Just Entered The Workforce? Financial Strategy for You to Follow as a Millennial

As a millennial, our financial strategies are entirely different than our parent’s. The plans that worked for our parents might not be as efficient for us today. Our generation has seen phases of economic turmoil and is almost on the edge of a recession again. This has made our financial needs and the tools to radically differ.

About 2,600 years back, a slave from Greece warned people of his tribe about failing to plan for their future. Aesop’s 1867’s renowned fiction, Grasshopper and Ant stories also emphasize on the eminence of future planning. Over the years, stories evolved but the idea of planning for the future remained unchanged.

So how do we go about it? Well, if you have just joined the workforce, we have a few amazing tips to set your financial strategies right. Here we go -
• Use the 50–30–20 Rule

This is the Golden Financial rule for someone who has just begun earning. To break 50–30–20 in simple terms, you got to spend 50% of your income on your necessities like rent, gas, commute, etc. 30% of your salary can be your luxury budget which means a restaurant, movies, staycations, subscription, etc. The last 20% of your salary must be your savings. You either save this portion or invest it in a low or moderate risk SIP. • Focus on Short Term Goals

Long term strategies can be luring but short term goals can be a lot more effective to start with. Long term strategies can be overwhelming and difficult to keep up with. Jot your short term goal and start planning for it accordingly. • Have an Emergency Fund

This is the most crucial part of financial planning. From the very beginning, try to save as much as you can for your ‘Emergency Bucket’. We are living with global economic uncertainty. With massive automation, we are already witnessing lay off and job losses. It is for your own best to save up for the bad days. • Have a Savings Account

We know you have a salary account already but you need to open a savings account right away! Having a separate account for savings can help you stay focused and impulsively spend the money left in your account. If you are an impulsive spender, you can also consider not registering the account for any online banking mediums.
• Invest

This has been said over a trillion times but we have to mention this again. Start investing as early as you can. Once you are done with paying off your debts, having an emergency fund, and other major liabilities, you are all set to start investing. Always invest with a long term approach unless you do not have extensive knowledge of the field. Also, never underestimate the power of compounding. Investing a small amount over a long period of time can help you achieve bigger goals.

• Pay Your Taxes

Even if you aren’t categorized in the payable tax slab, file an ITR i.e Income Tax Returns every financial year. Filing an ITR helps you build your credit score. Having a good credit score can immensely in the longer run. • List Down Your Debts

We suggest the Snowball Technique can help you the best with clearing off your debts. To explain it in simple terms, snowball strategy means starting with clearing off petty debts first. This keeps you driven towards your goal and relieving in many ways. • Learn to Use a Credit Card

Picture Credit: Tech Girl Financial Do not sign up for every credit card offer you get! As someone who has recently joined the workforce, you will receive a lot of credit card offers. Have one card with a decent limit and use it wisely. Here are a few things to remember. — Do not utilize more than 30% of your credit limit in general

- Do not get into the minimum payment cycles, it is a trap!

- Credit card companies do not earn any money out of you unless you defer payment or pay late fees/ interest.

- Do not impulse shop! A credit card does not give you a financial cushion but a liability addiction.

• Get an RD i.e Recurring Deposit

Recurring Deposits are of paramount importance for a salaried individual. It is a form of automated payment. With an RD a sum of your salary gets blocked on a fixed date every month. You can open an RD account with a preferred bank and start with any amount possible. If you are someone who cannot set the money aside yourself, RD is a great way to save consistently. • Buy an Insurance

Buying insurance is one of the most under spoken financial tips for millennials. We live in an era of uncertainties and having to spend an exorbitant amount on an uncalled misfortune can disrupt our financial balance. But be sure that you are not over-insured too. Remember, Ensure before you Insure! • Try to Build a Secondary Source of Income

As Gen Z, your time is your greatest asset. Use your time wisely to build a secondary source of income or have an investment portfolio to keep you secured. Your secondary source of income can also be a side business of your hobby or anything that you can do for fun, which would make the hustle easier. • Have a No-Spend Day

A No-Spend day is a fun way of saving. It is deciding on one day a week and not spending anything on that day. It can be your week off or some other day. The idea is to not spend at all for one whole day. • Have a Luxury Budget

Picture Courtesy: World Atlas All work and no play makes Jack a dull boy. Remember? As millennials, we are too exposed to ‘The Millionaire Next Door’ perspective. Plan your fun days well in advance and save for the Holiday Plan! Or buy that phone you have always wanted with the money you save but in any case, avoid getting into debts for your adventures. Give yourself the liberty to have a Luxury Budget and avoid impulsive spending. The more impulsive you are, the more you will rack the debts. Lastly, in the time of global economic uncertainty, merely saving is not enough. With rising inflation, if the worth of the money you save would gradually go down. Hence, preparing for your future is extremely crucial. Using these financial strategies right from the early days of working can enable you to achieve financial independence in true sense.

Click here to read the ultimate beginner’s guide to budgeting. Stay disciplined and stay sound! All the best!