Graduating from a college and getting a job comes with some financial independence to the youngsters, but it also greets them with several economic challenges. Since most youngsters rely on their parents for managing their finances until they graduate and get a job, they do not have much idea about handling their money. Let us discuss some common financial hurdles that a youngster encounters and possible ways to overcome them.
Hurdle 1 – Emergencies
Emergencies never come with a warning and can arrive at anyone, any time. Even a single emergency like hospitalization due to any reason can blow away all your savings in the initial days of your career. Therefore, keeping yourself ready for any possible emergency is a smart way to manage your finances.
You should have funds to fight against financial, health, and other certainties of your life. For this, you must regularly save some amount of your income in your savings account. Youngsters must also think about health insurance policies. The advantage of having health insurance at a young age is that you pay the lowest amount of the premium.
If you are living in a country like India & you are planning to buy health insurance. There are many web aggregators where you can compare the premiums & select the best health insurance plan to protect your beloved one as per your requirement. When it comes to purchasing an online insurance policy, you will get the best quotes which will help save your money.
Also, you can avail the highest coverage offered by the insurer.
Hurdle 2 – Financial Illiteracy
As soon as the youngsters enter the professional world, they start experiencing a plethora of financial responsibilities. Be it renting a house in a new city/country or paying various bills on time and making some contribution to their savings; everything comes at once. You can consider it a loophole in our education system or parenting techniques, as our youngsters do not know anything about personal finance management except for a few terms. Therefore, due to lack of understanding towards finance, youngsters are unable to handle their income correctly, and hence it becomes a hurdle for them.
Both educational institutes and parents must educate their children regarding personal money management. Moreover, finance management is not an inner quality, and you can learn it like mathematics, science, and other subjects after while completing your education even by yourself. For this, you must read news, articles, and discussions on finance-related topics. Becoming financial literate will help you avoid chaos about your finance management.
Hurdle 3 – Education Loans
In an era where an undergraduate degree is no longer good enough to get a high-paying job, more and more youngsters prefer to get a degree that helps them generate a need for education loan. It is because this loan helps youngsters finish their studies without a problem. However, repaying the EMIs of the loan becomes difficult even after a student starts earning. There are two main reasons behind it – one – unmanaged personal finances and second – low starting salaries. Resultantly, the loan keeps on increasing and irregular repayment of the loan EMIs dents the credit score of a youngster.
To make things under your control, do not take multiple loans in the beginning of your career. Also, keep the tenure of your education loan longer to keep the EMIs smaller. You can lower the tenure of your education loan as soon as your income increases.
Hurdle 4 – Differentiation Between Wants And Needs
In younger age, we all readily get confused about what is our need and what we want. Needs are what we require essentially in our life such as food, clothing, and shelter. On the other hand, our wants define our purchasing power and hence can be unlimited, such as you can spend as much as you want on your entertainment or travel to exotic and expensive vacations or luxury cars. Primarily, youngsters spend a significant portion of their earnings on the wants instead of their needs, which results in their poor financial state.
By mentioning the difference between needs and wants, we do not want youngsters to be harsh on their lives, but we suggest them to spend after seeing their pocket. It is advised to save something every month.
Hurdle 5 – Maintain Balance Between Savings And Investments
To become wealthy, one must maintain a balance between their savings and investments. Saving is something that remains after meeting your needs; however, when you keep your money in some financial institution where it can increase, it is known as investment. It is difficult for youngsters to save a generous amount of money and they do not even think of investing.
It is recommended to save at least 10 – 20% of your income every month. Put a portion of this saving in some investment plan that suits you. If you are planning to invest in stocks, think of a long-term investment. It is suggested to invest early in your life as it will give you more benefits.
Financial Hurdles – Conclusion
Financial planning, for an individual, is more than a necessity, today. Experts suggest that you start saving the day you start earning. Therefore, the earlier you start saving the bigger corpus you can build for your future. Take care of your needs and don’t run after fulfilling your wants.
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