Life throws up various responsibilities at different times during our lives. Managing finances is a constant effort for many of us. Let us attempt to chalk out a few common financial dilemmas that you will face at some stage in life. We’ll tell you how to sail through these trying times.
During your 20s
- It’s a fine balance between debt and college choice
At this early stage in your life, you must be browsing through college prospectuses to find the perfect academic course that will push you up the corporate ladder. Haven’t bagged a scholarship? Not enough in savings? It’s best not to begin your working life with a huge amount of debt on your shoulders.
Choose your employment options and start modestly with base salaries after you have a degree under your belt.
Remember, the EMI for any loan should be not more than 50% of your net monthly income.
What can you do? It might be a good idea to work for a few years, save some money and then apply for a post-graduation course.
During your 30s
- Juggling a Home Loan EMI or investing for children in equities
Dream house or a secure future for your child? There would be an obvious answer to that question: your child’s future would be first priority.
If you’re considering buying a house, don’t delay the purchase so much that the debt carries forward into your retirement. It can also be stressful to live in rented accommodation after retirement.
What can you do? Consider buying a smaller apartment. This would be more affordable. Also, think about opting for SIPs over lump sum investments.
How does that help? By investing in SIPs every month, you can build a sizable corpus for both your goals of higher education and securing your child’s future. Ever heard of killing two birds with one stone?
Additional Reading: How Much Do I Need When I Retire
During your 40s
- Continuing with a job or becoming an entrepreneur
This could be a bit of a tricky decision. At the age of 40, you would most probably have a dependent family and various financial liabilities such as a Home Loan or a Car Loan.
If you’re contemplating becoming an entrepreneur, there is a risk of not finding success with your new business. You might need to put most of your savings into this venture as initial funding.
Before you do anything you might regret later, make necessary provisions to secure you family and your assets.
During your 50s
- Higher education for your child and your retirement
You may find that these two life goals collide by the time you are in your 50s. The advice going around is that your retirement fund should be your priority.
What can you do? Think of an Education Loan or scholarship for your child.
How will that help? An Education Loan would help make your child financially responsible and give you tax benefits.
During your 60s
- Plan a retirement income
As you get closer to retirement, it’s a good idea to move your investments to debt instruments, to give yourself more financial stability. You can consider Debt Mutual Funds. Reduce your equity investments but don’t do away with them. At least 20-30% of your portfolio needs to be in equities because returns from equities can beat inflation in the long run.
What can you do? It’s a good idea to have several income streams going. This could include income from renting out your property and interest from fixed income investments such as Fixed Deposits.
Additional Reading: Investing in Your Golden Years
Now that you’re better informed, how about checking out some financial products on BankBazaar?