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Avoid The Debt Trap And 5 Other Tips For Millennials To Save Their Hard-Earned Money

Posted: April 6, 2020

A lot of us probably are new to saving and investing money we earn. But fret not, here are 6 tips to help you save and invest, in the new financial year!

“Hey Ciana! What are your hobbies?” Alex asks her. “Shopping,” she replies, managing to grab everyone’s attention.

Ciana is an independent girl working with an MNC and who leads a luxurious life. She earns a good salary and spends it all on clothes, jewellery, and movies.

Alex was already blown over by her, thanks to the clothes and the makeup she had put on. And thus, he didn’t hear her answer.

When she’s happy, Ciana shops, or when she’s sad she shops. She also shops when she wants to celebrate anything. For Ciana, shopping is an integral part of life.

As time passes, Ciana moves on with the same lifestyle. She’s a free bird who enjoys her life to the fullest. Her life is her own and she spends it with her friends, family and Alex. It is all wonderful.

And then recession strikes, and strikes hard

Until one day, a few years after their marriage, recession strikes and Alex loses his job. Ciana too, is informed of the recession by her office. Her HR person tells her, “Either you keep working with us for a lesser pay or find a new job.”

Given how bad the job market is, she can’t even think of the second option and thus, sticks to her old job- with a lesser pay and no perks. Now this means, no parties, no new clothes, jewellery or even movies.

Since neither Ciana nor Alex have saved up any money, and Alex’s lost job, things between the two are a little awkward. And to make some extra money, Ciana sells practically all the branded things she owns while the bank blocked her cards, thanks to the non-payment of bills.

Days pass and Ciana and Alex learn to live frugally. One day while Ciana is at a grocery store, buying the essentials (a job earlier delegated to a helper) a friend notices her. She thinks to herself, ‘Is that really Ciana? Without makeup, not at all looking like her former dazzling and glamorous self?’ Moving closer, she realises it indeed was Ciana!

The friends catch-up at a near-by café where Ciana tells her friend, Tina, her condition. Once Tina understands what the issue is, she decides to lend her two cents to it. She gives her friend some rules and tips to follow to manage and save money.

Here are the tips

Start budgeting

Before you begin saving, you need to plan your basic needs. These include the utility bills, rent, fuel, insurance and groceries and kids’ school fees (if you have any) So make a list of your monthly spending on these before you plan a visit to the grocery store.

Another thing that helps is the division of your expenses into three parts- Need/Important, Optional/Unrestricted and Entertainment/Travel. There are several apps to help you plan these. Or you can simply open a diary or an excel sheet and plan it.

Then, plan

Once you get your salary, immediately park 10 to 30 percent of it in a savings account. A savings account is the easiest way to save money and generally also has a fixed deposit linked to it which gives you better rates on your money.

This could be your rainy day fund or your travel fund for the trip of your life time.

Post planning, structure your goals

Set up goals for yourself and divide them into three categories- short-term, medium-term and long-term. Then focus on each one and the time you’d need to achieve it. Along with this, also map out the amount you would need for each of them. These could be anything right from a vacation to a house or even a car.

Now invest in the right tools

Where to invest? That is the question a number of us face. So here’s what you CAN do- start small, with a recurring deposit or fixed deposit account. Once you understand your target, plan to convert your savings into investments.

Then take into account other factors like returns, liquidity, and tax liability before choosing an asset class. Do not blindly take advice from anyone, conduct your research about the market before finalising anything.

Save some money for the dark, rainy days

When most of us start earning, we are so excited by the prospect of making money and buying things, we forget to save. The want to buy fancy new things overpowers need to prepare for financial traumas.

And when something suddenly strikes, the loss of a job, a medical emergency, there arises a problem. So the first thing you need to do, is start saving for emergencies. It should be equal to three to six months of your household expenses and should include loan refunds and insurance premium responsibilities. This amount should be easily accessible.

Avoid the trap of debt

When you will start earning, you will opt for the credit cards. The world is full of scammers trying to steal data and trap people. DO NOT share your details with anyone- these include your OTP, PIN and CVVs.

Additionally, be careful when you use a credit card. They are useful only if you restrict the credit to a month and pay the bills on time.

Other than these, try to invest in insurance that serves its purpose and optimises long-term savings.

As Tina leaves, she says, “Ciana, I am sure that you have understood the value of savings and now onwards you will be more careful in the future as well.” A little abashed, Ciana nods.

I am sure we all have learned something from the insights provided, as financial planning is a must for every one of us.

Picture credits: Still from Bollywood movie Aisha

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