10 Financial decisions to take before you turn 28 !!
Financial decisions taken at the right time can make a lot of difference in your stability. As you start earning, by the age of 23-25, your crucial years start as well. Investing and making the right choices in the next 2-3 years would decide your future.
In this article, we would discuss the 10 Financial decisions one should take before they turn 28. These pointers do apply to mariners as well, so pay attention.
Insurance is of various types, ranging from life, health, car, home etc. You should buy a life and health insurance at the earliest. Life is always unpredictable, so it is always better to be safe than sorry. While getting a life insurance, you should opt for a term plan because it offers a higher cover at a much lower premium.
Tip: The premium which you will pay largely depends on the age at which you buy the policy !!
The medical costs continue to rise at an exponential rate, a simple sinus x-ray can set you back by a thousand bucks !! It is always better to get yourself covered by a good health insurer. Generally, employers do give a nominal health cover to your and your family, it’s still advised to have your own cover. Since the cover your employer provides would depend on the tenure you stay with that organization. Mariners are offered a much higher cover when they are on land and almost all the good shipping companies offer health insurance to their employees, it is advised to read the T&C very carefully.
Tip: Always read the T&C of the policy very carefully. Keep a scanned copy of the policy and your membership card in your google drive.
Always remember to compare different policies or products as they are called on sites like Policy Bazaar and choose accordingly.
Tip: While you are still not sure as to which policy you wish to buy, give a different number while registering to Policy Bazaar. Those guys would spam the hell out of you and make you buy a policy for sure.
Insurance is NOT an INVESTMENT, so do not fall prey to agents or the suggestions of your near and dear ones, when they ask you to buy policies based on the “return” value.
Insurance plans are to be bought not for profit but for the safeguard of your life and health. Nothing more. You can always buy Investment plans separately.
Keep an Emergency fund
No matter how good your life is going on, one should always keep some money aside for a rainy day. Any emergency can occur in your life at any time. Arranging funds at such a short notice is difficult and then one has to rely on friends and family. There is nothing wrong with it, but having your own set-up ready for such situations is always preferred.
Normally one should keep about 3-6 months worth of salary as an emergency fund. The form in which you keep the money is MOST important. The point is that it should be easily accessible.
Tip: DO NOT dip into that fund for anything other than an emergency. A new iPhone in the market Is not one. Keep the money either in a savings account or make and FD (Fixed deposit) out of it. Ask your bank to give you a CC (Cash Credit) on that FD so that you can use it at your own free will.
Choose a career which suits you, which you like but also, one which pays well !! Passion is important but money is needed to fulfil your basic needs and desires. So if you like playing music then instead of trying to become a playback singer, I would suggest you go and do a course on it from a reputed college and join an MNC brand. Something on the lines that would ensure a steady flow of money.
Tip: If you are a sailor, you already have a very good stream of steady income. Make good use of it. Do not spend all of it in one go after your sign-off.
If you want your money to grow in the long run, you should give it enough time to grow. The market will always have their ups and downs, the trick is to go for the long run so that these minor variations would even out later on. Eventually, you would end up having a substantial corpus for yourself. I will give a marine analogy to make it easier for you to understand:
A cadet starts investing INR 10,000 every year right from the time he starts sailing at the age of 23, stops at 33, so that’s 10 years.He doesn’t withdraw the money.
A 2nd engineer starts investing INR 10,000 every year at the age of 33 and continues till he is 63, so that is 30 years.
In the end, the cadet would have a much bigger corpus as compared to the 2nd Engineer !! The simple reason being, he gave time for the money to grow. He would approximately have about 1.3 Cr as compared to 47lakhs !!
Tip: Start investing early. As soon as possible. The amount doesn’t matter. But you must START.
Try learning new skills
Instead of being a miser when it comes to spending, try to increase your income. There are various options available to learn new skills. When you learn a new skill, it will increase your confidence and also help you grow as a person. The key is to learn something that you always wanted to learn. Be it playing an instrument or doing an MBA. There are online options for both and much more. This will take a lot of time and effort but it would definitely be worth it.
Tip: Learn something which you can monetize. If you can do a distant MBA in social media marketing, it is much more in demand as compared to a short course in gardening. Always know WHY you are learning a new skill.
Have a passive income
When you are sailing, your bank account is being regularly credited so that’s not an issue. But once you sign off from you vessel, then your account statement only shows debit transactions. Having a passive income, no matter how small can help you when you are on your vacation. That way you are not bound to go for your next sail in a hurry.
Tip: Try to go for such options where your attention is least needed. Something like rental income from a shop.
Plan for your retirement
Ideally, you should start planning for your retirement from the very first day of your job. That is the right time to start thinking. Normally people do not take it seriously because it seems so far off in the future. But time passes too quickly and you suddenly realise that your retirement is only a few years away !! Talk to your parents and take their advice on how to start planning and saving for your retirement. You can know more about mutual funds here.
Tip: Try to opt for mutual funds that are aimed at retirement benefits. Also, keep in mind the inflation when you decide on the investment amount. Invest via SIP on a regular basis and track the progress of our fund after every 6 months.
Buy a house
This is a tricky one. It is always better to buy your own house than living in a rented place. If you buy your own house, it is much sensible to pay the EMI and knowing that you are working towards making your own asset. Instead paying a monthly rent and loosing that amount, pay it to the bank and generate a good asset for yourself.
For seafarers it is a good bet to invest in properties with a long term repayment option, and has all payments in White i.e no cash transaction. Since all that a mariner earns is non taxable, its preferable for him to perform all transactions via non-cash mode.
Tip: Shortlist the city and projects which suit your needs and go for your sail. Once you come bak you can immediately pay for the downpayment and get the remaining from the bank. Go for projects which have low initial down payment.
Make a 5 year Plan
It is very important to set up a five year plan and write down what all you wish to achieve in your immediate future. Be it in any field, you must be clear what you want before you can go ahead and work towards them. Setting up your financial goals can give you a clear idea what steps you need to take in order to achieve them.
Tip: Start Mutual funds for all your goals, and go via an intermediatary like Sharekhan. Research a fund via online tools like moneycontrol and invest in them after consulting you financial advisor.
Plan for your marriage and future generations
A decent marriage in the year 2014 would cost you anywhere between 20-30 lakhs. That was two years ago, you need to make your own arrangements so that when the time comes, you are in a capable position to support the financial burden of your parents during your marriage. If you plan it out well, maybe you can sustain the entire cost aswell !!
You should have a rough plan ready for the expenses of your honeymoon, medical expenses, first child, education etc.
Tip: Avail the services of a professional CFP (Certified Financial Planner) who would chalk out a financial plan for you and you family. Following it would be a wise choice.
I hope these points would help you in your financial future.