Under 25? Here's How You Can Plan Your Finances

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Contrary to popular belief, financial planning is a must for all age groups. It is ok to not have an immediate goal, but that does not mean you cannot work for your long-term needs. This requires one to ascertain the need, efficiency and time frame before getting started. At an age where financial independence becomes increasingly more important, how much one can save depends on end number of factors, including income and debt. The relevance of a financial plan is only understood when you start to put your future in perspective. Learning to manage finances wisely, especially under age 25, is the first step towards financial independence. Here are some ways you can plan your finances as under 25. 


1. A budget and goal for all times

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Drawing out a budget is a way to be never out of money and save enough for life's goals. Following a budget lets you take control over your finances. This gets you in a good position to manage cash flows, pay short-term dues and make arrangements for other goals. Of course, the budget of one person may vary from that of another, depending upon lifestyle and choices. Having well-defined short-term and long-term goals for yourself makes the path easier as decisions can be made in accordance with them.

2. Division of expenses

  • Regular and Non-Discretionary Expenses

These are your regular expenses, which include grocery, phone bills, electricity, domestic help, transportation or fuel, laundry, entertainment and eating out expenses. As these are unavoidable, you can certainly try and put a limit to not let these go out of control. Another way is to make bulk purchases which can fetch you good discounts. The right modes for such transactions, ideally, are cash transactions, debit card and/or credit card. 

  • Irregular and Discretionary Expenses

This include expenses like purchasing furniture, consumer durables, valuables like jewellery or going for vacations. One must plan accordingly and smartly, since these are heavy expenses. For example, when it comes to purchasing furniture, make sure to do a price-value analysis and determine the quality and store you can buy from. Various payment options like cash discount, zero-interest EMIs, etc. are available these days. 

Managing expense is about getting the right value for every rupee spent. While making payment through credit card, especially, make sure you can pay by the due date to avoid paying high interest.

3. Pay off loans

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Make a record of your credit score and focus on paying off your debts and loans consequently. Stop carrying large credit card debt for a longer period as this will only dampen the situation. Clear the debts timely.


4. Use the digital power

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Everything is on digital these days and using the platform wisely can benefit your financial management routine. Automating your finances can help save you time and money. It’s conveniently easier to save if you automate a transfer to your savings account every time you get a pay cheque. It’s also easy to keep a track of all of your bills if they are automatically deducted from your bank account.

5. Look for best deals

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Negotiation always plays a key role in saving money and fetching you the best deal. With the rise in online shopping, you can always get good deals on the internet. Another advantage is that internet allows us to compare prices of various products and services and choose the best option. These days you can also rent flats and buy/sell other assets through the internet and save heavy brokerage. These options can reduce expenses to a great extent.


6. Ideal composition of the salary

  • Divide your salary into three sections -- Expenditure, Emergency funds, and Investments. The Expenditure part will deal with all kinds of expenses like house-rent, bills, conveyance charges, ration, shopping expenses, and other miscellaneous expenses. This is the most critical component, so it is important to regulate and assign a fixed amount and further manage everything within the decided amount only.
  • The second part is Emergency funds. For this, try and to save a small amount each month to be used up in cases of emergencies. Maintain this fund regularly and do not use it until you actually face an emergency.


  • The most important part, for a financially secured future, is Investment. Invest a fixed part of your salary into different assets. This will be responsible for your financial security. Saving in just Fixed Deposits will not help, you must diversify across different assets. This will not only help you accumulate wealth, but also assist in managing taxes.

7. Savings in early 20s 

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Experts say that young adults in their twenties should allocate 10% of their income to savings. One of the worst pitfalls for young adults can be to delay the habit of saving money. There are other factors as well that can impact how much you may actually be able to save, including necessary expenses and debt. Regardless of your age, it’s important to make savings a priority. These will help to make larger purchases, as you get older.

8. Get insured

It's important to start thinking of insurance if you haven't already. With rising medical costs, you must consider getting a medical insurance to to cover your medical costs. Make sure to follow it by other insurance policies. The earlier you get these, the lesser the premium amount, and complications you will have to face.

9. Study finance and take professional/family help

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Talking to your partner or family about financial matters and resolving difficulties through consolidated effort can help a great deal. Start by discussing your shared goals and from there, build a roadmap. Reveal your plans and take suggestions. Also, studying about finances can help you understand better. Financial knowledge concerning matters that shape your life is important too.

Whether you need help getting out of debt or developing a stronger relationship with money, there is a financial resource out there for you. Another important thing is to closely listen to yearly budgets and understand every aspect of it. So start now, and save big!

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