5 Financial Advices for the new Generation

The new generation, often referred to as Millennials or Generation Y are in the age group of 20-35 years. Gen Z will be added soon as their predecessors to be the main earning group in India. 84% of India’s millennials are smartphone users and they are fond of credit options be it their car or travel. But from the retirement perspective many of the Gen Y members need to start planning their savings early. :Spend now and save later’ theory might be misleading.

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Lifestyle Management: Lavish spending and luxurious habits result into unnecessary expenses. Credit cards and EMIs are tempting the new gen into more and more spending than their predecessors. Spending the money that we already do not have, might lend us into a pool of trouble. Make a budget of income and expenses to make sure that debt obligations do not arise.

Disproportionate fund management will create more debt obligations, crossing the budgets. Both short-term and long-term goals should be made. Start taking baby steps to save a little for a short duration and gradually shift to bigger plans for longer duration. 

Gen X or the previous level of generation believed in buying things towards asset accumulation for a long term, like house or a car. But Gen Y believes in short term goals and spends whatever they earn sparing a very little to invest for the long-term.

Inculcate the habit to pay more: Do not delay the payment of debts. The longer the period and smaller the amount, one might end up paying twice or thrice the outstanding debt amount. Payment of debt needs to be backed up by regular payment in smaller amounts. Try to get rid off the large amount instead of postponing it to a future date. This will save you from paying out heavier amounts.

Emergency funds: Building an emergency fund may help to shed the unforeseen financial crisis. What if a higher repayment is required all of a sudden?  Keeping aside a certain sum of money as an emergency fund can be of great help.

Early retirement planning: Due to many reasons the youth is going for early retirement. But to meet the expenses both monthly as well as extraordinary, projection of the required amount needed to maintain the current lifestyle after retirement should be made and one should start saving for it at an early age.

Investment strategy: Millennials with lesser experience of financial markets might end up parking their funds unnecessarily in equity funds. It is imperative to check the negative effects of such decisions. Always allocate funds into a balanced portfolio to maximise returns while avoiding risks. SIPs are a great option to invest. This could be easy due to the digital platform. Such an investment strategy will help in lessening the current debt situation as well as post retirement requirements.

Mutual funds also are helpful to avoid loss due to lack of experience of markets. Facing any bad experience will force one to be away from investment habit. Better to start off with some proven and safe investment plans to fuel the encouragement towards savings. Starting with low-risk investments will boost the confidence and once comfortable, hybrid, aggressive and equity funds too can be tried.

As per experts, over 50% of Indian population is below 40 years. In the era of globalisation, India’s economy has bright prospective. Millennials can add a lot towards fruitful building of funds through their investments, which not only will help them but will support many other sustainable causes.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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