5 Reasons To Plan Your Finances In Your 20s
By: Nikhila P
Tags: Investing, Financial Planning, Financial Goals, Personal Finance, Money Management

Several surveys and research studies conclude that young adults are better with their money when compared to Boomers and GenX.

But, are they after all?

Ironically, it is the Millennial and GenZ population that keep hitting the snooze button on financial goal planning like no others.

When we have a whole life ahead of us, it sure is a far shot. Why hurry or worry about the future, right?

Wrong!

When it comes to making way for healthy financial habits, the sooner you start, the better it is!

Well, well! That’s pretty old school, cliché advice. How do we put all those ideas into action?

Worry not, we’ve got you covered.

To spur you into action, you need a purpose; a strong one at that.

When you find your WHY, you won’t hit the snooze button anymore.

To help you discover your WHY, we explore 5 compelling reasons for planning your finances early on.

Brace yourself for some jaw-dropping insights and real-world use cases on how effective planning can create wonders.

We’ll also let you in on some secrets to unlock financial freedom, if you will.

Without much ado, let’s dive right in to find out.

Reason #1: You can achieve ‘Big Goals’ with extreme ease

Small amounts today could turn big even before you realize it.

As you sow, so you reap.

Saving or investing small amounts “smartly” on a monthly basis is sure to reap its fruits in the long-run.

Starting early helps you get a much better grip on your big financial goals.

Remember the key lesson from the rabbit-tortoise parable?

It is small steps taken consistently that help you win.

Note that ‘Big” here either indicates your dream goal or high ticket-size goal.

By big financial goals, we mean, buying a house, saving for retirement, saving for a child’s future, saving for higher education, and the likes.

Let’s understand how a simple financial plan can make a sea of difference.

Note that in all the examples mentioned, Inflation is accounted for in all calculations.

Brace yourself for some mind-boggling calculations. Don’t worry, we did the math for you!

Meet two colleagues who earn the same money and have the same big goals. They both aspire to buy a house by 2023.

Let’s follow their journey towards their goal.

Meet Ramesh!

He prefers the old school way and does the planning all by himself.

He has around 10 Lakhs in savings in 2020.

He typically invests that in an FD or the likes.

By 2023, he then takes a home loan of ₹50 Lakhs to buy a house worth ₹62 lakhs.

He ends up paying an EMI of around ₹50,000 for 15 Years.

This amounts to a total of around ₹ 1.04 Cr including the loan interest.

Now meet Suresh!

He too wishes to buy a house.

But, he is smart and prudent. Naturally, he uses MoneyPlanned to plan his finances.

He uses the Planning Wizard on the MoneyPlanned App.

He then finds out that by investing ₹ 20,000 per month till 2023, he can save up to ₹21 lakhs for a down payment while continuing the FD.

The loan amount is reduced to ₹ 41 Lakhs.

Thereby, he ends up paying an EMI of just ₹40,000 for the same 15 Years.

If he invests the remaining ₹10,000 every month in a SIP, it would grow to ₹50 Lakhs!

The total cost of the house is reduced to ₹96 Lakhs including the interest rate.

The effective expenditure is only ₹46 Lakhs.

That’s the difference a simple yet effective plan can make.

It is the little changes that one makes that make such a huge difference.

MoneyPlanned is here to guide you through the entire process so you do not have any regrets about your money.

That’s the power of starting early. That’s the power of effective planning.

Reason #2: You can build a better lifestyle and future

Popular wisdom tells us that aspiring for an elevated lifestyle while we are still young is the last thing a financially smart person does.

If we had to, we’d say that is a load of gibberish.

Financial smartness is not about penny-pinching, sacrificing and compromising. True financial smartness lies in starting early.

Achieving your goals and living an elevated lifestyle can very well go hand in hand with smart choices.

Smart choices coupled with consistency can achieve incredible results over time.

Let’s understand this with a case study of two friends.

Meet Ramya and Saumya.

Ramya starts investing when she is 25.

She starts investing ₹5,000 per month is a SIP as of now.

Every subsequent year, she tops it up by ₹500.

By the time she is 55 years old, Ramya would have hit the jackpot by earning an awesome ₹1.3 Crores.

Sadly for Saumya, realization dawns a decade later upon her and she begins her SIP when she is 35.

By the time she is 55 years old, she would have earned only ₹35 Lakhs.

That’s the massive difference starting early can create.

It’s a 3.7 X less than the wealth Saumya amassed.

Starting her investments in her 20s gave Ramya a humongous edge over Saumya. She can hence

You have the power to decide what you want to do with your money.

Your future depends on the choices you make today.

Reason #3: You can do more fun things with your money

Remember your bucket list from college?

Wasn’t it full of exciting endeavors and adventurous activities?

Of course, you bet!

Sadly, once the daily grind of life sets it, it tends to make us compromise on our dreams.

But, does it really have to? We think not!

Financial planning is worth our while when it makes our life more joyful and fun.

Smart planning frees up more money for you to fulfill your dreams.

With more money in your pocket, what once seemed far-fetched becomes attainable.

Let’s meet with Raghu.

Raghu earns ₹1 Lakh per month.

He has always dreamt of owning a cool car to go on trips with his friends.

Let’s take a look at how his dream goal would pan out if he were to buy it immediately with no planning vs started a year in advance.