Financial Tips for Working Millennials

Millennials make for almost half of India’s working population and naturally they are the biggest determinant of the nation’s current and future spending and investment patterns. Living in the present, they write the consumption story of India which is very different from the past generation.  

Unmesh Kulkarni, MD and Senior Advisor, Julius Baer Wealth Advisors, India, said, “Millennials are living in a vibrant economy with global linkages, more nuclear families and a lot more access to jobs as well as business opportunities. They tend to spend more, especially in the initial years of work life. If required, they do not hesitate to borrow, in order to finance a particular need.” 

For such a lifestyle, saving and investing regularly is also important. As it can help one can create a corpus that will grow over time and help to fulfill various financial goals. The question of how much to spend and how much to save is a matter of personal choice. And that is exactly their attitude differ from their parents.

Poorva Manoj Bhise, 31 said, “I live with my parents and haven’t really managed finances in totality. But yes I have been bearing my own expenses along with phone bills, electricity bill and part of monthly groceries for the last four to five years. I have always emphasised on saving more than spending, but it got a certain direction only after proper guidance- through professionals, parents and internet. It’s basically about prioritising expenditure. In my case, a fixed expenditure is comparatively less than variable expenditure. And variable can be reviewed.”

Keeping the larger picture in mind, the smartest advice would be to ensure a certain level of savings and investment along with enjoying life to be ready for future financial emergencies. 

Explaining the importance of investment, Kulkarni added, “Millennials have sufficiently long investment horizon and can afford to take risks while making investments. A general thumb rule is that some proportion or percentage of the savings (say equal to the age of the person) can be invested in fixed income for meeting liquidity and providing safety of capital, whereas the balance proportion or percentage equivalent to (100- age) can be invested in growth assets such as equities and related investments.” 

For instance, a millennial who is 35-year-old can start with a 35:65 allocation to fixed income and equities respectively. This allocation can be gradually be re-balanced every five years in favour of fixed income, as age increases, example 40:60, 45:55, 50:50 and so on. Such a re-balance helps in gradually reducing the risk as one grows older.

Disciplined financial planning helps millennial to achieve financial goals through

 (a) regular saving and investment

 (b) growth of personal assets and

(c) preservation of capital and risk reduction over the years.

Another major saving and investment tool for a millennial could be insurance. It allows one to secure financial support and peace of mind against any eventuality or retirement at a very little investment.

Identifying future requirement should be considered at the time of financial planning to fulfill financial goals. Always seek advice from investment professionals or wealth managers before making any investments.