Financial Planning is like fixing an Exercise regimen – Personal Finance for University Students

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Think Millennials…. and we are describing a generation born between 1981-1996, which is have one problem to deal with – ‘savings’, while being loaded with debts, and perhaps needs some insight to ‘investing’.

This is backed with a survey that indicates how the meaning of creating ‘wealth’ and  owning ‘savings habits’ across generations that practiced financial planning has changed , while learning to manage money and future life’s goals through sound investment strategies requiring framing a road map to include the following –

1] Financial planning and goal setting

2] Saving & Investing

3] Tracking spends and shopping behavior

4] Planning with confidence.

There is an ancient proverb – ‘when you write a plan or a goal, the universe joins the dots to make it succeed’…. For those who have written down a financial plan, chances are they have already met the right set of advisors, investment opportunities and even ‘financial planners’ who helped them in reaching their financial goals.

The Modern Wealth Index (2018) scores millions of millennial based on their habits of savings and investments between 1-100 percentile.

Modern Wealth Index Those who Plan regularly Still not decided Rest of the Universe
Average Modern Wealth Index score 68 44 50
Have Bills to Pay and Yet Save 75% 33% 43%
Must own Funds for Emergency? 65% 24% 35%
Still Thinking of Life Insurance? 62% 39% 45%
Feeling financially stable 62% 32% 40%
Need to pay credit card outstanding’s and other loan payments on time, or have no debt 42% 26% 30%
Living on a month to month basis 38% 68% 60%

So, what does mean, Financial Planning is like fixing an Exercise regimen, where hitting the gym gets us into shape, the former helps in achieving a goal. Both need the same approach – ‘Discipline and Rigorous Commitment’.

Statistics prove that 31% of Millennial are learning and determined to save as opposed the previous generations but let’s pause, and check their ‘savings priority’ and life’s challenges.Well three out every four millennial are drowned in debt -age group is [18 to 34 years]. See the figure below.

Credit Card Debts – are the highest prevailing burden within the group . 56% of Millennial with College Degrees as compared to 40% who don’t possess a College Degree, while two in every 10 millennial have a home loan or some sort of an emergency debt/ student loan..

Now let’s pause around and ask these questions to ourselves

  1. Financial Literacy – There is a direct connect between financial planning and building the necessary confidence surrounding financial decision-making, when identifying a trusted financial adviser. It is said that most millennials would look up to their parents or family members on financial literacy,to engage in an open communication, despite numerous websites and formal programs on financial management and perhaps may learn from self experiences.
  2. Invest at 20 – Invest starting today or when you turn 20, or as early as you can, as money grows with time. Here’s a tip, buy stocks by following S&P 500, chances are you may end up buying firms considering an IPO or wanting to go public…Do it weekly. Buy Index Funds or still better dabble in low-cost index funds…Track your Returns on Investments & for sure you would stay addicted to the Capital Markets for creating wealth by the age of 30 and retire by the age 40.
  3. Robo Advisors – We are all different when it comes to investing and savings, so can technology come to our rescue in determining our ‘risk-profile’ ? . The answer is UAE’s first robo advisor SARWA, which received its operational licence and can help create a customized investment portfolio of exchange traded funds, carries lower management fees, is convenient and has 2700 registered users already. Currently a part of Dubai International Financial Center’s sandbox.
  4. Debt Management- When managing debts, there is a lack of understanding among many. It is important to prioritize paying off credit cards which carry the highest interest to be paid off first,.as interest is compounded. High School Mathematics informs us that compound interest is good when saving your hard-earned monies not when paying banks on credit card interest. Next is paying down student loans by reviewing the tax benefits.
  5. Design your own Budget & Forecast a Savings Goal – You can create a budget for tracking all the spends [ essential and one-off], then plan and forecast a financial savings for a specific period. This would get you in the habit of spending lesser than you earn, inculcate ‘savings habit’…and then repeat this habit until you achieve your fore casted financial goal.
  6. Reward & Treat yourself – So utilities and monthly commitments from groceries, SEWA, loan installments, all needs to be paid, why not automate all these to see how these can be controlled over time to create savings good enough, to ‘plan a holiday’ or ‘buying a house’ or ‘snapping up a second hand car by considering depreciation and resale value’ or even ‘settling down with the person whom you love’. Live the life of a college student throughout your life to fight ‘inflation’, keep spends to a bare minimum and lead a ‘frugal lifestyle’ which treats you well with sufficient cash.
  7. Emergency Fund – Life is full of surprises and sometimes unexpected events hits us when least prepared. Have you ever thought of how to tackle emergencies that may suddenly arise when you meet tough times ahead in case you get laid off, arrange for funds in an medical emergency….always be prepared for good and bad….Life Happens.
  8. Be good at an Alternative Passion – So you are good at dancing, singing, fitness or yoga, cooking, stitching fashionable clothing outfits, …hmm why not convert into a money making profession? Start off Part Time…check the response and go ahead…as there is no human being who does not want to stop earning more money? You know where I am coming from.
  9. Educate, Learn, Grow – Okay, so may not be having a passion or a hobby, it’s okay,  but may want to acquire a degree or professional certification or develop job-oriented skills to get the next promotion or ask for a raise and meet the constantly evolving economic and business transformation climate with confidence. Try investing on your dreams with a reputed University …and you will find that in a few years, you are leading an organization or better still setting up your own dream company.

Eventually it’s all about choices, when pursing our dreams and goals in this lifetime. Now ask yourself, what are the top two most important goals you would like to accomplish before completing the age of 30?…

Written By
Dr. Raman Subramanian
Westford University College

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