By 2030, millennials and Gen Z together will make up more than 50% of India’s population. Known for making sound financial choices, millennials are much more advanced. When it comes to millennials, their investments in mutual funds, stocks, real estate and other assets are at an all-time high, for them a cookie-cutter method does not fit well and when it comes to financial protection - they opt for multiple options to put the method to madness. In the midst of the digital age's relentless surge, millennials find themselves at the forefront of an era characterized by unprecedented connectivity and information access.
So as we commemorate 78th Independence Day, achieving financial independence thus remain crucial for personal empowerment and long-term security. It allows individuals to pursue their passions, retire early, and handle unexpected challenges without financial stress. In today's rapidly evolving digital era, leveraging technology and innovative financial tools can simplify this journey. Financial independence not only enhances personal well-being but also contributes to the nation’s economic resilience.
Let's explore some of the top mantras for millennials which can help them achieve their financial freedom!
Start Early and Invest Regularly
Don't wait for the perfect moment to begin investing—start your personal finance journey with your very first paycheck. While the retirement age has stayed the same, life expectancy has increased, necessitating a larger corpus to support a longer life. Additionally, many of us aspire to retire by 50 to pursue other interests, making early planning essential.
Consider this: if you start investing ₹5,000 per month at age 25, you could accumulate a corpus of ₹1.76 crore by age 55, assuming a 12% annual return. However, if you delay and start at age 35, you'd need to invest ₹17,500 per month to reach the same amount. A 10-year delay can triple the amount you need to invest monthly. Investing early leverages compounding and the time value of money. When you're young, you can take on more risks, benefiting from high-risk assets like equities and mutual funds.
Create Multiple Sources of Income
Creating multiple sources of income is essential for achieving financial stability and independence. Diversifying your income streams can protect you against job loss and economic downturns, while also accelerating wealth accumulation. Consider options like freelance work, side businesses, rental properties, investments in stocks or mutual funds, and passive income sources such as dividends or royalties. Multiple income sources not only enhance financial security but also offer flexibility and freedom to pursue personal interests and goals, ultimately leading to a more resilient and prosperous future.
Build an Emergency Fund
Building an emergency fund is a crucial element of achieving financial independence. During unforeseen circumstances like sudden medical emergencies, layoffs, or unexpected major expenses, having a financial safety net can mean the difference between a temporary setback and a lasting crisis. Experts recommend saving 12 months’ worth of living expenses to ensure adequate coverage.
Digital banking apps facilitate this by enabling seamless fund transfers and automated savings plans, making it easier to consistently allocate money to an emergency fund. These tools also offer features like goal tracking and notifications to help maintain regular contributions. By establishing and maintaining an emergency fund, individuals can navigate financial challenges more effectively, ensuring they stay on the path to long-term financial independence.
Eliminate Debt Strategically
Eliminating debt strategically is vital for achieving financial independence. Start by listing all your debts, including credit cards, loans, and any other liabilities. Prioritize them by interest rates, focusing on high-interest debts first, as these cost you more over time. One effective strategy is the "avalanche method," where you pay off debts with the highest interest rates first while making minimum payments on others. Alternatively, the "snowball method" involves paying off the smallest debts first to build momentum and encourage continued progress.
Consider consolidating debts to secure lower interest rates and simplify payments. Additionally, create a realistic budget to free up extra money for debt repayment. Avoid accumulating new debt by using cash or debit for purchases instead of credit cards. By systematically eliminating debt, you can reduce financial stress and create a solid foundation for future financial growth.
Insurance – a big must!
Before making any investment, ensure that you have adequate life and health insurance coverage. As your liabilities increase, so should your coverage amount. Prioritizing insurance safeguards your financial stability and provides a safety net for unforeseen circumstances, allowing you to focus on growing your investments with peace of mind. Purchasing life insurance at a younger age offers the benefit of lower premiums, which remain constant throughout the policy term. Younger millennials too find term insurance appealing because of its simplicity and affordability, coupled with the digital era which equips them with real-time financial data, market insights, and most importantly - investment tools that can assist in making informed decisions for insuring safety and security.
The bottom line
All that being said, India’s millennials are still relatively new to the concept of achieving financial freedom and its imperative for them to have a roadmap in place. India has the youngest population globally. So, if our youth is financially secure, it means India’s future is also safe. By adopting strategies such as early investing, eliminating debt etc., millennials can pave the way for their financial independence. This not only empowers them individually but also ensures a stable and prosperous future for generations to come.
Cometh Independence, lets ensure that we revise all our plans to address gaps and be independent from financial burdens!
Authored by Mayank Gupta, Co-Founder & COO, Zopper
