Three places to start putting your money before you’re 30

As a financial advisor who understands the incredible potential of value addition for one’s money that early money management holds, here’s some solid advice for people in their mid and late 20s.

Start putting your money where it is going to really matter for you and manage your money, no matter how insufficient you think that is, in an optimal manner.

The 50/20/30 rule you should practice before you are 30

It’s straightforward, and following it makes life so much easier when you know that you’re building some financial cushion for yourself without having to really give up much.

Optimal money management makes you realise you actually have money to put to good use for it to earn more money for you.

According to the 50/20/30 rule, no more than 50 percent, or half of your income, should be spent on your basic living expenses. A minimum of 20 percent of your income should go towards building a financial foundation for yourself – this means you should put this money towards life insurance, emergency funds, retirement fund, child savings accounts, systematic investment plans and any other form of untouchable long-term savings. The remaining 30 percent is for the expenses you can choose, be it to create comfort and enjoyment in your life or towards travelling or entertainment.

Start putting your money where it is going to really matter for you and manage your money.

1. Life insurance

There can be life without health, unfortunately, but there certainly can’t be health without life, so let’s be grateful for the fact that we’re alive and talk about life insurance.

There’s no guarantee to life. That’s a hard fact. The younger you are, the cheaper it is. Premiums are higher at an older age, especially if you start late. So, life insurance is definitely something that one should start putting money towards when it costs less and can turn around to pay back much more in your time of need.

2. Health insurance

Being young and healthy is no protection against the cruelties of life.

Medical insurance is one subject that can literally save your life. Still, the trouble is, in most cases, it is presented in such a complicated, costly and chilling manner that the person is likely to fall ill just from the shock of trying to navigate these treacherous waters.

If your health fails you, don’t let that be the reason to allow your dreams and the dreams of your beloved family to fail as well. Insure your health, and rest assured that your medical expenses will be taken care of in case something goes awry, not putting you or your family under pressure for arranging funds during an already emotionally troubled state.

3. Retirement funds / saving plans

Don’t wait till you get old to worry about your retirement because you have to worry too much then.

Helping your money make more money while you are in your prime earning years means you don’t have to struggle to do it when you’re tied for time or energy or just simply lost the will to work more.

Ensure you are saving money into an annuity plan, which provides you with income as soon as you retire. Income in retirement is an asset. Assets in retirement can become a liability. Income from an annuity is excellent when you’ve stopped working for a living but are receiving regular income because you made an intelligent money decision a few decades ago. It’s a guaranteed monthly income that is given to you as long as you are alive.

Even if you outlive your other savings, this will keep trickling in. It’s a very underrated wealth generation product that needs to be better examined.

If you’re clear about your goals, disciplined with your finances and take the trouble to understand, review and rectify, even in times of hardship, you’ll find that the twin pillars of savings and insurance will pull you ashore.

Dr Sanjay Tolani, CEO and MD, Goodwill World.