Accounting for nearly 27 per cent of the global population, millennials, or those in their mid-20s to late-30s, have taken centre stage across consumer markets. The dominance of this generation is even more remarkable in India, with one-third of the total population falling in this category. Moreover, with millennials forming 46 per cent of the workforce in India, and contributing 70 per cent of the total household income, this is the segment, which has money in its pockets and looking at various options to invest it.
According to a recent study*, COVID pandemic has changed the way this generation looks at money. While millennials earlier believed in buy-now-pay-later policy, now they are suddenly thinking about saving for a rainy day. Professionals who face the risks of salary cuts and layoffs are learning to adjust with less money. According to a survey by the Indian Society of Labour Economics (ISLE), approximately 80 per cent of jobs were affected in urban areas (which includes job losses, salary cuts and salary delays). In contrast, the pandemic affected 54 per cent of employment in the rural economy.
Such circumstances have made efficient money management even more critical, especially for millennials who have a considerable share in the economy. To help them do that, here are five money management tips that can help them not only survive the crisis but be prepared for any future uncertainties:
1. Create a budget: Before you figure out the right ways to manage your money, you must have a fair idea of all your income and expenses. It is crucial that you have a list of your monthly expenses, divided into essential and non-essential ones. All income sources should be a part of this budget; the interest on deposits, dividends, rental income and others, apart from your salary. This planning would help you understand the overview of your flow of funds, both incoming and outgoing. Irrespective of whether you are good or bad at handling money, you must spend a few hours each month in finding non-essential expenses and possible ways of saving more by making some changes to your day-to-day life.
2. Become Financially Literate: Understanding financial instruments is not everyone’s cup of tea. So, unless you make an effort to understand them, you may find yourself in a position where you invest money without any idea about how much risk it involves and how much returns they may fetch. So no matter your area of expertise, teach yourself the basics of personal finance. It is essential to be aware of what mutual funds are, how SIPs work and how important it is to have insurance. These days, you can make most of the investments on your own through online platforms. You can invest in mutual funds through a few clicks of your mouse or taps of your fingers. You can understand how much you need to invest for a given goal using online SIP calculators. With some financial literacy, you can make the most out of your time spent on the internet and your money.
3. Do Not Feed on Lazy Money: Idle funds lying around in your home or your savings account are barely covering the effects of inflation. Depending on your age and other factors that affect your risk-taking ability, make meaningful investments. Most people prefer keeping aside their six-month total expected expenses in liquid funds and invest the rest for different goals. A savings account’s primary purpose is to keep your money safe and not help you earn from it. For starters, mutual fund investment is excellent. You can use SIPs to invest in them. To know how much to invest, you can use a lump sum mutual fund calculator or mutual fund SIP calculator.
4. Curate Long-term and Short-term Goals: An efficient financial plan comprises of two types of goals – long-term and short-term ones. The short-term goals can be planning for a vacation or buying a new gadget or a car. On the other hand, a long-term goal can be planning for retirement, children’s education or marriage. You must allocate funds accordingly for different purposes depending on their priority. It is imperative for you to understand that long-term goals take years to accomplish, and you need shorter duration landmarks for them to keep yourself motivated.
5. Make it a Habit: You must understand that it is not a one-time thing. You cannot practice financial wellness and money management for a month, a quarter, or a year. One should imbibe these habits as a part of the lifestyle for a lifetime. When you are starting, you cannot expect to be an ace investor. However, the more experience you have, the more additional income you can generate through your investments.
The good news is that millennials by far are the most digitally savvy investor group overall. With their preference for technology-based interactions, they are bringing wealth management into a future rife with automation. Due to their significant share in the global population, wealth management companies are also scrambling to cater to them and bringing them digital and simple ways to invest. All it takes is a little bit of effort and a few carefully taken steps to make most of what the world has to offer in terms of wealth. With a little bit of financial discipline and a careful selection of investment instruments, they can grow their wealth seamlessly into a considerable corpus.
*Source: Financial Express study
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