Depending entirely on credit is a bad idea. | Photo Credit: BCCL
New Delhi: Good financial health leads to better and informed decisions. At the beginning of the job, most of the millennials end up exhausting their complete earnings by the mid of the month. Individuals in their late 20s tend to skip planning, budgeting and checking the expenses following which they become a victim of a debt trap, revolving credit cycles, heavy interest payments on Equated Monthly Instalments (EMIs), etc. If not a robust financial plan, individuals should at least follow some steps by which they can save more and have a financially independent life.Five personal finance habits for beginners
Preparing a budget
Allocating the money to the basic and obvious requirements can be a good idea. For periodic needs such as house rents, electricity bills, housekeeping salaries, water bills, food expenses, travel expenses etc, money should be reserved at the beginning of the month itself. With this step, you are not required to worry about these expenses.
Saving and investing in the early stages of your career can be easy as at the beginning of a job, individuals are not bound with many responsibilities. You can choose any asset to invest depending upon the the risk-taking capacities.
Low dependence on credit
Depending entirely on credit is a bad idea. In case there is an unplanned requirement or a temporary unemployment, then you will not be able to meet the basic needs. On a safer side, credit dependency should not exceed 40 per cent of the total income. Credit can be in any form, short term loans or credit cards.
You should have a weekly review of your expenses, so that you can track the quantum of unplanned expenses. This will also help to check overspending on any particular item.
Maintaining emergency fund
An emergency fund is best suited for individuals living alone as at the time of urgent requirements, help from other sources may take a while to reach. You can opt for a liquid saving option from which money can be withdrawn quickly, one can consider bank fixed deposits (FD), recurring deposits (RD), mutual fund SIPs, etc.