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When it comes to their monetary or financial planning aspects, a majority of young adults have moved on from the traditional and safe saving avenues put forth by their parents. The rising consumerism and the easy access to luxuries have led to the young adults focussing on spending more. However, the larger focus on easy expenses, fuelled by credit cards, mobile wallets, QR Codes, etc., can lead to a disbalance in the financial planning, leading to a host of monetary mistakes.
Below we have compiled four common mistakes made by youngsters.
● Getting heavily influenced by the ‘influencer’ lifestyle
Influencers are individuals that have a significant following on any social media platform. They regularly upload photos and vlogs of their lifestyle, purchase of certain brands and vacations to exotic locations. For influencers, this lifestyle is their source of livelihood and most of the expenses are managed through brand partnerships and sponsorships. However, certain viewers or content consumers fail to understand this aspect.
The influencer way of living seems to attract the youngsters that tend to live vicariously through these videos and posts. It is only natural that millennials will want a similar life when they start earning. They use their credit cards to incur extra debt to facilitate a manner of living that they can flaunt on their social media. This is harmful, as they do not prepare for financial and other emergencies.
● Debt mismanagement
Education loan is the first loan that youngsters take to finance their higher education. While it is true that education loans provide access to wider knowledge, they can be stressful in the longer run. These loans are prone to higher interest rates. If not dealt with during the initial phases, then they might become cumbersome to repay.
Proper financial planning and good tax planning is essential to handle debts. Young adults might also take car loans, house loans and credit card debt. However, instead of building up more debt, young adults should focus on repaying the existing liabilities first.
● Wrong perception about insurance
Most youngsters think that life insurance policies are for older people. This is untrue, as insurance policies are meant to protect the individual and their family irrespective of their age.
Young adults can also choose an insurance plan that combines life cover with wealth generation, such as Unit Linked Insurance Plans. A ULIP policy@ is a versatile investment that provides life coverage and invests money in market-linked funds on your behalf. ULIP schemes@ also provide significant tax benefits
Additionally, if an individual has financial dependents, they should definitely opt for term insurance plans. Term plans offer affordable premiums and high coverage for youngsters. Finally, considering the rising medical inflation and the ongoing health crisis, it is also advisable to invest in a comprehensive health insurance plan.
● Spending more than Investing
People tend to spend more on materialistic things instead of focusing on wealth creation. A proper financial plan includes a good investment strategy. You can create different funds for different financial goals for different stages of your life. The mere magic of compounding can only be felt when one starts early. The more you delay investing your money, the more money you lose due to inflation. Keeping in mind these money investment tips could prove to be a lucrative option.
Tata AIA Insurance plans come in varied categories to provide diverse benefits to insurance seekers.
Tata AIA Life Insurance Fortune Pro (UIN: 110L112V04) is a ULIP scheme@. In ULIP (Unit Link Insurance plan) @, the premium you pay is divided into two parts. One part is used to provide coverage, while the other part is invested in the share market. You get tax benefits# under Section 80C for the premium paid. But taxes may apply to the profits from the equity investments.
There are various avenues where you can opt to invest your money. Fixed deposits, Public Provident Funds and life insurance savings plans are the go-to place for risk-averse people. They feel safe knowing that their money is in good hands.
People with higher risk appetite invest directly in the equity markets through their Demat account. Youngsters that are risk-neutral might go for mutual funds. They can invest in other financial instruments such as debt funds and multi-purpose insurance policies as well.
You might come up with excuses like youngsters do not make much money, to begin with. That is not going to suffice. You will have to make significant lifestyle changes to start leading a financially secure life. Even if you save and invest ₹500 per month, it can still make a difference. Therefore, focus on changing your lifestyle and formulating a financial plan to help you lead a worry-free life when you are older.