If you are in your late 20’s then this blog is for you!
By this age, you must be getting to hear the clichéd- “you need to settle down”. And they are not wrong. By now, you must have found a suitable job and stabilized financially. It is high time that you plan for the remaining.
Here are a few financial decisions that you must take before you enter your 30’s.
1. Insurance
Getting insurance for you and your family is very important and everyone must be insured.
Life is unpredictable and you must be prepared for the challenges it throws.
Out of the several insurances available, two most valuable insurances you need to avail are medical and life insurance. Both life and medical insurance will also help you save tax under Section 80C and Section 80D respectively.
It is recommended that you get life insurance at the earliest as the premium will be less and so will be the complications.
With rising medical costs, medical insurance will help you cover your medical expenses. Even if your employer provides you with a medical cover, it is advisable that you buy an additional medical insurance cover for you and your family.
Tip: Remember, insurance is an expense and not an investment. Avoid buying money back plans that usually offer lower returns. Also, while choosing life insurance, always go for term insurance.
2. Buying a house or rent
Everybody wants to have their own house at some point in life. While some people buy a house of their own, others prefer living in a rented house lifelong. However, for most people, buying a house is more of an emotional purchase rather than a logical purchase.
It is important to understand the pros and cons of buying a house and living in a rented house before making a decision as it will have a huge impact on your future financial planning.
3. Start investing early
Compounding is a powerful term in finance and you must understand it before investing.
Assume that Mr. A starts investing Rs. 10,000 every year at the age of 25 and stops at the age of 35 but does not withdraw. Mr. B starts investing at Rs.10000 every year but at the age of 35 and continues till the age of 65 years old.
Who do you think will earn more?
Well, if your answer is Mr.B then you are wrong. As Mr. A started investing early in his life, he benefited immensely from the power of compounding and earned a handsome interest. Therefore, it is recommended that you start investing early in life and accumulate a generous corpus by your retirement.
4. Choose the right career
By the time you are 30, you would have probably settled in a job. If not, it is time you do some soul-searching and understand what works for you and stick to it.
If a friend or a relative has started his/her own firm does not mean that you should take the plunge as well. You may not be cut out for business.
You need to analyze your strengths and weaknesses and take calculated risks. Remember following your passion always does not help pay your bills. So, it is important that you choose a career that makes you happy and will help you follow an investment routine to get a good amount of savings by the time you retire.
5. Work out your emergency fund
Setting aside 3-6 months of your monthly expenses as emergency fund is important. This will help you in case of a financial emergency. However, make sure that you don’t withdraw money from this fund unless required.
6. Plan your retirement
Don’t be surprised to read this. Most people are not prepared for their retirement and this can cost you a lot. Avoid relying on your children for your expenses and not saving enough for your retirement.
Start planning for your retirement before you hit your 30’s. You may contact an expert financial advisor who will help you save a good retirement corpus.
7. Be debt-free
With easy access to loans and EMI schemes, more and more people today are under debt. This you will have to take care of or at least take steps to reduce it.
Next time, before splurging your bonus or salary increment on the latest mobile phone, you can consider pre-paying your loans and become debt-free.
That said, not all debt may be bad. Debt taken for high-value assets such as starting a business or buying a house are good ways to be in debt.
Conclusion
The above-mentioned points are some of the important decisions that you will need to make before you enter your 30’s. It will help you plan your future in a better way.