Personal finance includes investing your money in many ways. It can assist you in achieving various financial objectives and leading a pleasant life. The way that millennials and generation Z see money is different. If they sense promise in a certain financial product, these generations are not hostile to the notion of risk. A high-risk instrument, however, might not always yield high profits, and vice versa. In a world that is always changing, it is crucial to make wise financial decisions.
Few important steps for Millennials and Gen Z for Investing Money
1. Make a Budget:
Making a budget may seem like a quaint way to track one’s spending. In actuality, though, its applicability is still undeniable. Understanding your connection with money is facilitated by budgeting. It enables you to manage your money. You can prevent overspending by setting up a reasonable budget. It also enables you to make sound plans for your future requirements. By doing so, you may create a better financial plan and make sure that you follow it.
2. Follow the 30/20/50 Rule:
This guideline states that just 50% of your income should be used for necessities including food, gasoline, electricity, and water. You can spend up to 30% of your income on non-essential items like vacation, dining out, electronics purchases, and more. Last but not least, you should save and invest the remaining 20% of your income.
The generation Z and millennial generations can use this guideline as a guide. It can guarantee that, regardless of your income, you always have enough savings and investments without impairing your desired lifestyle.
3. Diversify your Portfolio:
To spread your risk and avoid having it concentrated in one area. Through diversification, you may make sure that your money is put in a variety of vehicles so that the gains from one instrument can offset the losses from another. Regardless of the assets you select, it is essential to diversify well. Therefore, in addition to investing in stocks and cryptocurrencies, you can also do so in the Public Provident Fund (PPF) or the National Pension Scheme (NPS).
4. Maintain Consistency:
Winning half the battle requires maintaining consistency. Making incremental, steady progress toward your goals is made easier with consistency. It is essential to save money and invest it over the course of your life.
How can financial knowledge assist millennials in making better decisions?
Millennials make up a sizable portion of the nation’s population nowadays. The millennial generation, which makes up around 34% of the total population and is the country’s main income group, is ambitious and will shape India’s economic trajectory for the next 15 years.
The millennial generation of today is aspirational, driven, and eager to travel; they have a different perspective on saving. Compared to the same age group 20 years ago, people between the ages of 25 and 35 are financially sounder. Millennials no longer simply consider safe investment alternatives while saving money; they also aim to develop their portfolio using a variety of instruments.
The millennial generation, which has not been conservative about saving, has also begun to become more aware of the many saving choices. Financial literacy has been proven to be incredibly useful in educating customers about their alternatives, according to research conducted across industries; platforms like Fintech applications, authorised Fintech specialists, and digital channels have all played a key role in this development.
Millennials in smaller cities have also been able to learn about investing and savings because to growing smartphone usage and reasonably priced internet.
4 Toxic ways Millennials and Gen Z Approach Finance in India
1. FOMO mixed with quick satisfaction
The Fear Of Missing Out has been one of the most prevalent impacts of internet culture (FOMO). Nowadays, young people see the world through the idealised and filtered glass of social media.
As a result, consumerism has increased, particularly with regard to materialistic items that may be shown on these platforms.
Young millennials and members of generation Z who are just starting their careers see their salary and earnings as a way to live life to the fullest. This strategy is not flawed in and of itself, but what it means to enjoy life has changed significantly.
2. Seeing Thrift as a Negative Trait
Frugality is the habit of managing your finances wisely and spending your money sparingly, however many young members of generations z and millennials equate it with being stingy.
How many of us have put off collecting a debt from a buddy because we didn’t want to seem stingy?
How many times have you wanted to decline an offer because it would put a strain on your finances, but you said yes or came up with another justification to avoid being frugal?
How many times have you put off asking for a raise, promotion, or wage negotiation out of concern that you’ll come out as ungrateful or greedy?
3. Lacking Discipline in making Financial Decisions
This is one of the biggest issues facing all generations, not just millennials and Gen Z. If you are persistent and patient, financial planning and investment may perform miracles for you. However, the majority of people lack the discipline necessary to maintain consistency over time.
It’s not like young people nowadays don’t want to improve their life and safeguard their financial future. However, they act irrationally and in spurts when they do.
There are days when we are motivated to get our lives in order for one reason or another, and we are determined to alter our routines in order to do so.
After a while, this quick burst of impulsive activity goes away, and we resume our typical activities.
4. Planning your Finances but waiting for the perfect moment, resources, or expertise to do so
Even while the lack of a financial education requirement in our curricula is a failure on the part of the educational system, we cannot use this as an excuse to put off establishing a strategy for your finances.
Because they are uninformed about money and lack access to extra finances, it is also comprehensible why the majority of young people are afraid to invest.
But doing so only delays your investment trip more, preventing you from taking advantage of compounding, which is a highly unproductive strategy.