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A Millennials Handbook On Living It Up Today While Saving For Tomorrow

Knowing the prevailing economic conditions while keeping certain financial tips in mind will help you contribute towards wealth accumulation for the future, without giving up your leisure and lifestyle. 

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While you may have noticed that millennials by nature prefer independence and seek instant gratification from their money. Given their age bracket, it is natural to view today with priority as compared to tomorrow, which explains why millennials are more comfortable saving for short-term goals rather than retirement. However, it is interesting for you to note that millennials form 34 per cent of the Indian population today, making up 47 per cent of the working-class population.  

Being the primary wage-earner in the country, it is time for you to view your money and income with more care and deliberation, especially now when the market is giving mixed signals. On one front, you can use the RBI repo rate cuts to your benefit by applying for low-interest rate loans. However, on the other hand, this means a lull with lower interest returns on certain investments. Moreover, given the stuttering market scenario in the present, with liquidity from mutual funds drying up, corporates are opening subscriptions for Non-Convertible Debentures or NCDs. These need to be approached with caution as not all corporates enjoy credibility or the backing these require to give timely and high returns to investors. 

Knowing the prevailing economic conditions while keeping certain financial tips in mind will help you contribute towards wealth accumulation for the future, without giving up your leisure and lifestyle. 

Spend smart by prioritising and having goals 

While sticking to a budget is an essential part of saving, go a step further to identify the surplus. Use apps to track your income, expenditure, and leftover finances with more clarity. Start by subtracting your expenses from income to understand the opportunity for leftover cash. To free up your finances, you do not have to stop going out or restrict yourself from buying the latest electronics or running shoes. All you have to do is reduce the frequency of such lifestyle expenditures and start prioritising. Let your aspirations drive your saving habit. When you free up your budget every month to keep aside funds for a European vacation, it will automatically push you to save more. So, by having goals in mind, you will spend more carefully and be able to have life experiences that you truly value. 

Create an investment portfolio that suits current market trends 

Maintaining healthy savings will certainly help you navigate through life’s ups and downs; but the trick is to time your savings for further growth. With age by your side, consider creating a diversified spread that includes investments in FDs for medium-term goals, SIPs for short-term goals, PF for retirement, and gold or the like for emergencies. When selecting options, be wary of short-term performance over long term consistent growth. For instance, choosing high return options like gilt funds today is not a good idea as they may have performed very well over the past one year owing to several rate cuts, but such stellar spikes may not be a constant in the time to come.  

Ideally, you should invest 80 to 85 per cent of your savings in equity mutual funds, 15 per cent in FDs or debt funds, and the remaining 5 per cent in retirement savings. You can rework this mix to suit your lifestyle with age or responsibilities making way into your life. You can also start a SIP by contributing a small sum monthly to encourage your habit of saving. Here, select short to medium term fund options, as once the repo rate readjusts, these are going to give better returns. When selecting options like FDs and fund houses for mutual funds, check credit ratings and select the ones with high ratings from ICRA or CRISIL. The highest ratings assure you of secured returns and confirm the security of your principal as well. 

Enjoy yourself but insure your life and health  

Studies reveal that 62 per cent of millennials can afford a vacation every two to five years. Once you layout your financial planning cards and commit to smart investments, you too can be a part of this group. While you can tackle vacation or other immediate goals using high return options, it’s important to make room for security too. To add safety to your investment portfolio, choose options like PPF, life insurance, and health insurance plans.  

PPF is a government-backed scheme, which allows you to earn high interest. Treat this as retirement savings and allow your savings to reap benefits in the years to come. On the other hand, a life or health insurance plan secures you and your loved ones against undue emergencies, keeping you financially safe at all times. Additionally, all these investments allow you to enjoy tax benefits under varied sections of the Income Tax Act all through your earning years.  

Reports claim that millennials love to follow their instincts when it comes to money, savings and investment. Fair enough; listen to your inner voice and keep the pointers above handy to start building your corpus of wealth right away.  

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Sachin Sikka

The author is Business Head - Retail & Corporate Liabilities, Bajaj Finance Limited

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