things that keep tempting them. Yes house to car to travel, there is no end to this want in our life, by the time we have our car, the next thing is there in the market questioning our purchase and standing in the society, one travel in few years are history now, we all want to travel few times in a year and the travel channels keep tempting us…house we keep renovating and we keep changing the place for a better positioning statement.

    Early saving is the best thing one could do and this generation is undermining this very important need and the power of early and regular saving. Earning is one aspect of wealth creation equally important and even more important is how we plan our saving and multiply our wealth by wise planning and better deployment in different assets classes and the de-risking by not putting the eggs in the same basket.

    Another nice post on the financial planning and investment proposition for a better future.
    😀

    Reply
    • July 31, 2017 at 12:10 pm
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      Thank you so much, Nihar. You have highlighted so well that earning is one aspect of wealth creation, the need for which is well understood by all generations.
      Though from time to time, we have been taught by our elders about the importance of saving, very few people emphasize upon the need for investing and proper wealth planning. Today’s younger generation is digitally very savvy, and it is easy for them to invest if they inculcate the discipline. As you say there is no end to aspirations, the benchmark will always shifting up. Given the consumerist mindset, the earlier people realize the advantage of wealth planning, the better it is in terms of returns.

      Reply
      • July 31, 2017 at 2:30 pm
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        You are absolutely right Somali, with a higher cultivation of a consumerist mindset, the need for wealth planing becomes more important, yes this digitally savvy generation have so many options and so easy to get them done only what matters is the appreciation for early saving and discipline in investment. As most of this generation live for today and now, making them understand about the contingency plan becomes a tad difficult, as they have a higher appetite for risk and they have dismantle the bogey of fear of failure we all have been carrying for years and failure is not more a taboo…

        Great insights from these articles for this young generation who have taken things for granted and they need a torch bearer and this insightful posts of yours keep providing those much needed awakening.
        😀

        Reply
    • July 31, 2017 at 12:13 pm
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      Very well said, Rose. The habit to save can be adopted right from the childhood and in their 30s, people can take up proper wealth planning. Have a great week ahead.

      Reply
  • August 1, 2017 at 12:38 am
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    Actually, I think, we don’t think much about the future when in early twenties. We tend to take the world in our stride. With passing years, slowly, wisdom appears and all of a sudden we feel the need to save and invest 😀 But, as the adage goes, an early bird catches the worm, so, it’s always a prudent decision to start investing early. Quite an eye-opening post, Somali…nicely explained… 🙂

    Reply
    • August 1, 2017 at 7:12 am
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      Very true, Maniparna. We live the twenties thinking that forties are a long way off, and then suddenly we realize how fast time has elapsed. Midway in the thirties it is good to start being worldly wise and start saving and investing for later in life. Thank you for sharing your views. 🙂

      Reply
  • August 3, 2017 at 12:55 pm
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    Another important post.. And we invested when my hubby was in his 30’s into a future pension.. It was hard at the time financially to manage to commit to regular investment each month to a pension pot.. I recommend those who are young now to think about their future in later years.. If we had not done that, we would still be struggling more so now..
    😉 Love and Blessings
    Sue

    Reply
    • August 3, 2017 at 5:00 pm
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      Hello Sue. Thank you for sharing your own experience of starting to save in the pension scheme early on. Happy to know it is something that you would recommend to the younger generation.
      Have a lovely weekend. 🙂

      Reply
  • August 3, 2017 at 10:37 pm
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    I open my first saving account in my 20’s and start investing in 24′. Because of my mentor, like you she shares with me here own experience and make me realize that waiting money on superficial stuff that will not last is not good. It’s always to hear other people experience. Thanks for sharing

    Reply
    • August 4, 2017 at 4:43 am
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      Thank you very much, Melissa, for telling us how your mentor inspired you to start saving and investing. Investing is a matter of discipline and it is never too early to start investing. Have a good day. 🙂

      Reply

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