While it is necessary for parents to teach their children how to best manage their finances, they often neglect this task which has given rise to a large number of millennials who have no idea how to be financially independent. As a result, millennials often end up scrambling for advice from friends and colleagues and other financial advisors who may be present at the company they work in. They learn about the importance of paying taxes on time, investing in dependable instruments and even about features of term insurance from people around them.
As a child, Reeta had only to ask for a new toy or a new book before her parents hastened to get it for her. Even when she was in college and was running low on funds, a simple call to her parents was enough for her account balance to be credited by a few thousand rupees. However, the minute she landed her first job, she decided that it was high time she stopped asking her parents for financial assistance. Living in the city of Mumbai was expensive, but over time, she gained insight from her friends and colleagues who had been living in the city longer than she and were more capable of handling their finances.
Read on to learn about how millennials can achieve financial independence, without having to depend on anybody else.
Budgeting: Budgeting is the first step to becoming financially independent. It involves drawing up a list of necessary expenses and allocating values to them, based on how much they will cost and how much they should cost in comparison to your income. Budgeting will allow you to analyse your largest expenses and determine their necessity. Once you have identified your biggest expenses, analyse how necessary they are and cut down on them if possible. Since expenses on food and regular groceries cannot be brought down, you can decide to go out less or eat out fewer times in a month. Of course, once your income rises, your expenses will also rise accordingly. Thus, you must budget according to your means.
Pay off Debt: Many millennials carry student loans from their college days, which have a tendency to have a long payback period. It is thus, important to pay back these debts at the earliest to ensure a debt-free life. Repaying student loans and other debts can take a sizeable chunk out of your monthly income. If it is paid back at the earliest, this leaves you with more resources to live a fulfilling life. Additionally, being debt-free at a young age leaves you with more money to travel and explore the world
Learn to Save: Savings is a foolproof formula that has been followed by people for centuries now. The minute you get your salary, it is important to set aside some funds that can serve as your savings. There is no telling what the future may hold, but the best way to be prepared for it is to set aside some funds. These savings can help if you are suddenly struck down with some illness. If you have savings, you don’t need to ask your parents for help, and thus, you can truly achieve financial independence. You can also read up on the features of term insurance and opt for one that covers illnesses as well. This will allow you to rest assured that no matter what happens, the financial burden does not fall on your family. Also, you always have an option to play safe.
Plan for the Future: It is best to start planning for the future at an early age. In your 20s, if you begin preparing a retirement fund, you will be able to live your sunset years in comfort and ease. Start building a corpus from the minute you draw your first salary, and you will find that you never have to ask anybody for money in the future.
Maintain a Healthy Credit Score: A credit score is determined by how quickly you repay loans and your credit card bills. Banks and financial institutions use credit score as a determinant for whether the borrowing party should be given a loan, which is why it is important to maintain a healthy credit score. If the credit score is too low, there is a chance that they will be turned down by institutions for financial aid; or will be forced to pay higher rates of interest on their loans.
Millennials are seeking financial independence as soon as they begin working. This is achievable, as long as they plan out their future carefully and are able to hold their expenditure in check. Savings, investments and insurance are three factors that millennials must have in control before they can declare financial independence. While savings and investments will help in building a corpus for the future, insurance will ensure that they do not need to ask their parents or anybody else for help in case they fall sick.
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