DON'T Make THESE Financial MISTAKES in your 20s!
Not Keeping Track of Your
Money:
- Advice: Start monitoring your expenses
meticulously. Use apps, Excel sheets, or even a simple notebook to record
every expense. Knowing where your money goes is the first step toward
financial control.
2. Not Budgeting:
- Advice: Adopt the 50/30/20 rule:
- 50% of income for needs (rent, groceries, bills).
- 30% for wants (dining out, vacations).
- 20% for savings and investments.
- Importance: Without a budget, it’s easy to
overspend, leaving you with little to save.
3. Taking On Too Much Debt:
- Advice: Avoid unnecessary loans. Stick to
essential loans like education or a home. Credit is easy to get, but
high-interest rates can lead to a debt spiral.
- Personal Insight: Learn from family
experiences, and be cautious with credit cards and personal loans.
4. Delaying Investments:
- Advice: Start investing early, even small
amounts. Delaying can cost you valuable compounding years.
5. Ignoring Insurance:
- Advice: Purchase term insurance in your 20s
to lock in low premiums. Don’t mix insurance with investment; they serve
different purposes.
- Family Consideration: Ensure your parents
have health insurance, as they are more likely to need it.
6. No Emergency Fund:
- Advice: Save at least six months of living
expenses in an easily accessible emergency fund. This will protect you
from unexpected financial shocks.
7. Over-Reliance on Employer’s
Health Insurance:
- Advice: Get personal health insurance for
you and your parents, as job-based insurance ends when you leave the
company.
8. Taking Loans to Invest:
- Advice: Never take out a loan to invest in
volatile assets like stocks or forex. The returns are unpredictable, but
the loan interest is fixed.
9. Falling for Get-Rich-Quick
Schemes:
- Advice: Be wary of schemes promising high
returns with little effort. If it sounds too good to be true, it probably
is.
10. Trading Without Knowledge:
- Advice: Avoid day trading or speculative
investments unless you’re well-educated and experienced. Most traders lose
money, so don’t gamble with what you can’t afford to lose.
11. Not Cutting Losses:
- Advice: If an investment is losing money,
don’t throw more money at it hoping to recover. Learn to accept losses and
move on.
12. Investing While Carrying
High-Interest Debt:
- Advice: Pay off expensive debts (like credit
card loans) before investing. The interest saved on debt is often greater
than the returns you’ll make from investments.
13. Buying a House Too Early:
- Advice: Don’t rush into buying a house in
your 20s. Renting might be more flexible and less financially burdensome
while your life and career are still evolving.
14. Investing in High-Risk
Assets for Short Terms:
- Advice: Long-term investment reduces risk.
If you invest in high-risk assets like small-cap stocks, be prepared for
potential losses, especially in the short term.
15. Overdependence on Family:
- Advice: Take control of your finances, even
if your family is helping. Learn about managing money, investing, and tax
planning yourself to ensure you're making informed decisions.
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 is 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 on house. They are
sending how much money is being
spent on the party, how much money is being spent on it all together, you know
what the biggest reaction is when I take an excel sheet and add up each of
their income and expenses, I tell them that your ₹ You have an income of Rs 1
and your expenses are Rs 80 so 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.
I used to record every single thing, even the biggest expenses, and that's how
I got a grip of where my money goes every month. If you find out, then not
budgeting is a big 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 wishes 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, then 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 in, when a little You will start investing only when regularity
comes.
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 as for your
mother.
Always take 100% health insurance
for your parents. It should be outside of your corporate health insurance
number. No, this 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 off. 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
Number 10 Schemes to get rich overnight There are many such schemes that you
put in some chit fund or some 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 does
not 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 recover
your loss by doing the same thing which 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 market, if you go to the
stock market and they also 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 paying is
so expensive that whatever money you are putting 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, Pay That Off First
That Should Be The Way To Get Rid Of Your Loans There Is No Use That You Are
Invested And Your Loans Are Still On Your Head Become Loan Free Definitely Loan
Free From Expensive Loans And Then Start Your Investing Journey Start number 14
is a big buying a house too early in our 20's under the pressure of parents
under the pressure of society and do n't know for what reason we buy a house
and we buy the house but then as I told in the email that ₹1 A 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 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
20s or early 30s, 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 it, 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, this
is the size and 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. Number 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 also it is 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 others are
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. There is a large cap,
a mid cap or a flexi cap and a 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 my 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 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 MBA. I started my education loan with a loan of lakhs, the loan from my
father's business and that 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 not, no, but
if that was 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
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on hope, this is my new book that Money has become the best seller of India by
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