Moneycontrol
Jul 27, 2017 01:52 PM IST | Source: Moneycontrol.com

You are ahead of most millennials financially if you have done these 5 things

If you are not up to speed with these 5 things to save and invest money, better get your act together.

You are ahead of most millennials financially if you have done these 5 things

Nikhil Walavalkar

Moneycontrol News

Peer pressure is one of the more important things in the lives of most millennials. Photos of vacations, electronic gadgets purchased, fine dining moments, bikes - all make good ‘facebook posts’. In most cases, many keep planning towards the idea of how to be ahead of their ‘friends’. Buying the right gadget before others get it, going to more exotic vacations before others post their photos of their visit to that destination, is the thing to do. Here are five money steps you need to take. If you have already taken them, you are ahead of most other millennials financially.

Have your emergency fund in place

Do you have an amount equal to at least six months of expenses in a bank fixed deposit or a liquid fund? If yes, you have created an emergency fund. “If you lose your job, the emergency fund comes to your rescue till you get another one,” says Tanvir Alam, Founder and CEO of Finkart.com. Job jumping is common among young employees. Often one decides to take up a full-time short course and quits the job. Emergency fund can be of help in such situations.


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Though the rule-of-thumb says that one should have six months’ expenses ready in the form of a bank fixed deposit, it would be better if you have more. It offers more breathing space. The emergency fund should also account for your EMIs. For example, if you have monthly expenses of Rs 25,000 and an EMI of Rs 5,000, then you should have at least (Rs 30,000X6) Rs 1.8 lakh in the emergency fund.

Know your credit score and have a debt servicing plan

Most personal finance experts admit that younger individuals more often have loans than investments. That makes the liabilities equally important if not more.

It is a good idea to check your credit score. Credit score, the measure that captures your loan repayment track record, is an important indicator for the banks while approving loans. A number more than 750 out of 900 is seen as a good score. If you have a debt repayment plan in place, you have understood the importance of debt management in your money matters.

“Differentiate between good loans and bad loans. Target bad loans first,” says Tanvir Alam. Typically, loans raised for consumption purpose – personal loans, credit card loans are termed bad loans and carry very high interest rates. Try to knock them off first. Home loans and education loans are good loans. Get a debt repayment plan in place. One should diligently repay all his loans on time and maintain a good credit score. This ensures better access to credit in future.

You bought term life insurance

Not many think of protection as the sense of responsibility hits over a period of time, typically after marriage or a child birth. But insurance is something that you should be buying as early as possible. If you have bought adequate life and health insurance you are far ahead of others.

“Buy adequate term life insurance when you are young. This ensures that your dependents are taken care of in case of an eventuality,” says Nirmal Rewaria, Founder and CEO of Finpeace. Consider buying health insurance and personal accident insurance as it comes at a nominal premium.

Know your monthly budget and you stick to it

If you really want to achieve financial independence or retire early, you should know where your money goes. Most young individuals do not have a clear idea of their expenses. If you know your monthly budget and you are sticking to it – you have taken control of your personal finances to a greater extent and there is a fair chance that you will succeed, say experts.

“Instead of spending money out of your income first and saving remaining amount of money, first decide how much money you want to save,” says Nirmal Rewaria. This helps you to invest better and achieve your financial goals.

You have started saving for your financial goals

While some of us save and invest, not many are aware of their goals. Investing without a financial goal is akin to travelling without a destination in mind. Rarely one defines his financial goals. Personal finance experts prefer financial goals that are simple, measurable, achievable, realistic and time-bound. If you can specify what you want to achieve moneywise and time wise, you can devise a plan for your goals. If you have clearly defined financial goals in mind and you are saving for them, you are on track. Just stay put.
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