For example, Imagine you’re 24 and you earn ₹40,000 per month. You decide to save 20% (₹8,000) each month and invest in a mutual fund with an average return of 8% annually. By the time you’re 30, you will have saved ₹480,000 and earned ₹74,000 in interest.
Saving and investing early builds wealth. Saving ₹8,000 monthly in mutual funds grows savings and ensures financial security over time.
Real-Life Facts About Financial Trends
According to RBI’s sectoral data on bank credit, personal loans grew by 14.4%, reaching nearly Rs 55.3 lakh crore. Credit to agriculture and allied activities also saw an 18.1% increase, totalling about Rs 21.6 lakh crore.
Many young adults are using loans for big expenses, such as buying cars or going on holidays. Before borrowing, it’s important to understand how to manage your money, especially when taking a personal loan in Hyderabad.
1. Create a Budget
The first step to managing money is budgeting. Have all the income and expenses categorised on a piece of paper.
- Essentials: Things like rent, food, and utilities.
- Wants: Things like eating out, entertainment, and shopping.
Use the 50/30/20 rule: spend 50% on essentials, 30% on wants, and save 20% to manage money effectively.
2. Build an Emergency Fund
An emergency fund covers unexpected expenses, like medical bills or job loss. Save 3 to 6 months’ living costs.
For example, if your monthly expenses are ₹20,000, save ₹60,000 to ₹1,20,000 in an emergency fund to avoid relying on loans or credit cards during emergencies.
3. Understand Debt Management
If you owe ₹50,000 on a credit card at 18% and ₹100,000 on a personal loan at 12%, paying off the credit card first saves money by reducing high-interest payments.
Paying off high-interest debts, like credit cards, first saves money by reducing interest, making your overall debt more manageable.
4. Start Investing Early
Investing early helps build wealth. Even small investments grow over time, and the earlier you start, the more they grow.
For example, investing ₹ 5,000 monthly in a mutual fund with a 10% annual return could grow to ₹ 22 lakh in 10 years. Consider using SIPs for automatic monthly investments.
5. Build a Good Credit Score
For example, using a ₹ 20,000 credit card for small purchases and paying off the balance monthly improves your credit score. This can result in a lower interest rate on a ₹ 2 lakh personal loan.
A good credit score helps in securing loans with a low interest rate. Proper usage of the credit card and timely payment increase your score.
6. Educate Yourself About Personal Finance
Learning about personal finance through free online resources like “MoneyControl,” “ClearTax,” “The Financial Panther” blog, and podcasts like “The Dave Ramsey Show” boosts your confidence in budgeting, investing, and saving.
7. Plan for Retirement Early
Starting to save for retirement early is crucial, even if it seems far off. In India, options like the Employee Provident Fund (EPF) and National Pension System (NPS) allow you to save small amounts monthly. Starting with as little as ₹ 1,000 per month can grow significantly over time.
Example: Using a Personal Loan in Hyderabad Wisely
Let’s say you are thinking of taking a personal loan in Hyderabad for ₹10,00,000 to buy a new car. Here’s what you need to consider:
| Loan Amount (₹) | Interest Rate (%) | Loan Term (Years) | Total Repayment (₹) |
| 10,00,000 | 12% | 2 | 11,20,000 |
Taking the loan means paying ₹1,20,000 extra in interest over two years. Is the car worth the extra cost, or would it be better to save and buy it later?
Conclusion: Smart Financial Decisions Lead to a Bright Future
Your 20s are the perfect time to develop good financial habits. By budgeting, saving for emergencies, managing debt, investing early, building a strong credit score, and planning for retirement, you’re setting yourself up for future success. Always align loans, like personal loans in Hyderabad, with long-term goals.
Sound small and smart decisions today for securing a future. Just like saving for a phone, early financial planning pays off.