What important things does a 20-year-old need to know about money and finance?

Matthew Sweet

Matthew Sweet, I get better everyday.

Répondu il y a 139w · L'auteur dispose de réponses 273 et de vues de réponses 864.2k

You’re vulnerable. You have a job, a family, a mortgage, bills to pay. You’re vulnerable.

Pourquoi?

Because, if you’re like most people, you have one job. One single source of income. You have a single point of failure. Wikipedia describes what this is:

“A single point of failure (SPOF) is a part of a system that, if it fails, will stop the entire system from working. SPOFs are undesirable in any system with a goal of high availability or reliability, be it a business practice, software application, or other industrial system.”

Or a family.

If you can’t provide for your family, what happens? If you get fired, or the company you work for implodes, what will you do?

First defense?

Eliminate SPOFs altogether.

You do this by creating multiple income streams. Google what they are. They’re critical.

Second defense?

Build redundancies.

Reserves that you can call upon in times of need and disruption. An emergency fund. Cash. Liquid assets. Ideally, this should be enough to sustain your current lifestyle for anywhere between six months to two years.

This is not a paltry sum. But if you can’t resist the temptation to splurge on a down-payment for a house or other illiquid investments, you strip away a critical line of defense against turmoil. By having such a large redundancy, you give yourself time to rethink and reinvent.

You can do a lot in two years with a little money and a lot of time.

The third defense is to have a plan.

As James Altucher notes, even “a bad plan is better than no plan.” Ideally, you should have multiple plans. Follow the “3 Plans Rule” and remember the acronym PACE.

Primary. Alternative. Contingency. Emergency.

“All this is exhausting. Can’t I just have a good job and raise my family?” Not anymore.

As the world we live in grows in complexity, we are exposed to more stress, more uncertainty, more risk. You can either take action to protect yourself against it, or leave yourself open to damage.

Choisir.

Eliminate SPOFs by building multiple income streams. Create redundancies you can fall back on. Have plans. One for when things go well. One for when they don’t. One for when they go really bad. And one for when the world starts to collapse around you.

Don’t be a sucker and wait for the storm to hit before you build a shelter.

Manoranjan Panigrahi

Manoranjan Panigrahi, Senior Consultant at Capgemini Technology Services (2012-present)

Répondu il y a 34w · L'auteur dispose de réponses 69 et de vues de réponses 195.9k

Merci pour A2A!

I am making a large assumption here and will base my answer on it :-

You are an Indian, residing in India and your question more or less is limited to information relevant in India. If all this is true, then read on!

I am extremely happy and proud that at this age, you atleast have an urge or want to build your knowledge on such things. It is the most standard advice i keep giving young people - start small, start early and be regular.

I went through a lot of the other answers posted here by fellow Quorans to make a base on what i should touch that has not been already said and what i can choose to skip which has been covered already.

So here goes my planification advice:-

  • Je vais never skip on saving. Apart from other benefits, saving teaches you to respect money. Growing or making more money is different and saving is a different habit altogether. Indians are known to be good savers in general and there is a reason it is more relevant to do here :
    • Unlike many countries, we do not have unemployment benefits.
    • Economy is still influenced heavily by many factors outside domestic factors.
    • Tax paying and working population forms a very small percentage of the entire population.
    • Retirement Age is 58 in private and 60 in public sector which is comparatively early than in many other countries.
    • There is a reason why in general, people who earn a living in india do not drastically have a lifestyle change (for the bad) or do not go completely haywire despite economy shocks, finance budgets being sometimes unfavourable, high inflation, bad crop season etc etc. Mind you these things happen very often here.
      • It is because the habit of saving is well preserved and practiced and preached and hence there is always something to bank upon.
  • Make a habit of saving. At least 20% of your income. Be it pocket money, a scholarship award money or salary in general. Save first and then spend.
  • Learn to use your savings to earn you more money. This is investing for you. You can start by using a part of your savings and putting it in investment instruments - Bank Deposits, Provident Funds, Mutual Funds, Shares. With time and experience you will have more knowledge and confidence to deploy more and better. Nevertheless, nothing beats the concept of starting early and that should be your goal first.
  • Invest in yourself. A certification that brings you more knowledge, better career prospects, promotion, skills to manage a business anything. That makes you more capable of earning more money in different ways. Be it a side business, partnering an investment etc.
  • Insure yourself. If there will be dependents in future, plan and prepare yourself for the risk mitigation. A term life insurance, a health insurance, an accident insurance and a critical illness policy. Try to keep them independent of each other (standalone policies). The younger you take them, the smallest premium you will pay which put together will not account very much monetarily.
  • Plan retirement. Even though our average age lifespans are high and increasing, our retirement ages are very low compared to the outside world. This means we have longer periods of post retirement years to take care of. This is where the world of investing will come into your life prominently. Use this phase to up your investing strategies not just for retirement but for growing wealth as well.
  • Plan Taxes. By the time you reach this phase, your insurances, provident funds and retirement planning would have already taken care of your tax planning to a large extent. But since now you would ideally be in a better position financially, with or without liabilities and more knowledgeable and experienced with money management in general, you could plan tax saving in a more efficient way which will help you eke out a little more idle money.
  • Build Assets. Please keep the meaning of assets as broadly as you can. It can mean buying real estate or it could mean planning for your kid’s education, or it could mean a foreign holiday (consider this as an asset to the relationship with your better half ;-)) or many other things. May be pursuing a hobby or opening up a secondary business… huge list.

Banks will be part of your lifecycle right from the beginning. In layman’s terms, just consider it a place where your money will reside and exchange hands with whomever you want to.

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Credit Cards, Loans are just ancillary things you will learn on the way when you go through this lifecycle. With more knowledge and experience through time, you will automatically know what these are and when you would need or not need them.

This covers a stable base. Ofcourse how life would pan out going forward, i cannot tell you or nobody can predict. But you had questions mostly on finance related knowledge and i have tried to cover those especially in an Indian context.

À votre santé!

Akash Gautam

Akash Gautam, Motivational Speaker, Happy Guy

Mise à jour il y a 39w

I understand that people do not expect a Conférencier motivateur to talk about Money & Finances. But I do not have any high funda gyaan about money either. I just want to share what I have learnt from my mistakes and what I want to tell my son about managing money. I hope that would be a good enough answer for this question, as I hope I had realized the following sooner:

The fastest way to lose money is to try to make fast money

Your ROI gets decided with the quality of your investment decisions (the biggest factor after Luck). So, take a lot of time, yes- I say- a lot of careful, intelligent, well researched time before making that investment. In 4 out of 5 cases- a delayed decision turns out to be good than a rushed up, emotional decision (data from many discussions).

The best way to make money fast is to not invest in scams that begin with ‘make money fast’ �� … Just think, had it been that reliable, everyone would have been rich by now!

Stock Market- Look at Inherent Value (& not Apparent Value)

You definitely must think about investing in stocks - considering where India is right now. Salaries don’t make you rich, good investments do.

Warren Buffet’s approach of Valeur Investir is something which shall stay valid for the next 1000 yrs or more. It says- invest your money, emotions or energies into stocks, people and aspects which are trading low (for some reason) but have a huge embedded/ inherent value. Then have the patience to stick with them for a lot of time. Stock recommendations on TV / Newspapers by (paid) experts are usually Apparent Value.

Learn to how to research for your own self. This hard work of yours is what will pay you in long run.

There are established and reputed organizations like Tata Motors, Aditya Birla Group, ICICI Bank, SBI, L&T etc. who are less likely to run away with your money. They are proven leaders. You can trust them for not only growth but also tax free returns.

Do not operate out of Emotions (in Money aspects)

Emotional decisions (which lack patience) & decisions which spring out of sheer comfort zone (familiarity) are likely to turn up bad mostly. E.g. Your fondness for a particular asset class e.g. Equity (same comfort zone, familiar stocks) or only Real Estate or Gold or same traditional choices.

It is like ‘I know how to ride a scooter. So, I will ride a scooter only (inspite of cars or SUVs available for ride at home)’. Diversify! That is what most Asset Managers will advise you. Do not just be emotional about ONE thing only. Be loyal to one lady only (your wife) . But be promiscuous about investments. Educate yourself about things which you do not know about. Then diversify and keep patience.

Impressing People = Depressing Yourself

Do not play for an audience i.e. do not spend your hard earned income to impress people, relatives and friends by doing things which have a higher GQ (Gallery Quotient) than IQ. Spend primarily for your comfort and for your future than for anything else. No point buying an Audi or a Mercedes on a 70%+ loan when the future isn’t set.

That’s why it is said, rich people plan for 3 generations. Poor people plan for Saturday nights!

Do not bring JUNK home

Don’t give in to just any advice by any Tom Dick and Harry when it comes to investments and end up buying glossy, tantalizing garbage which is very attractive but has very low embedded value. A lot of people make emotional, random, hushed up decisions based on equally random pieces of advice by friends / media etc. E.g. buying a flat or a property seeing an advt in newspaper or a hoarding.

Your returns could get extremely low because you miserably failed to check the inherent value and maybe went by the facade value. Pay a little more but buy that A+ thing instead of a C+ thing (which is available at a sexy, attractive discount). Bad times or worst market conditions will prove that your A+ investment was a very valid decision. C+ investments look fun like a one night stand but usually bring with them the next morning guilt.

Get these three Insurances

Let me get this thing straight- ‘Insurances are not a waste of money at all’. They are the price you pay for your peace of mind. Simply buy the right Insurances and buy them as early as possible. Three Insurances which one must compulsorily have are:- a) A very good, comprehensive Attestation de droits (for self and for the family too) b) A plain vanilla Term Insurance (Cover -as high as possible) & c) Motor Insurances (there are funny people who drive without insurances).

Start Saving as Early as possible. Compounding will be MAGICAL

Most people start saving after rude wake up calls or they stupidly save what is left of their expenses. That’s just wrong! You save first. And then you expend the remaining! Always.

Start saving very early. And if you are young and do not want to invest directly into Stocks on your own- religiously invest into this India Growth Story through Equity (Fonds communs de placement SIP / STP). Just keep on doing that for 10-15 or if possible more years and see what magic is possible through the power of compounding. It is like someone else will start earning for you after a few years of such investments.

Take a Home Loan

The rate of borrowings is near 8%+ (Home loans) and if you invest your savings right (as in above mentioned points, you can expect a minimum of 17-20% returns over a period). So, net you are growing 10% plus while the asset becomes yours (& it grows too). As a bonus you also receive Income Tax benefits with the Loan (The effective rate of interest comes to be 6-6.5% with IT benefits for a particular slab). Cool na !

Don’t become a Bank to Friends/ Relatives

Lastly, avoid loaning your money to any friend / relative. You are very likely to lose both – the friend as well as the money. I did this mistake very recently. Had done it out of love. But then 90% people who ask money from you are like a falling knife. They will not only bring you down but might just wound you along. The anxiety of following up with them for your own money is not warranted. People change colors and trust me they do it faster when money is involved.

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I have written about these in detail ICI.

I blog regularly on other topics that I get frequently asked about. You can find it cliquez ici.

Ari Ginsberg

Ari Ginsberg, studied at Dr Richard Bandler John La Valle Liscenced NLP Practioner

Répondu il y a 125w · L'auteur dispose de réponses 448 et de vues de réponses 317.7k

I think that learning about money, is wise for the beginning of your journey into the world of income and responsibilities of life.

Assets that earn income, make money. Liabilities drain money.Owing money takes away your sense of independence and integrity with yourself. I am not suggesting that buying a house and a car does not require finance for certain stages of your life, however buying everything else on credit is not ideal unless you are paying it off, at a very low interest rate and the amount you are paying off is within the 70% budget of your income which also includes other parts of your day to day living and expenses. 30% goes to paying off loans debt and savings short term and long term.

Value of anything is what someone is willing to pay for it. A penny red stamp today because of scarcity and perception was sold last year for half a million pounds, at the time it was made and sold it was just one penny. I know from having worked in property that just because someone believes their property is worth a certain figure it does not mean the market or, that someone, is going to pay that price for it.

Money is energy and a sign of blessing, is you have it, your state of mind effects your ability to access opportunities. You have the RAS in your brain which is the part which highlights conscious thoughts from your unconscious thoughts. When you buy a new item or desire a certain item, its amazing how this item suddenly appears all over your world. What do you want to see in your world?

Living for others is not going to make you happy, if I buy products and spend money in order to show off, yes for that moment in time you will have attention, however later is it worth the pain of paying for it. A T shirt with a certain name does not make you more rich, clever or successful. Paying for this type of product when you have debt is not necessary, unless wearing the T shirt is important because you are a financial advisor and your success is part of your business.

Enjoy the journey, set achievable financial goals, a budget is a life skill, and future or present business skill. The more you practice building this muscle the better you become and the greater your financial independence and stability

If you are interested in developing financial skills and budgets I can give your details to a collegue who specialises in this training. Please contact me through my website at successfacilitator

KishorKumar Balpalli

KishorKumar Balpalli, Certified Financial Planner with 10+ years of experience in Personal Finance

Répondu il y a 127w · L'auteur dispose de réponses 324 et de vues de réponses 1.1m

Here is one from an Indian perspective...

6 Steps for Financial Planning of Young Adults

Personal finance, despite its importance, is yet to be taught as a subject in high school or colleges in our country. Hence, most youngsters, when they join their first job or embark on a professional career are fairly clueless about how to manage their money. If you are one of them and believe that understanding personal finance is far above your head, let me say, you are wrong. All it takes to start treading on the correct path to financial security is the willingness to create wealth and a little reading. Trust me; you don’t need to be outstanding in maths. Knowledge of the available financial products and their suitability to an individual’s goals is all that one should be concerned about.

To start with your financial planning, take a look at the six most important things to understand about money management that will help you lead a prosperous and comfortable life.

Understanding savings, investment, insurance

Sumit Mukherjee, 27, is two years into his first job. He saves a good amount of his salary and invests in bank deposits, and is comfortable with short-term deposits that give him the flexibility to access his money whenever he wants. Sumit believes that his provident fund contribution, savings, and insurance are sufficient to secure his future. Is he missing out on something?.

Investments yield higher returns, but usually come with fluctuating values and lower liquidity. Sumit can manage his risks by aligning the investment horizon for the products he is considering with the time frame of his financial goals. Funds required for long-term goals must be held in investments based on his risk profile. Sumit should also periodically review his investments to ensure they remain relevant to his preferences and goals.

Well, Sumit is making a mistake by not differentiating between, savings, investments and insurance. The money in his savings account is readily available without any risk. But holding the money this way is only suitable for unexpected or immediate needs that are usually few in a person’s life. Parking the entire money this way could be a costly choice because of the trade-off for liquidity and safety, is lower returns.

Investments yield higher returns, but usually come with fluctuating values and lower liquidity. Sumit can manage his risks by aligning the investment horizon for the products he is considering with the time frame of his financial goals. Funds required for long-term goals must be held in investments based on his risk profile. Sumit should also periodically review his investments to ensure they remain relevant to his preferences and goals.

Make no mistake; insurance is covering yourself financially for probable future risks, whereas an investment is a commitment of money for purchasing financial instruments to gain profitable returns in the form of income, interest or value appreciation of the instrument itself. There’s no profit angle involved in insurance e. Investment can be in assets like Equities, Real Estate, Gold, etc.

La gestion des risques

Risk management mitigates financial losses as and when they arise. A comprehensive risk management strategy would involve personal, and property risks. The earlier you adopt a risk management system, the better for you. Personal risks include probable loss of income because of poor health, injury, unemployment, death, etc. Property risks include loss of assets due to fire, earthquakes, and other uncontrollable events.

The best way to managing financial risks is by purchasing an insurance policy. Insurance will protect you from unexpected financial losses, compensating according to your contractual obligation with the insurer. Avoidance is another common way to mitigate risks. Many risks and their consequences are often unavoidable in life and may cost a fortune. For instance, subscribing to a health insurance policy will help you avoid expensive medical treatments in case of hospitalization. For ex. an annual premium of about ₹4,500 can get you a cover of ₹3 lakhs. You can similarly insure the assets you have purchased like the car or your house.

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Its recommended to have your own health insurance policy, even though your employer is providing you group health cover.

Fonds de prévoyance

Now that you have your risks covered, its time to setup an exigency fund. A contingency or exigency fund acts as a financial cushion during unforeseen emergencies like job loss, illness, family crisis etc. It helps you to avoid digging into other funds. Such a fund should ideally cover at least 3 to 6 months expenses.

Remember the following about contingency fund.

The investment should be either low-risk or guaranteed.
It should be liquid, like a savings bank account, FD, Liquid Funds.

Invest in yourself

Its now time to invest in yourself, Even before you start investing in any financial instrument make sure that you have invested enough on “Yourself.”
“Investing in yourself is the best investment you will ever make. it will not only improve your life, but it will also improve the lives of all those around you.” – Robin Sharma

Develop your skills: Enhancing your technical as well as your interpersonal skills will only add on to your career growth and helps bring you to an expert level. Many people find satisfaction in following their passion, rather than professional qualification. Learn another language, or better your skill sets related to your passion, to add value to yourself.

Health is wealth: Young adults, having landed a job, begin ignoring their health. But what worth is the money, if you have no health to enjoy it? If you have been neglecting your health because of erratic work hours, and no exercise due to lack of time, you should start looking after yourself immediately.

Building relationships: Youth today spend more time with electronic gadgets than with people. Relationships are much like emergency funds. The more you invest, the more you have during an exigency. Try spending more time with your family/friends and also, acquaint with new people.

Fixer des objectifs

Before investing any of your savings, determine why exactly you are investing. Grab a paper and list all the things you want to do in life, focusing on the big moments that comes with a hefty price tag. Assign time frames to organize your future plans. May be five years down the line, you want to get married, have a child and buy your first house. Ten years out, maybe you want to buy a car or a bigger house. Twenty years from today, higher education expenses for your child would begin. And then what about retirement?

It seems the future obligations are adding up quickly. But don’t get discouraged. Because that’s why you are investing. Try to specific regarding your future plans; even they are far off.

Retirement is the best example here. The amount to be saved substantially depends on when you plan to retire. If you want to retire early—perhaps in your 50s—you must set aside more from your salary to save enough for the remaining 25 or 30 years of your working life. But if you want to work till 65 or 70, you may invest significantly less. Also, retirement plans are not equal for all. The amount you need to save for your retirement corpus will depend on many factors like your life expectancy, Lifestyle, etc. it’s time to get familiar with the various investment instruments.

Start SIPs

Having set your goals its now time to invest, Start SIPing is the mantra, the moment you get your first salary is when you should start your first SIP
Systematic investment plans (SIPs) are one of the best instruments for wealth creation for young adults. SIPs work on the principle of regular and disciplined investments. It’s like a recurring deposit where you contribute a small amount every month. SIPs allow investing in mutual funds (MFs) through smaller periodic investments (monthly in most cases), rather than a one-time lump sum investment. That means you can pay 12 periodic investments of ₹700 each, instead of a single investment of ₹8,400. Besides, you can invest via SIPs without any impact on your other financial liabilities. It’s important to understand the power of compounding and rupee-cost averaging to appreciate SIPs better. You can take the SIP route to invest directly in equities as well.

SIPs have brought MFs within the average Indian’s reach and it makes more sense when you start early. Even ₹500 is enough to start an SIP.

Small investments through SIP are unlikely to be appealing at first. But it enables people to get into a habit of savings. And over the years, it can yield handsome returns. A monthly ₹1,000 SIP at 9%, would grow to ₹6.69 lakhs in 10 years, ₹17.83 lakhs in 30 years, and ₹44.20 lakhs in 40 years.

Even for cash rich individuals, SIPs reduce the risk of badly timed investments and losing sleep over bad decisions. But the real benefits of SIPs can be realized by investing early and at lower levels.

Mots finis

Getting into financial discipline is the most important thing for young adults. Most youth, in their first job, Spend their earnings on things that give them instant gratification, largely because they taste financial independence for the first time in their life. But saving for the future, and providing for emergencies, should also be prioritized, because financial planning is all about planning for a CERTAIN TODAY as well as a UNCERTAIN TOMORROW

Further Reading...

SIP Vs Lumpsum Investment

5 Mistakes to Avoid While Investing in MFs - Mymoneysage Blog

All that You Wanted to Know about Your Credit Score - Mymoneysage Blog

,Gene Khalyapin

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