Turning 30, for many people, is a wakeup call. It’s the time when you typically enter a new phase of life- either you get married or have kids (or plan to have them).
In this article, We cover 9 important financial decisions you need to make before you turn 30.
#1: Understand the most powerful word in finance: Compounding
Consider the investment behavior of two friends, Sameer and Rajesh
Sameer starts investing Rs 10,000 every year at the age of 25 and stops at the age of 35, but does not withdraw
Rajesh starts investing Rs 10,000 every year at the age of 35 and continues till he’s 65 years old
Who do you think will have more money when they are both 65?
As crazy as it may sound, Sameer will have 2.5 times the amount Rajesh has (1.28 Crores vs 46.5 lakhs), even though Rajesh invested for 20 years more.
What happened in this case is that for Sameer, money started compounding early, and earned interest, which in turn generated further interest, and this goes on. This is the true power of compounding. (Click here to see the calculation sheet)
Expert Tip:Start investing today. Even if it’s just Rs 10,000 a year, it will compound to many times that amount by the time you retire.
#2: Buy a home or keep renting?
Most of us would like to have a place we call home. The question you have to ask yourself is, do you need to buy one or would you want to stay in a rented place?
Buying a home is more of an emotional purchase rather than a logical one for most people- especially if they are taking a home loan.
Understand the pros and cons of owning a home/living in a rented accommodation and make a decision. Your home buying/renting decision will have a huge impact on your future financial planning since it’s probably the biggest single ever investment you’d make in your lifetime.
We have all, at some point of time, seen those LIC advertisements. It portrays the role LIC plays in helping with children’s marriage or education when the earning member of the family has passed away unexpectedly.
While we all wish it does not happen to us, life is highly unpredictable. Make sure that you get a life insurance – term insurance is most recommended. The earlier you get a life insurance, the lower the premiums and complications.
And don’t stop with just life insurance. With rising medical costs, you also need to get a medical insurance to cover your medical costs. Even if your employer gives you a medical cover, take one additional to cover you and your entire family.
Taking medical and life insurance also helps you save tax under Section 80D and Section 80C respectively.
Expert tip: Insurance is an expense and not an investment. Don’t fall for money back plans that typically give you much lower returns for your investments. When choosing life insurance, always opt for term insurance.
#4: Set aside an emergency fund
You should set aside 3-6 months of your monthly expenses (including any EMIs you might have) in a separate emergency fund. Make sure you do not withdraw from this fund unless it’s for emergencies.
And no, upgrading your hatchback to a sedan does not count as an emergency!
#5: Make the right career choice
Chances are, by the time you are 30, you would have switched a couple of jobs. If you are not yet settled in a job (not a company, but a line of work), you have to do some soul searching.
Find out what ticks with you and stick to it. Just because you might have read about someone starting up and claiming that you should be your own boss, doesn’t mean you can succeed at your own business.
Take calculated risks. Following your passion does not guarantee that it can help you pay the bills. In all likelihood, the moment you try to earn a living by following your passion, you’d probably starting liking it less.
Figure out what makes you happy and helps you pay the bills. Then stick to it and follow a routine investment plan to ensure you have enough savings to help you retire and do what you are most passionate about (even if it means you have to keep spending money on it).
#6: Invest in yourself
There are two ways to get more money.
One, be thrifty and save as much as possible. Two, increase your income.
The latter is better because there is only so much you can control when it comes to saving. There are too many external factors (rent increase, petrol prices shoot up and so on) due to which making money by controlling expenses become difficult.
Expert Tip: Increase your income by investing in yourself. Learn a new skill so that you get a promotion in your current job. Or maybe just spend money for a relaxing vacation to make you more efficient when you come back fresh.
#7: Plan for retirement
Unfortunately, most people are not prepared enough for retirement. Either they miscalculate the amount of money they require at the time of retirement, or start saving when it’s too late.
Don’t make the mistake of not having enough money and having to rely on your kids for your expenses.
Start planning for your retirement before you hit 30 (the earlier the better).
If you are not debt free yet, you are not alone. With easy access to loans and EMI schemes, more Indians than ever are under debt.
Debt is something that you need to get rid of before you turn 30 – or at least take steps to minimize it.
The next time you get your bonus or hike in salary, instead of the latest feature-packed mobile on EMI, decide to pre-pay your loans and become debt free as soon as possible.
Expert tip: While becoming debt free is good, not all debt is bad debt. Debt taken for purposes of creating a long term high value asset (like starting a businesses or buying a reasonably priced home within your budget) is OK.
#9: Plan for your children’s education & marriage
Even if you don’t have children, it pays to make a financial plan. With the spiralling cost of education, it’s important that you start planning as early as possible.
Some kindergartens charge you more than a lakh for admission. A medical seat in a reputed private college can be more than 60 lakhs. An MBA from a good business school can easily cost you 13-15 lakhs (50 lakhs + if you want to do it from a reputed school outside of India). That’s how expensive good education has become.
Make sure you start a SIP for your child as early as possible so that by the time they want to want to get into a good college, lack of funding won’t hold them back.
You have heard of the big fat Indian weddings. When it comes to your children’s marriage, you want to celebrate it- and that’s OK. These are small things in life that are ones in a lifetime moments.
Make sure you set a separate target for your children’s marriage spending and work towards that goal. Since the cost of conducting a marriage is increasing at a very rapid rate, traditional saving accounts like bank FDs and RDs won’t work
I have always had a hard time not being myself. This trait has mostly served me well, but sometimes it annoys people who expect me to be their version of a leader. Some people think they need to be a caricature of themselves to do well.
Some leaders try to act like Steve Jobs or Warren Buffett because they assume it’s the right path to success. They may not even be aware that they are hiding behind a facade as they try to be a person who they are not.
However, highly successful leaders choose a different way to lead, and it’s a radical departure from this idea of the carefully crafted persona. They understand that if they want others to follow them, they need to pull back the curtain.
Think for a moment about successful leaders you may know. They are charismatic. They draw people in. They aren’t afraid to show their true selves. They are real. I do my best to be the real Brian as the CEO of Aha! (product roadmap software).
Successful leaders don’t hide their goals and their motives. They broadcast them. For example, we give every employee direct access to the Aha! operating plan and share our key customer, revenue, and expense information. We do this because we believe that better insight into the business creates a greater sense of ownership.
So that was a big hint, I believe the one secret of highly successful leaders is transparency.
Here are a few reasons why being transparent can help you be a better leader.
Establishes confidence Transparency serves as a model for how you want the team to work. You will find that others will want to engage with you. Sharing not only the goal but how you arrived at the conclusion allows others to get on board, think things through, and grow stronger themselves.
Creates buy-in You choose to share the goals with your team -- but you also choose to explain why those goals matter. That means sharing your thought process -- your assumptions and conclusions that you have brought to bear in making a decision. When you are willing to share the “why” with the "what" you help create buy-in from your team.
Builds trust When you are transparent with employees, you show respect for their efforts. It's that simple. And respect builds trust. Being transparent is about being open and honest about your motivations and decisions. If you operate from the premise that what you see is what you get, you will build stronger, trusting teams.
Transparency goes hand in hand with humility. When you are transparent, you bring your authentic self to play. You are saying, “this is what I believe, and why I believe that.”
Transparency is the currency that is used to acquire trust. It's an investment that also requires you to be open to the possibility that you might be wrong. Someone else may have a better way or another idea. Someone may correct a misconception that you have. Can you accept that?
Truth is, you don’t have to throw a chair through a window or quit in the middle of a presentation to cause irreparable damage to your career.
No matter how talented you are or what you’ve accomplished, there are certain behaviors that instantly change the way people see you and forever cast you in a negative light.
The following list contains nine of the most notorious behaviors that you should avoid at all costs.
The name says it all. Stabbing your colleagues in the back, intentionally or otherwise, is a huge source of strife in the workplace. One of the most frequent forms of backstabbing is going over someone’s head to solve a problem. People typically do this in an attempt to avoid conflict, but they end up creating even more conflict as soon as the victim feels the blade. Anytime you make someone look bad in the eyes of their colleagues, it feels like a stab in the back, regardless of your intentions.
People make themselves look terrible when they get carried away with gossiping about other people. Wallowing in talk of other people’s misdeeds or misfortunes may end up hurting their feelings if the gossip finds its way to them, but gossiping will make you look negative and spiteful every time, guaranteed.
3. Taking Credit for Someone Else’s Work
We’ve all experienced that stomach-dropping feeling that happens when you discover that someone has stolen your idea. Taking credit for someone else’s work—no matter how small—creates the impression that you haven’t accomplished anything significant on your own. Stealing credit also shows that you have zero regard for your team and your working relationships.
4. Having an Emotional Hijacking
My company provides 360° feedback and executive coaching, and we come across far too many instances of people throwing things, screaming, making people cry, and other telltale signs of an emotional hijacking.
An emotional hijacking demonstrates low emotional intelligence, and it’s an easy way to get fired. As soon as you show that level of instability, people will question whether or not you’re trustworthy and capable of keeping it together when it counts.
Exploding at anyone, regardless of how much they might “deserve it,” turns a huge amount of negative attention your way. You’ll be labeled as unstable, unapproachable, and intimidating. Controlling your emotions keeps you in the driver’s seat. When you are able to control your emotions around someone who wrongs you, they end up looking bad instead of you.
5. Announcing That You Hate Your Job
The last thing anyone wants to hear at work is someone complaining about how much they hate their job. Doing so labels you as a negative person and brings down the morale of the group. Bosses are quick to catch on to naysayers who drag down morale, and they know that there are always enthusiastic replacements waiting just around the corner.
When someone hits a home run and starts gloating as they run the bases, it’s safe to assume that they haven’t hit very many home runs. On the other hand, if they hit a home run and simply run the bases, it conveys a business-as-usual mentality, which is far more intimidating to the other team.
Accomplishing great things without bragging about them demonstrates the same strong mentality—it shows people that succeeding isn’t unusual to you.
7. Telling Lies
So many lies begin with good intentions—people want to protect themselves or someone else—but lies have a tendency to grow and spread until they’re discovered, and once everyone knows that you’ve lied, there’s no taking it back.
Getting caught up in a lie, no matter how small, is exhausting and hard on your self-esteem. You have to be authentic if you want to be happy with who you are.
8. Eating Smelly Food
Unless you happen to work on a ship, your colleagues are going to mind if you make the entire place smell like day-old fish. The general rule of thumb when it comes to food at work is, anything with an odor that might waft beyond the kitchen door should be left at home.
It might seem like a minor thing, but smelly food is inconsiderate and distracting—and so easily avoidable. When something that creates discomfort for other people is so easily avoided, it tends to build resentment quickly. Your pungent lunch tells everyone that you just don’t care about them, even when you do.
9. Burning Bridges
So much of work revolves around the people you meet and the connections you make. Dropping an atomic bomb on any professional relationship is a major mistake.
One of TalentSmart’s clients is a large chain of coffee shops. They have a relatively high turnover, so when a barista quits, it isn’t usually taken personally. One barista, however, managed to burn every single bridge she had in a single day. The surprising thing is that she didn’t yell or do anything extreme; all she did was leave.
Without warning, she showed up to her Monday shift, told the store manager she was quitting (she had found a better-paying job somewhere else), and walked out. The result, of course, was that every shift that she was scheduled to work for the next two weeks had to be done with one less person, as she provided no time to find a replacement.
She most likely saw her actions as being offensive only to the manager (whom she didn’t like), but in reality, she created two miserable weeks for everyone who worked at the shop. She ruined her otherwise positive connections, with every single one of her colleagues.
Bringing It All Together
These behaviors sound extreme and highly inconsiderate, but they have a tendency to sneak up on you. A gentle reminder is a great way to avoid them completely.
What other behaviors should I add to this list? Please share your thoughts in the comments section below as I learn just as much from you as you do from me.