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DON'T Make THESE Financial MISTAKES in your 20s!
Kumar I hope you are doing well I am writing this with great
hope of getting suggestions from you This email came to me last week and this
email absolutely shook me We have been doing Money Matters for the last three
months There are 12 episodes For those 12 episodes, if not anything else, we
have at least read the forms of the people who want to come on Money Matters
and then through their story, we try to understand whose story we can help the
most.
You will find which story is what, what can you learn, what
can you know and some are really very scary like this email was My salary is
not too high and I have a debt or loan of Rs 25 lakh borrowed from family for
marriage. My sister 's recent credit card loan of Rs. 12 lakh is outstanding.
Personal loan is of Rs. 1 lakh whose monthly EMI is Rs. 66000.
I also have a home loan pending position for which I pay EMI
of Rs. 0000. Household Expenses & Everything else come later, I don't know
how to repay this loan, especially my credit card bills. My salary is Rs. 1300
per month. My brother gives me Rs. 000 per month. I also take my mother's
pension of Rs.
0000 per month on an average. 00 Hajj I meet and even then I
don't understand what should I do with this person. Even if I want to help this
person in my 20s, I don't even know where to start. I will probably help this
person with all his might. Every person will come out of this at some point or
the other, but how did they reach this point? How did they reach this point?
That's what this video is about. These 20 in your 20s.
Never make mistakes with money. Number one note. Keeping
Track of Your Money In Money Matters, first of all we ask people, do you know
where your money goes? Do you know how much money you get? And it is shocking
how many people do not know. The idea is not big, everyone knows the story,
everyone knows where the money goes, how much is going on rent, electricity,
how much is going on travel, how much is going on food, how much is going on
clothes, how much is going on subscription, how much is going on house. They
are
sending a party, how much money is being spent, how much
money is spent together, you know what the biggest reaction is, when I take an
excel sheet and add all their income and expenses, I tell them that your ₹ You
have an income of Rs 1 and your expenses are Rs 80 and you should save Rs 0 per
month. And they are like you are not saving.
You are writing on an excel sheet that we should save. We
have no idea where our money goes. First and foremost. Do n't keep track of
where your money goes. Start downloading a money management app. Start an excel
sheet. Make a notebook. I have spent two or three rupees on even the smallest
samosas in my entire life.
In those days, that was so much. And that's how I got a grip
of where my money goes every month. If you find out, then not budgeting is a
huge mistake. What does it mean that your Out of the Rs. 00 or whatever amount
of rupees you generate or generate your income, how much percentage will you
spend on your needs, how much will you spend on your desires, how much will you
keep aside and start investing, there should be a budget for this because if
there is no budget.
If it does n't happen then the money will be wasted and if
it is wasted then there will never be an account, so the 50 30 20 rule about
which I talk a lot is the basic budgeting rule that 50 % should go towards our
needs, your rent is done, food and drink. 30 rupees have been spent but towards
your desires because life has to be lived and have fun, that's why we are
earning money, what will we do after earning crores of rupees in old age, when
we have no teeth, no legs, we still have life to live, so 30 rupees But you
spend on those things
which you want to do, take the phone, go on vacation, party,
whatever, but within that 30 years and then in 20 years, you will invest and
what will this investment be for? Those are the big money decisions of your
life. Your house's down payment is done, your children's marriage is done, your
own marriage is done, your own education is done, you will start saving and
investing for anything that is going to be a big expense.
Number three is on additional loan. The problem of staying
in debt these days is that credit has become very easy. I remember there was a
point where personal loan was the only loan that you could get without
mortgaging anything but to get that personal loan, You had to fight so much to
get your salary slip, ITR of 3 years, what is this so and so, download the app,
got that Rs.
000, got that Rs. 000, you don't even have to do anything,
it is easy to get that loan but at what rate of interest? What are you using it
for? And God forbid, if you are unable to repay that loan then what will happen
in your life. Do you know what happens to all these money? First of all it is
your phone book.
Let's read these which give very easily, isn't this a trap,
so they will take interest of 30, 35, 40, but if even one of your EMIs
defaults, then it will go to your family, to your office colleague, to your
boss. You will go to the bank and start telling them that you have taken a loan
and you are not repaying that loan. Your photos will get morphed and start
going on the internet.
You have no idea to what extent you can stoop to take your
money. That's why this easy credit and easy loan does not mean that keep
taking, please take as few loans as you can in life and this is coming from a
person who has learned what happens due to taking loan in the family. You have
seen it in front of your eyes, please do not take two loans in your life, one
for education and one for a house.
Apart from these two loans, if you have to take any other
loan, then take it only after thinking 100 times. Number four is to delay your
investment, so many. We meet people, read the applications of so many people
and why don't they invest, we are not able to save much, we want that when a
little money increases, when a little money starts coming, when a little You
will start investing only when you get regularity.
Friends, till then a lot of time will pass. You have to
start investing today by giving ₹ 5000000. Ignore the big number five
insurance, especially those people whose parents have retired. The entire
income is yours. You are the one handling the household expenses. If something
bad happens to your life, then what will happen to the family? What will happen
to the remaining debts? Insurance is not a tax saving product, friend, it is a
means of saving life.
If your life If something happens to you or your income
stops because you have become critically ill or severely disabled, then who
will take care of your family? This is why insurance is important. So I say
that at the age of 25 to 30 years, life Buying insurance is a very good
decision.
You are still very young so you will get very good insurance
cover at a very low premium and you will lock that premium for the rest of your
term which is the smart thing to do as soon as you turn 30 the premium
increases. Turns 35, premium increases and then it becomes a number six. Seeing
insurance as an investment is a big mistake.
The job of insurance is only to insure your life. Don't see
it as an investment, which is ULIP. These are guaranteed return plans. All
these plans look good but give less with really really poor returns. What you
should ideally do is take term insurance in insurance which will give you the
maximum cover for the lowest premium possible and a separate investment
product.
Create it Could be a Mutual Fund It could be an ELSS Equity
Linked Savings Scheme It could be even NPS Provident Fund Anything else but it
will be poorly An investment product Insurance Different investment Different
number seven Ignore an emergency fund I talk to so many people I read their
application and there is no emergency fund.
There are a lot of expenses being invested. The job has
stopped and now there is no emergency fund to handle those expenses. ₹ 5 lakhs
are lying in the bank and are invested in mutual funds. Where is this thinking,
friend, where is this understanding, it is very important to create an
emergency fund, you should have at least 6 months of expenses at any time and
those expenses are only the expenses of the needs, which is your rent, your
EMI, your food and drink.
Expenses are your monthly expenses by adding all those
things. Multiply it by six. You should always have that much money in the bank.
Get an FD for it or just keep it in the bank. It does n't matter. Don't let it
grow. Protect it. Because God is bad, if there is any emergency in your life,
then you can use that money.
Number eight company has given health insurance, only I am
covered in it, parents are not covered and we do not even think in our mind.
This is the only health insurance. Yes, go ahead, no. Don't think. First of
all, are the parents covered or not? They are the ones who need health
insurance the most.
You are young, the probability of hospitalization for you is
very, very low. Mother- Father is getting old, he will probably need more.
Health insurance should be number one. Number two is health insurance. If you
have corporate health insurance, then the day you leave the job, that health
insurance will end and then you will start all over again.
PD Pre-existing disease: This is the biggest clause of the
insurance that if your parents or maybe you have any pre- existing disease,
then the insurance company says that from the day you take the insurance, we
will not cover that disease because it is Even before taking insurance, we had
to cover this disease only after a few years or after some time.
Now the waiting time for PD starts from zero whenever you
take a new insurance, if you change the job. Who is 20 years old, is changing
job every 6 months, every year, your insurance is again zero, again means PD
waiting time, again means no bonus, you get no claim bonus, you have to have
your own personal health. Insurance as well for your mother.
Always take 100% health insurance for your parents. It
should be outside of your corporate health. Rain's number is very terrible. I
meet so many people who say that we do not invest. We trade, we fund, we take a
loan, I lose my mind, first of all, you are investing in an asset with an
unpredictable return, be it stock market, Forex, day trading, even long term
investing, all of them.
Are Variable Return Assets? This means you cannot predict
these returns at any point. You cannot say that this will give at 7, this will
give at 12, it will average come out to that but there is no prediction of the
loan rate. The return is fixed, you cannot bring two in it, you will have to
pay as much as they are asking for, now which loan will be that too, mostly it
is not personal, at 13, at 14, it means after deducting tax, your investment
will be as much as the return you will earn. It will be made at least at 13 14,
only then
you will earn money in it, it means after adding tax, you
will have to put the return beyond that at 15 16 17. This is to break even,
meaning you are giving the same amount of money you are earning to the bank
from which you took the loan. What has happened is that if you really want to
earn more on this then you will have to generate a return of 20%.
Do you know how difficult it is to generate a return of 20%?
This is what you have been saying with addiction in the last one or two years.
Hey, we are rock stars. So, we are sitting at Rs 30, we are sitting at Rs 40,
all this is going to be removed over a long period of time.
It is very, very difficult to get returns at Rs 20 with such
consistency and it is very good, so for you to take a loan. 13% that we will
generate returns at 20% and that too predictably Stupid Don't ever ever take a
loan to invest in something that is unpayable No. 10 Schemes to get rich
overnight There are many such schemes that you put in some chit fund or some
other Put it in a timber plantation, put it in a fixed deposit somewhere, there
is some scheme going on where you will get Rs 100, Rs 200, Rs 400 and you are
like yes bro, this is very right, we will put the money here, there is no free
lunch in life. There is
no free money anywhere. If you are getting money very
easily, that money will also go away and will go away. The Number of People
Caught in These Get Rich Schemes It is Unbelievable Because Greed is a Real
Thing and 20 When we are too impatient, greed overtakes us. Don't fall into
this trap. What is the best way to earn money? Earning money slowly does not
mean that you are killing yourself, it means that It doesn't mean that you are
not enjoying life, it means that you are making your life beautifully secure by
taking very less risk
and you are also becoming financially independent without
understanding how this happens, everyone is addicted these days. It's like
playing a video game Buy here Sell here Buy here Sell here Buy here Market
opens at 9:1 You're on the screen Market closes at 3:30 You're squaring off
your losses or your gains It's insane How bad the situation is This is because
you cannot earn money in this thing without thinking.
I am not saying that Kaman who is the founder of Jaroda is
India 's number one or number two depending on how you look at it. It is a
brokerage account, so clearly sit on it. Lot of data on 82 on 82 on 82 on all
traders have a loss every year 82 This is their data boll it means on an
average you will be in loss in fact you will have to be a very rock star to be
in that 18 but such great people who earn money There are a lot of people
sitting around, I am not saying that you can't do it, don't do it without
knowing, without learning, without understanding, don't do
it because you think you understand, you will make money overnight, so do it
because. You're doing it with your own money because you've been doing it for
years, you're doing it because you really understand how it works and you're
able to bear the loss if it were to happen to someone else, not yourself.
So that you understand and we risk hours number 12 That's
why do n't cut your losses What does it mean by cutting your losses For
example, you have invested 00, the money is lost, you incur losses. You are now
at a loss of $00. To recover that loss of $00 you do not trade any more
stupidly and do not gamble and do not invest.
I am trying to recover from the loss by doing the same thing
that caused you. Loss You are trying to make up your loss by doing the same
thing that caused your loss. Where is the wisdom? Don't do it, when the next
reason is your loss, stop, stop, stop loss. You know in trading.
What happens is that there is very little in the deliveries
that if you buy a stock with the expectation that its price will increase, if
for what ever reason that event starts, then after a point you will sell by
stopping or cutting your loss, then you will have 00 You bought a stock of Rs.
101 or Rs. 102 but it became Rs. 99 or Rs. 99.5.
You said, if it falls to Rs. 98, I should sell it and leave,
there will be a loss of Rs. I will cover my loss. And don't want to increase
that is stop loss and it is extremely important that you always use all your
money with the same approach. Number 13, this is a very surprising thing, a lot
is happening in money matters, your loans are running expensive, expensive
loans are personal.
There is loan, there is credit card loan, this is all and
you still invest. The anchor had told me that if I have to invest in every
mutual fund, if I want to do SIP, then my SIP is going on but my credit card
loan is also going on, this is my personal loan also. I am going on this so and
so loan, also go on brother, that loan is expensive, I have already paid it,
the rate of interest is the single biggest determinant, do some comparison
between how much money you are giving to someone and how much money you are
earning, like I did. In the said market,
if you go to the stock market and that too go most
aggressively, if you earn over long term at 18 to 20, then you are God and that
loan to which you are giving at 30, 35, that credit card beyond which you earn
at 40. But the money you are giving is so expensive that whatever money you are
investing in To Earn the 20, it should go towards repaying that loan.
Friend, that is the way that you have to think about things.
Whatever money you are earning, it should go towards repaying that loan.
Whatever amount you are saving, if you have a loan and that loan is expensive
and expensive will be anything that judges a rate of interest of greater than
10, I say maximum 12, please repay that which is the most expensive loan in
terms of rate.
Of interest, repay it first, that should be the way to get
rid of your loans. There is no point that you are getting invested and your
loans are still on top. Become loan free definitely loan free from expensive
loans and then start your investing journey. Start number 14 is a very big
thing, buying a house too early in our 20s, under the pressure of our parents,
under the pressure of the society, we do n't know for what reason we buy a
house and we buy a house but then the same as I told in the email that ₹1
Monthly salary of Rs 30000 0000 is not less
but they are buying a house of which they have not even got
the possession and they are paying Rs 0000 for it. It makes me bleed when I see
this and many people beat me up. Physically, not verbally, that hey Ankur,
look, you have bought a house. People are being told not to buy a house.
Brother, use your brain a little, I am saying that don't buy a house in your
20's or early 30's, then our stress is still less.
Why do you want to take that much commitment for 20-2 years?
You are mobile, you work in this city today, live in this colony, why do you
want to forcefully get stuck in the same, your life is still being built, you
want to go to another city, you want to go to another city. You want to live in
a colony, you want to live in a big house, all of them should be flexible, then
the day they decide that yes, we will live in this city and now we will live in
this colony for the whole life or at least for 1015 years, we will live in this
colony only this
size, we will become a family. Children have arrived,
parents are also together, so you need such a big house. Keeping all these
things in mind, when you decide the house, your income will support you. You
must have arranged a huge down payment amount by investing. Then go and buy a
house, friend, then it is the right thing, before that, live on rent.
Rent is cheap in this country, you think it is very
expensive, but what is the value of the house you are living in and the rent
you are paying, if you buy the same house. If you go, you will have to pay 50
times 70 times the amount on rent. Why do you want to make such a big
commitment so early in your life? Please buy a house. Every person should buy a
house.
Do n't be in a hurry. No. 15 Investing in high risk assets.
Short term stocks. The market is a very interesting place. It seems that there
is a lot of risk here but the best way to manage this risk is that if you
invest for a year then what is the guarantee that you will earn Rs.
5050 which is a coin toss then a lot. It is risky. If you
invest for 3 years, what is the guarantee that you will earn profitable returns
or earn positive returns. But if you invest for 5 years, what is the guarantee
that you will earn profitable or positive returns? Near 100% Now the market has
remained the same, the market has not changed, but what you have done is you
have increased the time, the more you stay invested for time, the more the risk
will be, it will inherently reduce, but if you are very risky for a short
period. If you
invest in assets then it can go anywhere, so nowadays
everyone is talking about small cap, small cap, small cap, small cap, many
people are saying that this small cap is heated and in my view it is also in
the next one or two years. Will there be a correction, maybe it may come, so if
you want to stay invested for the next one or two years and are putting all
your money in small caps, then that is foolishness.
If you also want to stay in the stock market, then put it in
less risky assets. If you invest in small cap, it is so risky that in a year or
two your money can change from 40 to 50, it can decrease and maybe even
increase, but are you ready to take the same gamble or are you after growth? So
they are running away but ignoring the risk And that is a big mistake that
people make in their 20s Number 16 Be over dependent on their family for
everything not just money So in their 20s they are not earning but mom and dad
are paying the expenses
So we are living or in words, you have started earning but
all your money is being managed by your parents, they are investing for you,
they are doing tax planning for you and they are doing it as per their own.
They are right because they are so clued in today's world. No, you don't know,
maybe they are doing FD, they are doing RD, they are putting the same in the
provident fund, stocks are running away from the stock market for them.
The market is a speculative market where people lose their
money and ruin their lives. And all of these could be things which were right
for their times, so their way of investing is different. Your way of investing
should be different but as much depends on the family. You will remain
dependent on them and will not take decisions without listening to them or
understanding them on your own.
You will continue to earn their rate of return by being
dependent on them. Do n't complain that nothing has happened here, it is only
at 7 and here my friend who I was doing it myself, it was 15, 16, but number 17
is also very interesting, too much diversification, a blind diversification,
ask people, they invest in mutual funds, yes, it is very good, how many SIPs
are there, 13 SIPs are going on, 13 brother, I don't even know.
Are there so many SIPs or are there so many mutual funds? 13
Why are you sitting with 15? Why are you going on? What is going on? Do you
understand that mutual funds ultimately invest in companies and if you are
sitting with 15 mutual funds then it is very clear that 15 are there. You might
be investing in the same 15 stocks that everyone else is doing.
The overlap has become so much that you are unnecessarily
paying people to do the same thing that someone else is doing. According to me,
three major funds are enough. One large cap, one mid cap or flexi cap and one
small cap. Their percentage should not be 1/3 13 1/3. It should be based on
what is your risk appetite so if you are very risk averse that you want to pull
safely.
And you want predictable then large cap should be at least
60 70 small cap maximum should be at 5 10 if you are ready to take a little
risk then small cap can be at 20 large cap can go up to 40 % u Play around with
your income but according to me these three mutual funds are enough.
If you want to take the best then take one or two more which
will be sector specific. Have you put more in energy, put in infra, put in
pharma. etc. 13 There is no need to take 15 There is no need to take Too much
diversification does not give much return It is something that you have to
because of that No. 18 Being so conservative that you do not even enter the
stock market No gee that mummy sin ne It was told that in childhood, as soon as
I was born, there was an FD in my name, so now I will live on the same
principal throughout my life, I will only do FD, I will only invest in
Provident Fund, I will
only invest in NPS, I will buy gold, if I have a big desire
to buy a house. The day you get some money, you will buy a house, but before
that, don't study. Look at the conservative approach, there is no problem, I am
not saying beyond this that it is common wrong, I am saying that if because of
this approach, you feel sad that your Money does not increase very fast, that
is wrong.
If you have taken the decision in life that you want to walk
in this way and you understand then you should also know where you can reach by
following that way or that path. It is not possible that I walk on this good
path, but I want that expensive car, I want those expensive clothes, but my
path is such that it is not possible, it is not possible, that is other, that
is different, so if you are ready to take the risk.
You can get returns but if you do not take risk then you
will not be able to show greed or desire for the things that you get from
higher returns in life. That is not how life is, so please my opinion will be
this, do not be too conservative. 20 You can actually take risk not because you
are young, but because you have time, if your investment does not work out or
the market sinks, the economy something happens, you have time to recover, the
same thing happens to a 50 year old person.
Can't say because their income is going to stop within 10
years, so if something bad happens within 10 years, they will face a lot of
losses post late retirement, but if you are in your 20s, even if something
happens, you will recover within 10 years. 20 more years and you can easily get
to the point where you will be absolutely secure that is the beauty of entering
early and not being too cons 19 Expenses Co Under Estimator This often happens
when I am talking to the student and the student is like Yes, when we start a
job, the
rent will be around Rs 45000, we will buy food for Rs 000,
travel will cost Rs 000, party expenses will cost Rs 000 and I don't have any
expenses and everything will be done in Rs 7000. And if Then if I get a job
worth Rs. 0000 then I will invest Rs. 0000 per month. Either you are very cute
or very naive or you have no idea what happens in the real world.
You cannot under estimate expenses. You have to have a good
idea. What are your expenses You need to also have an idea What are your
expenses going to be in future What are your short term long term financial
goals and also expenses You want to study further Want to buy a house for your
parents Want to buy a house for yourself Want to buy a house Want to marry
yourself with your own money Children should be educated This should be
something for the children Have to go on a vacation somewhere Have to buy a car
What ever two things are you need to have
a sense of What Does It Cost You to Do That Today What Will
It Cost You When You Do It Tomorrow and How Do You Plan for It This is what we
call financial adulting when you grow up and stand on your own feet with your
own money. Ready to Take Responsibility for Yourself That's What I'd Expect and
Number Just This Goes Back to the Email If You Really Close Your Eyes and
Listen to the Email Again You'll Get the Sense of It's All Over Everything's
All Over The Worst Thing You Can Do for Your Financial Well-Being in Your 20s
I started earning after business school and MBA. I started
my education loan with a loan of lakhs. The loan from my father's business was
my start and at that point, if I had given up hope, if I had said that after so
much hard work, I have achieved so much. After getting a good job, I want to
start my life with this loan of 35 lakhs.
I said, what can I do and never made it even past one day
but the optimum was hope that it will happen, it will take time but it will
happen gradually, it will happen. It took 12 years, it took 12 years to repay
all the loans but it has been paid and you are at this point, there is no loan
here, good money, good life, family and every person for whom we worked so hard
is healthy and best time.
Be living my life that way Yes, would life have been very
different if there had not been a loan of 35 years, there would not have been a
loan of Rs 35 lakh, if you had invested with good money from the beginning,
yes, maybe it would have happened, maybe it would not have happened, but if
that was there in life.
Don't run away from what is happening to you, especially
when you have to take responsibility for that thing. You also need to have hope
and know that it may take time but no difficult time lasts forever, never have
this hope. With the hope that you will not make these mistakes in your life,
with the hope that you will never give up on hope, this is my new book that
Money has become the best seller of India by sending 1 lakh copies within a
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