Financial tips for working millennials- How to strike a balance between expenditure and savings

Millennials love spending on lifestyle and experiences, rather than save for the future. The focus is on living in the present as millennials buy gadgets on EMIs, particularly the zero-cost EMIs. The high cost of living and low salaries makes saving a necessity.

Extravagant living is dangerous. Excessive borrowing at high interest leads to the loan trap. Millennials have to save and also invest if they want to meet life goals like marriage and stay far from the debt trap. These simple tricks help millennials live a tension free life

Save first and spend later

The first rule of personal finance is pay yourself first. Save a part of your monthly income before spending it. Follow the 50-20-30 Rule, where 50% of income goes towards living expenses, 20% for spending on food, entertainment and travel and 30% in compulsory savings.

Also Read: Making Millennials Money Wise

Create an emergency fund

An emergency fund offers millennials a safety net, helping combat financial emergencies. Have 3-6 months of living expenses in the emergency fund. Keep the emergency fund in fixed deposits or liquid funds to enjoy high liquidity.

Use expense tracker apps

Millennials are tech-savvy and can use a mobile expense tracker app to track spending. These apps categorise expenses into categories like food, shopping and entertainment. The apps send reminders to pay your bills on time and avoid late fees. The expense tracker app helps split and settle bills on eating out, trips and vacations among friends. This reduces unnecessary hassles and saves a lot of money.  You can track spending real-time, avoid emotional spending and get a strong hold on finances.

Make a budget

Make a budget which includes every rupee earned and spent. With a budget, you gain control over money and become debt-free. There are plenty of budgeting apps for millennials to manage money. When you look at expenses and income, there's more money left than you realise. This is just like getting a raise. A budget shows where priorities lie and makes sure your money goes towards them.

Also Read: 5 loans for India's millennials

Keep track of credit reports

There are plenty of instant loan apps where millennials get loans in minutes. You can get personal loans, credit cards and top-up loans, making you forget these loans must be repaid. Don't make credit cards your emergency fund. Personal loans and credit cards charge high interest and credit score is affected if repayments are not made in time. Don't use more than 50% of your credit limit as this adversely impacts the credit score.

If you have a poor credit score, you don't get important loans like a home loan. You end up sacrificing the future for the present. There are online websites to get credit report and credit score for free. Tracking your credit report and score is crucial, as you can avoid high-interest loans, plan repayments in time and not fall prey to marketing gimmicks offering easy loans.

Don't fall for the minimum due on credit cards

Millennials must never overspend with credit cards. Credit cards charge high interest of 24-36% a year. You are then offered the facility of minimum amount due, where you pay only a small portion of the principal outstanding each month. This looks great if you are struggling with repayments.

The minimum amount due is around 4-5% of your outstanding balance. Paying the minimum amount due helps avoid late payment fees. You still must pay the interest.  If you make this a habit, the debt becomes unmanageable.

Also Read: Don't fall into 'trap' of buying cars: Uber CEO Dara Khosrowshahi's advice to Indians

Get a health insurance plan

Emergency hospitalisation can blow away your finances. This is why millennials must have a health insurance plan to cover expensive hospitalisation. You get cashless treatment if the insurer works in collaboration with various hospital networks.

If you take a personal loan for hospitalisation, you end up paying a lot in interest. Using the emergency fund empties money kept for emergencies. This is where the health insurance plan protects savings by giving you quality medical treatment at a nominal premium.  

Millennials must save, but instead, they upgrade their lifestyle to a point where they can't save. Maintaining a balance between saving and spending is crucial. When you grow into the sunset years, the capacity to earn diminishes. This is why you must save for the golden years.

Be Wise, Get Rich.

(The author is CEO and founder of IndianMoney.com)