If you’re in your 20s, adulthood has hit you, and life’s responsibilities are starting to build up. All of us can relate to the pains of being in our 20s, when expenses range anywhere from buying clothes for work, to a vehicle of your choice for conveyance, and from wedding shenanigans to vacations and home related expenses. With these aspects, savings and investments usually take a backseat.
But, you should also realize that aspirations and dreams of the future can only be realized through safe and smart investment as well as financial management. A secure job and high income are not the only fuel you need to sustain a good, well balanced life.
If you are in your 20s, we have rounded the best tips for sound investments and financial management:
Making a personal budget is seldom taught in schools. This is a trait that must be learnt by the person him or herself. Many tools are available off the internet. But the principles are simple- they remain the same. The importance of leading a life with clear financial objectives cannot be understated. The most important element of the budget should be saving, which should remain untouched and invested later in some of the tools described in the following paragraphs or several other investment opportunities available in the market.
The Best Investment
There can never be any investment as good and rewarding as investing in you. Seeking higher studies; MBA, FCPS or Master’s degree in your related field while being on the job should be considered seriously. Higher education can put you on the higher end of the career ladder, and the salary spectrum as well. Having said that, the focus should be to add to your credentials, so that you can use them to better your career.
The foremost financial decision a young person can make is purchasing a Life Insurance from his or her first salary. There are two distinct reasons to do so; social and financial. While a young person buys insurance cover he or she safeguards the financial requirements of the family, in case of an incident. Considering that, cost of the premium is far too low for the same amount of cover. A life policy for a period of 30 years will mature when you reach the age of 55, and you can then reap benefits of the huge pay out at the time of maturity of this policy. You can definitely add to your portfolio by buying an additional policy or two, as your salary grows over time.
Defence Saving Certificates
This is the safest mode of investment with high returns. These certificates are available in denominations starting from Rs. 500 to 1,000,000 and their rates of return vary, with the most recent rates being 7.4% per year. If you buy a certificate for PKR 100,000 today, your ten-year returns can be up to PKR 207,000. Defence Saving Certificates can be cashed at any time and there is no upper limit of investment and it is on the discretion of the purchaser. If you continue to purchase these certificates, you can earn a steady stream of income, and reinvestment can yield better income in the future.
Special Savings Certificates
These certificates are also government issued therefore exceedingly safe to invest. SSCs have a maturity period of 3 years after which the investor can have them either cashed or reinvest. The profit on these certificates is given every six months. This unique feature is extremely favourable for those who expect some sort of financial return on their investment. The profit can be used for any immediate need, buying household appliance or perhaps reinvested for greater returns for some huge investment in the future such as buying a house. These are available in the denominations starting from Rs. 500 to Rs. 1,000,000. The present rate of return is 6% which is occasionally revised by the government.
Generally, if you are a salaried individual, your company provides you with the avenues, documentation and choice of bank where you should open a bank account. However, you should evaluate the option of a “Profit & Loss” Account or a Savings Account. While you put money in your bank, it can accumulate profits. Different banks have different profit rates for their savings account options. Once you transfer your salary or savings into the account that you open, it starts accumulating profit on a daily basis. Banks announce profit at the end of each month based on the days balance.
Loans and Credit Cards
Early during your career, a personal loan or a credit card can be pretty damaging for savings and investments. If you do intend to obtain a loan or apply for a credit card, you should evaluate the need, see your capacity to pay back the debt, and understand how it can impact your savings and investments. Learn to compare different fees that will be applicable, and the amount of time and money you would have to invest in paying back the loan. Compare loans and credit cards to see which one would work best for you.
Gold prices have varied over time in the past few years, but with a longer term investment strategy in mind, gold can be a good investment. In the long run investment in gold pays; and pays well! Gold was half the cost some ten years back and here we are strategizing of a long term investment. Although buying gold is an expensive affair but it is recommended to buy in small grams every few months.
Some of the biggest mistakes you could make during your 20s would be not to start investing. If you start today, you have a margin of 30-40 years to multiply your money. With sound strategizing, you can consider having your money pay you returns on a regular basis to supplement your primary income.