Dear millennials, use time and technology to your advantage on money matters

Representative image

Millennials and Gen Z have never had it so good. A booming stock market, easy-to-invest facilities to direct your money to mutual funds, new-age instruments such as Bitcoins and Non-Fungible Tokens (NFT) and a plethora of festive offers to satiate your urge to splurge.

The abundance of choices also makes it imperative for you to exercise caution. On World Financial Planning Day, take a pledge to adhere to this list of seven dos and don’ts for a secure financial future.

Restrain yourselves during bumper festive sales

It’s raining offers and discounts. Festive sales offer great discounts, but use them well. “As clichéd as it may sound, it is important to make and stick to a budget. You can carve out a ‘fun’ or discretionary budget within this, and ensure that you adhere to it,” says Mrin Agarwal, Founder, Finsafe, a financial education firm.

How many credit cards should you have?

You can have more than one credit card, depending on your requirements. But make sure you pay your dues on time. Again, particularly in the current festive season, avoid converting your purchases into EMIs, unless you absolutely need the item and can’t afford to pay for it all at once.

Never make the mistake of paying just the minimum amount due. The annual interest rate of 39-45 percent will make clearing the dues in a short span nearly impossible, pushing you into a debt trap.

Avoid the lure of quick money

Millennials have taken to investing in cryptocurrencies in droves. While the regulatory sword continues to hang on this investment avenue, you can dabble in it, with some precautions. “You can try your hand at bitcoins or P2P, but do not invest more than 5 percent of your portfolio. Also, be prepared to lose money in this arena,” says Agarwal. Investing in cryptocurrencies can at best be an experimental, and not core, investment strategy.

Invest in equities, but first do your research

Equity markets have gone up and many people have made a quick buck, especially those who entered during the COVID-19 lockdown last year. These investors haven’t really seen a falling market. And that’s dangerous.

Preeti Zende, SEBI-registered investment advisor and Founder, ApnaDhan Financial Services explains the difference between trading and investing in equity shares. “Share trading is meant to make quick money. But if you do not understand how it works, do not burn your fingers. If you want to experiment, learn the basics by enrolling in courses. Start with smaller amounts,” she says.

More importantly, do not borrow funds to trade in the stock markets. “Also, what has worked for others, may not necessarily work for you. When someone tells you they doubled their investments, they will not tell you the amount he/she might have lost,” she adds.

Beware of free stock tips and tall claims. “There are social media influencers with huge following. But there have been cases where they have given wrong stock tips,” says Agarwal. Adopting a prudent, research-backed approach with calculated risks.

A mutual fund is a better alternative.

Health insurance comes real cheap

Your parents might not be dependent on your income, so term insurance purchase can wait for now. However, you must have adequate health and personal accident policies of your own in place, even if your employer provides these covers. Start with a health insurance cover of Rs 5 lakh and review it every five years. It will have to be enhanced at every life-stage – when you get married, have kids and so on.

Also, set aside at least 6-9 months’ expenses as emergency corpus. It will come in handy in case of job loss or other financial emergencies – something that we saw during the first few months of COVID-19 in 2020.