Money management tips for young professionals

Beginning your career marks an exciting new start. You will learn many skills along the way while growing your network and earnings. Building money management skills is a very important skill to be acquired on this journey.

These money management tips for young adults can help you achieve your life goals - from funding a world tour to becoming an entrepreneur. They will also turbocharge your confidence, lifestyle and fiscal health.

Money management tips for young adults

Here’s how to get a head start in acing your money management skills:

1. Create a budget and track expenses

This is the first step of any good money management plan. The most basic budget advice for young adults goes like this -
Divide your budget into four parts and address your needs -

• fixed expenses (like rent, utilities and EMIs)
• variable expenses (like clothes and shoes)
• savings and investments (such as Fixed Deposits, Mutual Funds, gold, etc.)
• your wants / indulgent expenses (like vacationing with family or eating out with friends)

By budgeting every aspect of your income, you can splurge and enjoy life while ensuring a secure financial future. However, always ensure that your needs are fulfilled first. Track your expenses every day using a budgeting app or an Excel sheet. This daily practice ensures that you never go over budget.

Also Read: Smart tips for teaching children money management

2. Build an emergency fund

Even if you love your job, what if you lose it tomorrow? The threat of layoffs and job loss is real because life is unpredictable. This is where an emergency fund comes in handy. Ensure that you have a corpus of three to six months of living expenses stashed away safely. If you lose your job, your emergency fund comes in handy.

You can survive without struggling for three to six months till you land a new job. To build your emergency fund, make sure that 5 to 10% of your paycheck directly goes into a Recurring Deposit or a liquid Mutual Fund, where it stays safe and earns interest.

3. Buy health insurance

As healthcare gets more expensive, it is advisable to buy Health Insurance and keep renewing it every year. Health insurance costs less when you are in good health. Hence, it makes sense to buy the policy when you are young.

For a small amount every year, you can get adequate coverage in case you are hospitalised or suffer a critical illness. Make sure to read the terms of the policy and choose the one that offers the best value. This is one of the most important money management tips for young adults. 

Also Read: Getting Married? Here are some valuable money management tips

4. Pay yourself first

This statement essentially refers to the habit of investing your money. Invested money earns interest without you lifting a finger. As you continue along your financial journey, your money will continue to grow, earning interest and increasing in value.

Ensure that 20% of your paycheck gets automatically invested every month. Make sure that you never put all your eggs in one basket. Instead, spread your investment across multiple assets like Mutual Funds, for instance, which tend to be slightly more risky but deliver higher returns over a three to five-year horizon. Fixed Deposits and Public Provident Funds deliver a fixed rate of interest. A mix of these instruments helps you balance the risk with rewards.

5. Build your credit

 

One of the top money management tips for the young is to start building your creditworthiness score early using a Credit Card. This is because when you need to take a loan, banks will assess your ability to pay back the loan by evaluating your credit score. When you pay your bill on time, your credit score improves. Moreover, you get to earn many rewards along the way, which is basically like free money. 

You can also start building your credit score today by availing of an Axis Bank Credit Card, which presents many benefits like amazing cashback offers and attractive discounts.

The bottom line

Embarking upon your financial journey can seem intimidating, but remember, well-begun is half-done! Start saving with a Savings Account, which comes with beneficial features such as a Debit Card, yearly interest, discounts and offers.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision