Wrong Age, Wrong Decision

The Problem

You may believe in your youthfulness well into your 30’s and even 40’s. But that does not mean you can feel the same about your choice of financial instruments. Just because you were drunk on the pride of youth to think of not taking a health insurance in your 20’s, does not mean you will not need one later in life.

Personal finance decisions have strong links to one’s age—learn what kind of product will suit you at what age and play it right. Moreover, financial decisions are not a one-time exercise—you need to review the progress and get into course correction depending on the change in your life’s circumstances. Likewise, decisions that will suit you later in life should not be applied when you are young.

Example

Opting for fixed return savings and investments in your 20’s instead of being bullish about investing in equities is a common mistake. Form decisions based on your age and financial needs than be driven by what worked for you at a younger age as the precedence.

Suggested intervention

Map the likely financial milestones at every stage in life. In your youth, you will be looking forward to buying a car or a house. While you can borrow for both, avoid borrowing for a car, unless such a purchase helps you in bolstering your career.

On the other hand, buying a house earlier in life when you have less financial commitments will see you not only less stressed with money in later years you will also manage to live with lesser money in hand, as the major earnings will go to servicing debt.

Tip

Take a pure life term insurance policy the moment you have a financial commitment, such as a spouse post your marriage than take a policy before that. After all, when you are 25, with no financial dependents, why go in for life insurance? Realise when to go in for which financial instrument that will support your financial life without stress.

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