Five Things To Achieve With Your Money Before Turning 30

It is often said nowadays that 30 is the new 20. This is to say that people often begin to discover themselves afresh as they enter the third decade of their lives. As people are marrying later than their parents’ generation, and therefore also having kids often after turning 30, they are realising newer aspects about their lives that they may have given a pass in their 20s when they were perhaps busy with studies, exams, careers and trying to find a life partner.

As they turn 30, most people are relatively more stable financially than they had been in their 20s as they are settled into their jobs or have managed to establish a business that may be earning them a steady income.

Whichever way you look at it, reaching the age of 30 is an important milestone in a person’s life, especially as most people have already experienced several vicissitudes by then. Apart from financial stability, the 30s also bring about some form of personal stability as well as maturity to deal with life’s challenges.

Everyone has unique goals in their lives that they would like to achieve by certain specific stages in their journey. While some of these goals may be easy to achieve, others may require careful planning. It would therefore help if one were to start planning in their 20s so that they have it all in place by the time they are 30.

This is especially important when it comes to financial planning. In fact, one should start thinking about financial goals before turning 30. One should ideally set goals, begin executing plans and begin a journey on a path to achieve them over one’s lifespan, before turning 30.

If one begins saving and investing before turning 30, it is bound to pay handsome returns. Given enough time, the power of compounding, often referred to as the eighth wonder in the world, leads to huge financial gains over the long run.

So, here are five things you can do with your money before turning 30.

1) Begin Saving As Soon As You Begin Earning

It is a no brainer that the sooner you start saving, the larger a corpus you will be able to accumulate over your lifetime. Or at least that is true in theory, assuming that you do not face any nasty surprises in later life that may be beyond your control.

If you are looking for a financially secure and stable life, you need to begin saving early, before you turn 30. One instrument that you can consider, to give yourself a chance to grow your net worth manifold over your working life, are equity mutual funds.

In fact, even if you set aside a small amount every month towards a systematic investment plan (SIP) there is a very good chance that you will reap rich rewards over your lifetime. You can begin by saving as low as a few hundred rupees which may be say less than 10% of your take home income, and then up those investments incrementally every year. You can also invest lump sum money periodically whenever you get your bonus or have managed to save some extra money over a short period of time, say from a side hustle that you may have been working towards.

Apart from mutual funds, you can also diversify your investments by parking a part of your savings in debt instruments like fixed deposits and small savings schemes that are considered safer and generate a fixed return over time. Gold and real estate can also be used as instruments to further diversify your portfolio, as you develop and grow it over time.

2) Build An Emergency Fund

Before you turn 30, you should have an emergency fund that can last you at least six months, in case of a sudden job loss. Such an emergency fund will also come in handy in case you or a family member faces a health calamity or any other kind of emergency that needs a substantial sum of money to tide over.

In fact, there can be no financial planning without the provision for an emergency fund. One should ideally only choose low risk instruments while investing for an emergency fund. These could be plain vanilla fixed deposits, low risk debt funds or liquid funds or any other such avenues that offer stable returns and can be liquidated without a hassle, in order to meet the emergency.

3) Always Maintain A Budget 

Budgeting is one of the most aspects of financial management and a good financial planner will always advise that you maintain a budget and try as much as possible to stick to it. Not only will keeping a budget help you save money, but will also come in handy when repaying your debts on personal loans or EMIs for a housing, education or a car loan.

Budgeting is a simple exercise where one needs to make note of all the major monthly expenses on the one hand and earnings on the other. A budget will list all your monthly bills for utilities, rent, fuel, fees, medicines, food, essentials, entertainment and such like. This will include both discretionary as well as non-discretionary expenses that you and your immediate family need to incur in day to day living.

Keeping a close watch over your spending will keep you in good stead and will let you enjoy your life well into your 30s, 40s, 50s, 60s and beyond.

4) Try And Become Debt Free

One important thing that you should try and accomplish before turning 30 is to become debt free. In your early twenties you may have taken personal loans, student loans, home loans etc. All of these loans should ideally be repaid by the time you are 30 so that you can enjoy a stress-free life while you are still relatively young. Loans often carry high interest rates and so are best avoided in later life when such a debt burden can become crippling.

5) Buy A Good Health And Life Insurance

A health insurance is for you (and your kin) while a life insurance is for those who may be dependent on your incomes and may be left behind if something untoward were to unfortunately happen to you at a young age.

If anything, the Covid-19 pandemic has highlighted the pressing need for having a good health insurance and a life insurance policy. Medical inflation in India is sky high and during the pandemic hospital bills crippled the finances of thousands of middle class Indian families several among whom literally had to borrow money and mortgage their family gold or even property, in order to pay steep hospital bills and tide over their immediate financial needs, even as a whole lot of them were facing salary cuts or job losses. And for those that lost their family members, the loss of income was permanent.

Good health and life insurance policies are therefore key to leading a stress-free life. When it comes to health insurance, people should not depend on the cover provided by their employers as that may not be enough. Such a cover is typically available only until one is employed by the organisation.

One should get a good health and life cover before 30 as the premiums for younger people are significantly lower. In fact, when it comes to life insurance, the premium is locked at the time of buying the policy. For health insurance it does rise with age but the increases till say 40 years of age are incremental.

One can also get tax breaks against life and health insurance premiums under sections 80C and 80D respectively of the income tax act.

Conclusion

If one uses these five steps on money management before turning 30, one can have a stress-free life in later years. One needs to start early and remain consistent and diligent in order to maintain fiscal discipline.