Your 20s are an exciting yet crucial phase of your life when financial habits start shaping your future. While this decade offers financial freedom, making the right money moves early can prevent future stress and set you on the path to long-term stability.
In India, individuals in their 30s exhibit a growing awareness of financial planning, with 79 per cent already initiating retirement savings, surpassing the 67 per cent in the 50-59 age group, according to an Outlook Money survey.
While 53.33 per cent of people aged 30-39 understand compound interest, their overall financial literacy remains average due to gaps in financial attitude, as per an RBI survey. Despite this, only 20 per cent believe serious retirement planning should start before 30, with many targeting 59 as the ideal retirement age. To bridge these gaps, experts recommend enhancing financial literacy, cultivating positive financial attitudes, and setting realistic retirement goals that factor in inflation and long-term needs.
Chartered Accountant Abhay Asknani shares key financial checkpoints to hit before you turn 30 - along with expert tips to help you get there faster.
1. Get Insured: Secure Your Future Early
CA Abhay Asknani emphasises, ’Buying insurance in your 20s is a smart move because premiums are significantly lower when you start young. Even if you don’t have dependents yet, securing a life and health insurance policy can be a game-changer.’
Pro Tip: Opt for a term insurance plan with a high coverage amount and a separate health insurance policy that includes critical illness coverage. If you’re renting, consider renter’s insurance to protect your belongings.
2. Start Saving For Retirement Now
It may seem too early, but the power of compounding works best when you start young. ‘Aim to save at least 15-20 per cent of your income towards retirement. If your employer provides a provident fund, maximise your contributions,’ suggests Asknani.
Pro Tip: Explore Public Provident Fund (PPF) or National Pension Scheme (NPS) to get tax benefits while saving for your retirement.
3. Build A Strong Credit History
A good credit score can help you secure loans at lower interest rates in the future. ’Always pay your credit card bills on time and maintain a credit utilisation ratio of less than 30 per cent,’ advises Asknani.
Pro Tip: If you struggle to pay off credit card bills, set up an auto-pay feature to ensure you never miss a due date.
4. Create An Emergency Fund
Life is unpredictable, and an emergency fund can be your financial safety net. Asknani recommends, ’Keep at least 3-6 months' worth of living expenses in a high-interest savings account or a liquid mutual fund.’
Pro Tip: Automate transfers to your emergency fund each month to build it consistently without feeling the pinch.
5. Master Your Taxes
Understanding tax-saving investments can help you keep more of what you earn. ’Use tax-saving instruments like ELSS (Equity Linked Savings Scheme), PPF, and NPS to maximise deductions under Section 80C,’ Asknani advises.
Pro Tip: Invest in a tax-saving SIP at the beginning of the financial year instead of last-minute rushing around in March - it will reduce the financial burden at year-end.
6. Budgeting For A Sustainable Lifestyle
Your spending habits now will determine your financial health later. ’Follow the 50-30-20 rule - 50 per cent for essentials, 30 per cent for wants, and 20 per cent for savings and investments,’ suggests Asknani.
Pro Tip: Use budgeting apps to track your expenses and categorise spending trends.
7. Eliminate Debt Before 30
Clear outstanding debts early to free up cash for wealth-building investments. ’Tackle high-interest debts first, like credit card balances, and aim to pay off student loans aggressively,’ says Asknani.
Pro Tip: Consider the ‘snowball method’ - pay off the smallest debt first for a psychological win, then move to the bigger ones.
Bonus Tips For Financial Growth
Start investing in stocks and mutual funds: SIPs (Systematic Investment Plans) in equity mutual funds can yield good returns over time.
Diversify your investments: Don’t put all your money into one asset - spread it across equities, fixed deposits, and real estate.
Look for passive income streams: Freelancing, rental income, or even a side hustle can provide extra financial security.
Asknani sums it up: ‘Financial planning in your 20s doesn’t have to be complicated. Automate savings, invest wisely, and stay disciplined with your expenses. By the time you hit 30, you’ll be in a strong financial position to tackle bigger life goals.’
It’s never too early to start, but waiting too long can cost you. Take charge of your finances today and build a secure tomorrow!