In the first part of this series on Financial planning, MintGenie gave you a simple guide on the things that you can do in your 50s to help with your financial savings and investments.
Proper financial planning has always been a challenge for people in their 30s. With many responsibilities like mortgages, kids, and an increasing number of bills we have to pay every month, it's easy to lose track of our finances. Financial planning is a never-ending task because there are always new goals to meet and ways to improve our money management skills. However, some basic principles should be followed by everyone regardless if they are single or married or how much money they make.
Get rid of student loans
Educating oneself is a wise investment, but the cost of college can be overwhelming.
As college costs continue to rise, paying off your student loans is an excellent way to become debt-free as early as possible.
Now is an excellent time to pay off your student loans. In your thirties, getting rid of your debts can make life easier for you and give you the freedom to pursue other financial goals.
Build an emergency fund
While having an emergency fund may not be an essential requirement in your 20s, it is non-negotiable in your 30s. In your 30s, you wouldn't want to run to your parents and ask their help to take care of any emergencies.
So, it is essential to have an emergency fund in your 30s. It will help you overcome emergencies such as job loss and medical emergencies. The amount of money in your emergency fund will depend on your job and financial obligations, among other factors. However, it would be best to have at least six months of expenses in an emergency fund.
Get a term insurance
Insurance is an important part of financial security. Life can be unpredictable, and term insurance could help you guarantee your financial future to some level. However, most individuals overlook it and only buy a life insurance policy when they can no longer ignore it.
Term insurance is one of the most uncomplicated life insurance products available in the market. It is important to have a term insurance policy as early as possible if you are already married or plan on getting married in the near future. It is essential for both the husband and wife to get a term insurance policy. This will ensure that your spouse and children are taken care of after your untimely demise.
Get a health insurance
India has the highest medical inflation rate of 14% among Asian countries in 2021, followed by China (12%), Indonesia (10%), Vietnam (10%), and the Philippines (9%), as per the data published in the Indian Health Insurance report by Motilal Oswal Financial Services Limited (MOFSL).
Adequate health or medical insurance is vital to beat the rising costs of health inflation. A health insurance policy takes care of the hospitalisation and other related services. Without health insurance, you might have to dip into your savings and investments that were earmarked for other financial goals. In some cases, a medical emergency can wipe off all the savings you accumulated in your lifetime. Hence, it is important to take a health insurance cover.
Start contributing to retirement kitty
In your 20s, you may think that you have many years to plan for your retirement. You need to start contributing for retirement in your 30s if you have not started investing in your retirement kitty.
The amount you need to contribute towards your retirement will depend on your income, financial obligations, other financial goals, and the lifestyle you want to maintain after your retirement.
It would be best to take help from a financial advisor to help you with retirement planning. But till then, you can start investing at least 20% of your monthly investment towards retirement. You can also contribute your yearly bonus and other lumpsum amounts that you receive as a gift from your parents and relatives towards your retirement kitty.
Having a good credit score is one of the important aspects of being an adult. It is important to build a credit history if you don't have a credit score. Using credit cards for purchasing and paying the bill on time is one of the ways to build a credit history. A good credit score can make it easier to get loans at an affordable rate in the future.
However, it is important to use credit, including credit cards, wisely to benefit from a good credit score.
You may already be in your thirties, or maybe you must definitely get to that age to fully understand the importance of these matters. Financial planning for people in their 30s can be a very tricky case, as a lot of things happen at this age, and some decisions become crucial not just from a financial point of view but from the point of view of well-being.
Padmaja Choudhury is a freelance financial content writer. With around six years of total experience, mutual funds and personal finance are her focus areas.
Follow the entire series on Financial planning here.