Have you even been in a situation where time is running out on you and you are desperate to finish off some work ? If yes, you don’t want to be in the same situation when you are nearing 30 years of age and realise that there are some financial goals or tasks you should have completed but haven’t. Read the below guide to find out what are those personal financial milestones you should be aware of before you turn 30 years old.
In India, generally a person starts earning between the ages of 22-24 depending on what kind of education he has been through in college. So that gives a person 8-10 years to plan and execute everything related to the milestones before he or she hits the age 30.
What do you think one should achieve in life by the age of 30 ? No, I am not taking about those naughty random thoughts that are crossing your mind now, my subject here has to do with personal financial milestones only.
Here is a list you should consider.
Money Milestones before age 30
1. Build a budget sheet for yourself
This might not sound like a milestone but the fact that no one does it makes it a target to be achieved. No one wants to be burdened by the boring task of estimating how much one would spend on groceries, entertainment and other lifestyle expenses.
But if you don’t plan now, you might falter later. The best habits in life are started early and it’s never too late.
So if you do create a budget for yourself, pat yourself on your back because you are among those few people who will know how much more you are spending against the baseline you have set for yourself. Most people fail here so keep pushing yourself till you get down to doing it.
Some of the items you want to budget for and assess your spendings are : Transportation (eg. Fuel, Insurance, Car Loan EMI, Maintenance, Bus Pass etc), Utilities (eg. Gas, Paper, Electricity, Water, Phone Bills, Internet etc.) , Home (eg. Rent, Maintenance, Home Loan EMI, Furniture, Groceries, Tax etc.), Entertainment (eg. Eating Out, Music, Movies, Events,Hobbies, Travel, Vacations etc.) , Health (eg. Dental, Medical, Medicines, Vision etc.) and Miscellaneous (eg. Dry Cleaning, Donations, Tuitions, Gifts, Pocket Money etc.).
I believe that investors who stick to budgeting and tracking actual expenses against estimated values, actually know where their money is going and end up cutting on unwanted expenditure and saving a lot of money.
2. Chalk out your targets
Simply put, document your financial goals which you want to achieve by 30. If you think for a moment, by 30 you will definitely want to get married and then probably buy yourself a house.
Marriage costs are not cheap these days and the 20% down-payment for an apartment is not a small amount either. So run through the exercise of knowing how much money you need to aim for and how much money you need to invest each month to get to these goals. Don’t forget the inflation monster when you strategize this goal based investing.
Worse, Indians are very good savers but very bad investors. In a recent study conducted across cities in India, Mumbai fared best with approximately 80% starting to save early in their lives while Delhi, Chennai and Bangalore were hovering around 25% !!! That explains why you should be worried.
If you invest smartly, you might end up buying an apartment of your choice with your local earnings. There are many lucky individuals who make international trips, earn quick bucks and invest in property. Even if you don’t belong to this lucky group, you can still achieve your goals with smart investing.
And as far as marriage is concerned, it will happen and you will go broke ! So the earlier you start the better.
3. Open a DEMAT account
The power of compounding works best when you start investing your money early. And it works best for long-term investing. Long term investing is all about putting your money in those investment avenues which will earn you the most with the least possible risk.
Over a long time, equity investments have returned the most for investors all across the world. So open a DEMAT account as soon as possible and start investing money. Now be aware of the fact that this is possibly the time when most people get carried away with direct stock investing. Dabbing your hands in the stock markets is not a bad thing but if you end up being a day trader, God bless you.
And if you don’t care about this blessing for a moment, then put aside some money which you are ready to lose in the stock markets and invest the rest in equity via systematic investment planning of mutual funds. If like a spoilt child you still want to go for direct stocks, try SIP in stocks for higher returns.
4. Save enough for a rainy day
Starting with your first pay check, save a little amount of money each month that can be used in case of emergencies. In personal finance parlance, that is called an emergency fund and it’s importance cannot be under estimated.
When you start your career, your earnings are a pittance so trying to form this fund might be a bit challenging because you need to save little by little over a period of some months. But that is exactly what teaches you to be patient and inculcates the habit of saving your money systematically.
Many young professionals are generally in probation for a year of service when they start their career. If at this time, the economy forces a job loss, your emergency fund can come handy then. Forming an emergency or contingency corpus is perhaps the most important personal financial milestones before 30 or for that matter any age !
5. Don’t sign up for credit cards
After college, this is probably the first time you get paid for working. Once you realize the power of a fat wallet on the 30th of each month, it’s easy to get carried away to spend it on things you always wanted to. While spending is fine and it is important to differentiate between needs and wants, don’t do the spends via credit cards.
Be aware of what credit card debts can lead you to. Use debit cards and cash to the best of your abilities but keep the credit card companies far far away. So your financial milestones here is not to have credit cards !
Honestly, credit cards are not bad but I would recommend one to look at them after 30.
6. Be serious about insurance
Most of the investors out there look at insurance as an investment. That is a blunder which I have talked about many times – investment and insurance are two ends of a coin. They just don’t match up and investors need to try to stay away from the lure of earning something on every penny they put in. It is very ironical that investors pay the premium for car insurance as there is no option given to them – they lose the money they pay each year. So why can’t they lose the premium for health and term insurance policies as well ?
Alas !
Term insurance is for those who want to leave behind a sum of money for their near and dear ones if case they are not around tomorrow. The money so left behind, technically called “Sum Insured” then helps the family to fund their expenses in the future. So if you have a family, term insurance is a must. Also, the premium that you pay is cheap when you are younger (before the age of 30) so ensure that you take the sum insured for maximum tenure – probably till 60 years of age. Do not under estimate the importance of life insurance – make sure you take it.
Health insurance is for hospitalization – in case you have to get admitted, then the insurance company comes to your rescue and pays the bills. Most of the corporates today provide health insurance so employees are safe but I have seen many instances where the policy was inadequate for the investor both in terms of facilities that it provided and even the amount of money that was available for the hospitalization. So make sure that you understand the importance of a health insurance policy and take one apart from the one your employer provides.
7. Get a financial planner
Do it Yourself is a great option for those investors who are quick learners, have the time to make mistakes and learn and lose some money along the way. If you do not happen to belong to this lot, then do not try your hands at investing yourself. Hire an expert.
Indians generally want free advice. They would rather walk into a bank or take tips from their neighbours or from the stock market channels that run on TV. They would then invest their hard earned money and lose it. Would it not be wise to give that money to a professional who can advice how, where and how to invest your money ? You would get a financial planner from somewhere between Rs 10,000 per annum upwards to Rs 50,000 depending on what you are expecting. I recommend going with a financial planner who offers advice for the money you pay him and does not in any way earn any commissions from you – this is the best situation to be in.
The technical term of the person who can help you is a certified financial planner and as per the regulator SEBI, he is called “Investment Advisor”. To get yourself an investment advisor follow the steps below.
# Step 1 : Head over to the SEBI website where you can find and search Investment Advisors. Check here.
# Step 2 : You will see the below page :
If you know the name of the advisor or his company, then click on the alphabet with which the name starts. From the list that comes up, look for the one you have in mind. If not, simply use the search functionality provided. I entered “ark” to find my friend Hemant Beniwal’s details. Here is what shows up :
It is really that simple !
Conclusion
As you can see above, all of the items are important for investors to put in place before they turn 30. It does not matter if you miss the deadline by a year or two on these money milestones but most of these are important enough to be there by the time you turn 30.
If you think otherwise, ask yourself questions like :
- How will I get the money for hospitalization if I do not have health insurance ?
- If I die, how will my family survive if I do not have term insurance ?
- Without budgeting is there a way I can know how my expenses are doing with respect to my income ?
- If I am blowing away all my money, who will provide for my retirement ? Who will provide for my wife’s retirement?
- If I need money in case of a job loss, should I be taking that from my savings meant for my kids and other goals or from a corpus meant for emergencies ?
- Can you lose money by direct stock trading but not pay the fees to a financial advisor ?
These questions will open your eyes and you will look at these personal financial milestones with a new view. All the best. And hey, I also made a cool looking infographic with some of the above milestones for you which I hope you find useful.
Radhey,
Good topic. I am over 30 now but i had achieved the first three milestones before 30. As for the last 2, i have just started working on them. Do write something for people in age group of 30-40.
Rakesh
@Rakesh, I will do that Rakesh sometime.
Looks like I missed quite a few of these milestones – primarily because I didn’t had the visibility of existence of such options. I hope I cover the lost ground fast 🙂
@Jaswinder Singh, You are my client, you will 🙂
Good Topic. I am following the advice from this blog like a school boy following the text book.
I am only 28 and single. apart from Demat account i have done everything. To compensate for Demat I am investing in SIP’s since I don’t have enough knowledge in stocks.
I have health and term insurance. Investing in EPF, PPF, and SIP. I have emergency fund of about six month salary. I bought an apartment last year, which will be ready for possession in Jan 2012. I have some money for my marriage plans and I track my expenses & savings in an excel sheet. I don’t use credit cards.
I have the feeling that I am being very conservative and not taking enough risks. My next plan is to invest in some high-risk & high-risk segments.
Everyone please provide your suggestions.
@Ramachandran R., Vow, that is really amazing – you must be earning some good dough !
Congratulations.
Your risk taking capability drives you in invest in risky investment avenues. Try mid cap and small caps via MFs.
Ramachandran,
Congrats, to do all this at 28 is amazing…. Seldom you find people in this age group taking initiative towards personal finance.
Keep it up…
Rakesh
@Rakesh,
Thanks Rakesh and Radhey.
I don’t earn much. But I spend less.
@Ramachandran R.,
To achieve these feats in less than 28 years needs complete control and lot of patience. Congratulations.
Now is the time for you to move into more riskier options only if your investment horizon is long term.
I loveeeeeeeeed this article……. the way you started in first para to the way you ened in last line ;)……
Cool Cool, this topics would surely get one on the financial track, if they follow before 30….. I am more happy to see myself reaching on track except Credit Card and House :(. Though I have few years to reach 30, so let me try :)…… I have one more goal to get a real good Financial Planner, I have alredy done my choice….. I am waiting for few months to sign up for some personal reasons and to plan fund to invest…… Let’s see. I always feel happy and gain something when I visit this site…. and m sure that will continue in future.
@Chirag, thank you for that wonderful feedback Chirag.
You interest and enthusiasm keeps us going. Congratulations on getting your financial planner as well.
Lol.. You are quite witty Radhey.. 😉
Regarding the milestones, all of them are perfect. A must to achieve all of them before one reaches 30.
I’m 26, working since 2 years; don’t prefer credit cards, made the emergency fund, chalked out targets (both short & long term), budget/monthly expenses I maintain in a notebook, demat account is next in my list. But haven’t quite started investing due to liability (education loan) & the uncertainity of jobs being in the private sector.
Any suggestion how to step forward & begin investing?
Sudip,
Good to hear that your taking interest in your personal finance at 26.
As for budgeting/monthly expenses i would advise you to maintain it in excel. I personally use excel to note down my day-day expenses and find it very convenient. Its more fast and easy and you can compare you monthly budgets too. I think you may find a calculator in this site itself.
Rakesh
@Rakesh, Hey Rakesh thanks for the tip. 🙂 Will try to make it in excel. I’m sure this would be much better to compare than writing in the notebook.
@Sudip D, I use perfios.com.
I pay Rs 500 annually, it pulls data from bank accounts and credit cards so I manually have to add only cash spends.
The biggest advantage is that I get the reports which are tremendously useful.
@Radhey Sharma, Ok..will exlpore the site. Thanks!
@Sudip D, Go for equities big time at this age via your DEMAT account.
Use SIPs of MFs. Avoid trading.
It’s the right time to invest as well as stock markets are down.
@Radhey Sharma, Hey Radhey thanks! Yes, stock markets have been quite volatile from last few days/months. Will start investing as soon as I open the demat a/c. Meanwhile, I can start investing in debt market like PPF, FD/RD. What say?
Hi,
I have been following this website for quite sometime now. Its indeed informative.
I am 26 and unmarried. I want to invest around 20k per month.
I own a house. I can’t fix upon my goals yet.
I own 2 MF – HDFC prudence (3k) and HDFC tax saver (2k) .
Can you suggest me some more investing tips.
And also if you can help me giving some insights in budgeting.
Thanks,
Rahul
@Rahul, Read the articles on budgeting here.
Investing tips can be varied and so many, one could write a book on it.
Are you looking for something specific ?
@Radhey Sharma, Hi Radhey,
Investing tips- How much should I invest in SIP(equity, debt n gold). Which are the best options ? How good is PPF?
I also would like to visit a FP. But, is on hold as certain decisions are pending.
The most important question – How do I fix my goals if I want to follow goal-based investing?
@Rahul, Rahul, the problem with listing the “best” options is that they are not constant and keep changing depending on the person in question and his/her financial state.
What is best for me today might not be best for you since I may have a different set of requirements, different risk profile, goals, time horizon etc. etc.
Only once a FP analyzes your complete profile and prepares a holistic portfolio, you’ll be able to have an insight regarding what’ll work well for you.
@Jaswinder Singh, Excellent one Jas – that’s it !
@Rahul, Did not the goal based investing article help you ? How much you need to invest depends on many factors – there is no single parameter actually.
Can you tell me what you are struggling with when you say – “How do I fix my goals if I want to follow goal-based investing” ?
I can then help you.
This is the best time to start with Systematic Investment Plan (SIP) as the markets are quite low. Also this will inculcate discipline and will help you ride out the volatilities and uncertainties of stock market and help you build long term wealth. Also as your income grows try to increase the amount if possible. The returns will compound multiple times and will give you handsome amount
@Sujay, That is a very important point you made there Sujay. It is the right time to do SIPs and start if someone is sleeping over it. The ups and downs of the stock market will be taken care of automatically.
You got to be kidding!! My advice – before 30, forget the finances. Just focus on the opposite sex.
@Pawan Nanda,
Ok, so I was laughing here for 5 mins before I got back to the keyboard.
Sir, it’s the opposite sex that wants the money – you can’t imagine taking your girl out and not spending money – anything less than Rs 1000 at one outing is a shame.
Then you need to buy a vehicle to take her around and then the house…
Need to plan before 30 🙂
@Radhey Sharma,
No man! You need to focus on choosing the right girl 😉 This is the most useful life tip that you will ever get from anybody. Before 30, focus your energies on choosing the right girl.
@Pawan Nanda, Will try in next lifetime – too late in this one.
@Pawan Nanda, Pawan, where were you all this time…!!
@Pawan Nanda, Hahaha.. True mate.
Radhey also made his point..which is VERY true.
Radhey, how about having health insurance and PPF account before 30? The premiums will be pretty less in your 20s as compared to 30s or 40s. And the PPF account will achieve the goal of starting to invest early and take benefit of compounding. Remember the first chapter of jagoinvestor book? 🙂
I’d probably put these two right on top.
@Vivek K, Of course, if you can start PPF earlier nothing like it but remember one thing, PPF asks for 70k (now 100k) to be invested which can also happen 5 years later at say 35, but if you begin with equity MFs instead of PPF, it probably is the right thing.
I had both PPF & health insurance before 30. By the time you are in your 50’s you will have a big corpus built in PPF. There are few readers in this blog who have done that in their mid 20’s late 20’s. So the current generation is getting financial savvy.
@Radhey Sharma, The DTC will make sure that PPF account is opened as soon as you start working 🙂
Along with PPF people will be forced to open NPS too.