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4 Wealth Building Habits to Start in Your 20s

 
  By : , Delhi, India       27.3.2019         Phone:-          Mail Now
 

“I made my first investment at age 11. I was wasting my life until then” – Warren Buffet

When it comes to success, there is no better story than that of Warren Buffet, the “Godfather of the Investment World”. Whether we talk about his unique take on strategising businesses or his simplistic approach towards life, Buffet is the personality to look up to for all young investors and working professionals.

Therefore, when he says that starting early is key to better financial planning and wealth creation, we can take his word for this. In fact, various studies show that the financial habits and skills that you develop at an early age, especially in your 20s, do have a definitive effect on your finances for years to come.

As a result, it is crucial to be proactive and flexible to develop an investment acumen early on if you wish to take control of your finances. To help, here are some essential wealth building habits that you must start on your 20s.

1. Investing Early Yields Benefits in Spades

Let’s say you invest Rs. 5,000 per month starting at the age of 20 years and continue doing so until you’re 60 years old. At a decent 8 percent rate of interest on your investment during that time, you would have approximately Rs. 1.75 crores in that account alone.

In case, you decide to wait until you were 30 to get started, you would only have up to Rs. 75 lakhs by the time you reach the 60-years-old mark. In terms of numbers, those first ten years of investment you missed out on, would cost you up to Rs. 1 crore in returns – even though you only skipped investing Rs. 6,00,000 and ten years of deposits!

This is the magic of compound interest, which helps maximise your savings by compounding them on themselves. Thus, if you want to be financially secure in the future, then you would have to start early to leverage the power of compounding and put it to work.

2. Set Regular Financial Goals

Setting clear financial goals early on in your career can help you stick to your budget, maximise your savings and build wealth. You can segregate your goals into short-term, mid-term and long-term financial goals and then work towards accomplishing them accordingly.

For example, goals such as going on a vacation or buying a MacBook Pro would classify as short-term while purchasing a car could be considered as a mid-term goal. Long-term goals usually require significant financial backing, therefore, planning your child’s education or marriage would automatically fall under long-term goals.

That said, setting up your goals and prioritising them would help you avoid any last-minute hassles of creating funds and putting them to use.

3. Diversify Your Financial Portfolio

While investing early into equities can help anyone to create wealth in the long run, such investments alone cannot fortify your plan for a financially secure future. Instead, there are other aspects that you need to include in your portfolio.

Just like you need to spread the butter evenly on the entire bread slice, rather than just putting it on top of it, you must look to diversify your financial portfolio rather than making it unidimensional.
Thus, you need to consider other forms of investments too, including life insurance, health insurance and retirement plans. For example, instruments such as online ulip plans from reputable insurers such as Future Generali not only allow your savings to maximise through money-market returns but also secure your finances with a life cover and yields tax benefits. Moreover, these Online ULIP plans come with many beneficial features like switching facility, top-up facility, multiple fund options and so on.

Overall, you may start small in the beginning, and later on, proceed to allocate varying proportions of your savings into a variety of instruments.

4. Automate Your Investments

Regardless of where you are in terms of personal finance management, it is crucial for you to automate your investments. Doing this would help make sure that your investments can take care of themselves and you can focus on other aspects of your portfolio.

Automating through ECS (Electronic Clearance Service) will also allow you to save consistently, without having to choose between delayed and instant gratification. For example, investing in allows you to automate premium payments, whether you have chosen a monthly or an annual payment mode.

Building Wealth is All About Maximising Your Savings!

The bottom line: if you can inculcate the habit of saving and investing your money during your 20s, you will allow your finances ample time and opportunity to grow. Moreover, you will be able to protect your investments better and fulfil your life goals hassle-free. Remember, it is a lot easier to build wealth when you prioritise saving and making investments, instead of an afterthought.




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