4 Financial Mistakes to Avoid at 25

Though an imperative at this age, Financial Planning is often neglected by 25 year olds. The life cycle of a human is most powerful predictor of economic behaviour; the human life cycle is divided into different stages starting with the ‘ALPHA’ stage. Alpha describes a young, single, childless person who is financially independent from parents. The tendency at this stage is to spend all the income robbing an individual from a secure financial future.

“It’s about being responsible, so as not to be financially burdened later in life”, explains the faculty of Wealth Management at Institute of Banking & Finance (TKWs). Every individual at this age should have a financial game plan and should avoid the following financial mistakes.

An education loan is ok but he should pay off credit card debts timely, auto loans and other debts.
The individual must have at least three months worth of living expenses saved in a high yield savings account. The emergency fund provides a safety net from the volatility of job market.
The young adults generally don’t go for it and make a financial blunder. To enjoy the best deals, individuals at this age should lock in low premium health insurance products. The health insurance can become expensive as they age and anyways becomes a part of tax planning.
As the famous saying goes “Sooner, the Better”, the best advantage of compounding is realised over a 30 to 40 year horizon. Start saving early and create a huge retirement corpus by investing now in high risk financial products.

Everybody is different, and age may not be the best benchmark to compare one’s finances with his peers. When it comes to savings, the only absolute numbers one should focus on is percentage of earnings. Save atleast one quarter of what you earn and not what is left after spending.

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