How to Build Financial Discipline in Your 20s

Identify Your Goals and Budget

Define Your ‘Why’

Your goals are your ‘why’ that motivates you to remain disciplined and stay on the right path. Define your goals, whether you want to buy a car in 2 years, go on your dream vacation, or retire early.

Track Your Expenses

Track your expenses for a month. Find out your household, entertainment, travelling, and dining-out expenses. You can use an app or a spreadsheet to track your expenses. This will help you identify and cut down unnecessary expenses.

Budget

Now that you know your expenses, they are divided into ‘Needs’, ‘Wants’, and ‘savings or investments’. Try using the famous 50/30/20 budgeting rule to divide your income, where

50% of your income will go towards your essential expenses.

30% will be for ‘Want’ like dining out, OTT subscriptions and hobbies.

20% of the total income will go towards your savings and investments.

Manage Your Savings & Investments

Save first

Prioritise your savings and investment amount by setting them aside at the very beginning so that you don’t spend it.

Automate your Savings

Have a system where a certain amount gets debited from your account and goes towards your savings. This eliminates the chances of accidentally using up your savings amount.

Build an Emergency Fund

An emergency fund is necessary, especially now that you are a financially independent young adult. In case of any serious financial or health crisis, your emergency fund will be your safety net.

Start Investing Early

You can start investing a portion of your income in the stock market, bonds, or mutual funds. If you prefer to have experienced fund managers manage your investments, you can start a SIP (Systematic Investment Plan) for as little as ₹500.

Avoid High-interest Debt & Pay off Existing Debt

Avoid bad debt

As a young adult, avoid bad debt like personal loans and credit cards with high-interest rates. Take a credit card only if it's necessary and pay off the balance within the interest-free period.

Build a good credit score

Building a good credit score today can help you avail loans at a lower interest rate in the future. You can avail a credit card with a low limit, use a small amount of credit, and pay it back within the interest-free period. This will help you safely build your credit score.

Get Insured

You can avail health insurance, so in case of a health crisis, you can afford the medical treatment and don’t end up draining your entire savings.

Educate yourself and develop your mindset

Live Below Your Means

Your parents' favorite financial advice is 'Live Below Your Means’. So simple yet so powerful. Try to buy things that you can actually afford instead of trying to impress your peers with expensive gadgets and sneakers.

Increase Your Income

Start a side-hustle like freelancing or a side business that can generate some extra income for you. Identify a skill you can earn money from and increase your overall income.

Avoid Impulse Buying

Social media has made over-consumerism trendy. Impulse buying is the very reason why most young adults struggle with saving. Before making a purchase, ask yourself if you actually need it or are you're buying it just for the rush of dopamine.

Learn About Financial Literacy

Join courses and read books on financial literacy to make informed financial decisions, adopt good habits, and achieve financial freedom.