I know a lot of people who are in their late teens or their early 20s who keep repeating these 5 potentially hazardous mistakes which might make them suffer in their later years. Let's discuss more of these in this article!
1st Mistake: Lifestyle Inflation
The most apparent thing that I see most people in their late teens or early 20s commit is to pick up lifestyle inflation. What exactly is this lifestyle inflation? Well, it simply means you have entered this race of materialistic desires - a better phone, a bigger house, a more powerful bike. This desire for better things never ends. Flipkart Big Billion Day, Amazon Great Indian Festival or whatever it is, you go on a shopping spree to upgrade every damn thing. This can be from the desire for a very cheap back cover for your phone to much expensive real estate. If you don't need it, you most probably should not buy it.
This is a completely negative approach towards achieving financial freedom. This is something even I am guilty of. I have purchased many items which are just laying around in my room.
I know some of you might be thinking, "What is the use of earning if we don't spend it to fulfil our desires? After all, we have just one life." Lifestyle inflation does not mean you don't go and spend on something you desire. It simply means if you have purchased Galaxy S20 last year, you probably don't need to upgrade it to iPhone 13 this year. Be clear on what you are spending, what is your purchasing power, how much money do you have at the moment and all that.
A simple rule that might help-
If the thing you are purchasing is more than 10% of your total savings, you probably should start thinking multiple times regarding your decision to buy it.
2nd Mistake: Emergency Fund
Guessing from the name, it is about a fund that is created to help you in your emergencies. But what exactly are the emergencies I am talking about here? Well, there is no boundary to which situation can be an emergency for you. It can be a sudden deterioration in health (of you or of your loved ones), loss of job, an unexpected legal battle and so on.
Most financial advisors generally recommend having an emergency fund that is big enough to fund you for at least 6 months in case you don't have a source of income for a certain period in time. The idea is that if you are fired from your job, you can have enough money to fulfil the bare minimum requirements for the next 6 months during which you will be looking for another job.
This is where if you are guilty of making the first mistake listed in this article i.e. of lifestyle inflation, you would probably never have a good enough emergency fund. This mistake might not be relatable to those in their late teens or early 20s as most of them would not have started earning, but their affinity to the first mistake will make them commit this one as well.
3rd Mistake: Single Source of Income
Almost all the people that I know who are earning, be it from their job or internship or business or whatever, are dependent on a single source of income for the influx of revenue. This can be a potential threat to personal well being. If we go a couple of years back, during the advent of the COVID-19 pandemic, a lot of people lost their jobs. Just Google to see how many employees of Zomato, Oyo Indigo were fired in those few months. It's nothing like only these 3 companies are guilty of firing people. It is just to give a rough idea.
It is very important to have/create multiple sources of income. It can be having an online blog or a podcast or something you are quite proficient at. Do check my previous article where I have mentioned a way to generate an income passively:
4th Mistake: Health is an afterthought
One of the biggest mistakes that people tend to overlook is their health. Most of the guys & girls in their late teens and early 20s are so much engrossed in the party culture - alcohol, tobacco and other sorts of intoxication. Be smart and make the required calls regarding what is right for you. I am not here to start a discussion on if drinking and smoking are good or bad. I am not speaking from a moral point of view, it is purely from the health point of view.
By not being healthy, it does not mean that you fall sick most often but with your lifestyle. If you are not active, you feel depressed, you feel lethargic, you are having an unbalanced diet; you will struggle at your primary work, forget about creating multiple sources of income. Engage yourself in some physical activity, follow a balanced diet and get good rest. You would not like to see the ones dependent on you (your parents, family or whatever) suffer for your bad health. This is not something that is for the present but for when you will turn 40 or so. Your kids will be dependent on you. Your old parents will be dependent on you. Don't make them suffer just because you are having an urge to be intoxicated with your peers.
5th Mistake: Not investing early
Many of us wait to reach our late 20s to start investing. But if you start investing early, probably when you are in your college, it can make a huge difference in your net worth. First, by the time you reach your late 20s, you will be well versed with how investments work. Second, the power of compounding would have taken your net worth much higher who generates similar income as you but haven't started investing yet.
I started investing when I was 20 years old with only ₹500. Now, it is worth more than twice its original value. Start early! I have articles published on mutual funds, crypto, p2p lending. You can start from as low as ₹100.
"I do not know enough about investing." "I do not know the technicals of mutual funds." "I do not have enough understanding of how these work." These excuses will never end. If you don't start, you will never understand and you will just ruin your savings. Learn how your savings are ruined by clicking here.
With this, we have come to the end of yet another article. I hope it conveys the message as it is intended to be. Your wellbeing depends on the habits that you inculcate early on in your life. Consider giving a like and share it among your peers. To get notified of new articles, sign up to the NerdyTree.
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