Wealth Creation Tips For Investors In Their 30s
October 20204 min read
The times we live in now are very challenging. Especially for people who have just gotten new responsibilities. Getting married, having a kid, buying a house, planning vacations, savings for goals, creating funds for emergency, the list doesn’t seem to end. If you notice carefully, all these responsibilities come at once for everyone in their 30s. The carefree young person in 20s usually fumbles in 30s as life in general gets very overwhelming. When you add the money issues to this, everything becomes more stressful. While, there are a lot of things which no one can control, one important aspect of life can be figured out if planned in a right way. And that is Finances. Planning ahead for every known and unknown aspects related to money can take a lot of stress out of life.
Some of the important financial aspects you need to have covered in your 30s:
- Having Adequate Life and Health Insurance.
- An emergency corpus covering at least 6-9 months of expenses.
- Investments going towards important financial goals like Retirement, Children’s education, Buying a house etc.
- Getting Debt free.
- Taking a step towards Financial Independence.
Now in hindsight, these look like normal very easy to achieve goals. However, actual statistics show a different scenario altogether. A latest PGIM India Retirement Readiness Survey showed some startling facts about how Indians are managing the money. Some of the highlights of this report are given below:
- Urban Indians are allocating 59% of their income towards expenses.
- Major 3 concerns about post retirement life in India are Cost of Living, Health issues and Lack of support from family in future.
- 51% of Indians have not planned for retirement at all.
- If one looks at investment habits of Indians, Life Insurance, Fixed Deposits and Post office schemes remain on top of the list.
- A lot of Indians are not okay with compromising current standard of living even if it impacts the future financial goals.
This simply proves that even if everyone knows importance of saving and investing for important goals, it’s easier said than done. Considering this, we will try to give some useful tips, that will help investors to stay on course their financial plan and create wealth over long term.
Wealth Creation Tips
Don’t get trapped in FOMO
A lot of big expenses and purchases are a result of FOMO i.e. Fear of Missing Out. Making a big unnecessary purchase does seem exciting and thrilling over short term but ends with nothing but regret. Hence, instead of giving in to peer pressure or so-called social standards, focus more on what’s important to you and how one poorly thought step can affect the bigger picture. This doesn’t mean you should compromise with your lifestyle, indulging once in a while is okay. But it shouldn’t be at a cost of your financial goals. It is important to draw a line when the expenses take up more part of your income.
Move on from the traditional investment products
Wealth creation will only happen when the return generated by investments is substantially more than inflation. The products like Endowment plans, Fixed Deposits hardly beat inflation as they offer guaranteed returns. In order to create wealth, market linked products are the best option. Albeit there is volatility in such products and this volatility makes them generate better returns over long term. With investors in their 30s, time is on their side and they can make most of the market volatility by investing regularly.
Prioritise your goals
As we saw earlier, a lot of Indians are worried that they will be dependent on their children during their retirement. To avoid this, clearly prioritise your goals and keep investing a dedicated amount towards your retirement. Also, don’t forget to increase your investments as your income increases. Remember that Retirement years make up almost 30 years of our life where there is no income and only expenses. Hence, having a sufficient fund for retirement is a necessity. With this in mind, give priority to your retirement goal even if it seems very far because the earlier you start, better off you will be.
Don’t let expenses eat all of your income
Improving standard of life is important but at the same time it shouldn’t reduce your savings rate. Considering the uncertainties around the world, it is important to save at least 30% of your income. More if you want to create bigger corpus for your goals. Hence, first save and then spend so that you can control your expenses. This also includes the Loan EMIs. You may have various loan EMIs including Home, Car, Personal etc. High liabilities limit the investors’ saving ability. If you have saved for all the goals and still have money left then save just to create wealth.
Create a secondary stream of Income
This is especially important now because the world is extremely dynamic and there is no room for slacking. The secondary income could be a passive income generated from your investments or an income generated by monetising your hobby. Having this income will help you during difficult times like losing a job or getting a pay cut. This will also help in increasing your Net worth over time and achieving financial independence.
If planned in a right way, 30s could be an exciting time frame of life as financial worries will no longer hold you back. If you are wondering where to start, Use Optimo to create a customised financial plan and start investing for all your financial goals.
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