In our early 20s, most of us depend on our parents for living. Some of us get a good amount of pocket money from our parents, and some others feel that they are not lucky enough to get sufficient pocket money. There are some others who have to work for a living and also to support their family. As a human being, we all need to learn each and everything in our life. The best process of learning is from your own experiences. Sometimes we listen to others and follow them blindly without judging their expertise or knowledge. That’s the wrong way but everybody of us does that, at least for one time for sure. Can you give an answer to my question? Will you pick up a burning coal with your hand? Anybody can answer this question without blinking an eye for once. Do you know why? Because everybody knows that burning coal can burn your hand, and everybody knows about the power of fire since their childhood. But if I ask you, should you invest in Stocks? The majority of you would be in a dilemma; Because most of you have no idea about the Stock Market. Sometimes you may have heard from your parents or close relatives or from your friend that it’s very risky. Now let me explain why financial cognizance or financial education is so crucial in the early 20s before starting a career. The most important aspect of financial education is that it is required throughout our life & it is not taught in schools. Many of us have big ambitions in our life but we have no knowledge at all, how to reach our destination. For managing a standard living most of us have to struggle, we forget our life goals, our ambitions, our passion. But certainly, there is a way to make our ambitions come true bypassing the biggest hurdle in our life i.e, financial security. If we need not worry about our living then one can easily follow his dreams. That’s the importance of Financial Cognizance in early 20s.
Now there are several ways to maintain a standard living. The first principle for that is having a regular income source & keeping eye on expenses. Now a regular income source may be a JOB(any type of JOB depending on qualification & expertise) or self-employment.
Now if you want to do something big in life then you must follow some golden rules with strict discipline.
- You must track our expenses. If anyone invests 3 hours in the entire month for planning his expenditure then it would be enough for that month.
- 50% of your income should be used for necessities/needs such as food, electricity, house rent, school fees, etc. i.e, which are inevitable
- 30% of your income for the wants such as going for a vacation, Watching Movies in theatre, shopping, eating at restaurants, buying a laptop etc. i.e, which you wish to do
- 20% of your income for Investments. You should always pay yourself first otherwise your dreams will never become reality.
- If anyone earns some extra money then it should be utilized for acquiring new skills. In this information age, lots of information is freely available on the web as well as online courses are available at a cheap rate.
- One of the most important point is to focus on increasing income rather than focusing on saving on small things, such as arguing with e-rickshaw drivers, greengrocers etc.
The rules described in points b,c & d are popularly known as 50-30-20 Principle. We can modify this to the X-Y-Z principle. But always remember that wants to be minimized i.e, Y and Investments to be increased i.e, Z as per your own convenience, and never do the reverse.
Hence its the perfect time to start following these principles as life will keep throwing challenges & perfect time will never come.
