30 Things About Money You Need To Learn Before You Turn 30

Being financially savvy requires a lot of effort and self-control. It takes time to develop. Some people live paycheck to paycheck their entire lives without ever saving a penny.

Early financial literacy instruction may not seem alluring, but it will undoubtedly set you on the right path. But if you have enough time to start paying attention to your finances, reconsider.

Even if you reach your 30s and think you are still young and unstoppable, the frightening reality is that you are already halfway to retirement.

It's time to put your 20s' reckless spending behind you and learn to be more frugal with your money by being aware of the top things you need to know about money.

Score Yourself on How Many Things You Know From These 30 Things

1. 3 Significant Ways to Manage Your Money

Well, this is basic, and I am sure you already know.

There are three ways you make money

1. By earning more
2. By saving more
3. By getting more returns on savings

Earning more requires you to develop skill sets that companies value.

The more irreplaceable you are, the bigger paycheck you can demand. Saving is significant because you do not want to be working for the rest of your life.

Also, what if some emergency strikes you?

What if you have considerable ticket expenses like marriage, house, etc.?

But what gives your money a big boost? It is when your savings start making huge returns.

2. Power of Compounding

Compounding is how earnings from an asset, such as interest or capital gains, are reinvested to produce more profits over time. The investment will make earnings from its initial principal and the accumulated earnings from prior periods, which are calculated using exponential functions.

Starting compounding your money as early as possible is one of the wisest decisions you can take in your life. Simply put, you start earning interest on the interest you have earned so far, creating a positive feedback loop.

When dividends or earnings from an investment are reinvested, Compounding takes place. These profits or dividends then produce more yields. In other words, Compounding occurs when your assets make income from income that has already been generated.

For instance, if you invest in a stock that pays dividends1, you might think about reinvesting the dividends to maximize the potential Power of Compounding.

3. Why Savings Account is not Savings Account?

So you might have saved a lakh in your savings account and are happy with yourself for having committed that much, aren’t you?

Sorry to disappoint you. You are losing money by putting it in a savings account.

Typically, a savings account offers interest of around 4%, while inflation is much higher than that.

In essence, you are losing money. Besides, there is always the temptation to spend money on unnecessary things.

You end up losing your money because the real purpose of money is to buy something. And because of inflation, you will be able to buy lesser.

4. Where should I invest money?

Investing helps make your money work so you can generate more money.

There are many options to invest your money.

However, all of them are fundamentally one of these three – equity, debt, and asset.

Equity means that you own part of a business in some way, and that business will share profits with you.

There are multiple ways you can invest in equities – buying stocks of publicly listed companies, buying equity mutual funds that buy stocks of these companies, or investing in privately held companies.

Debt is when you lend your money to someone with an agreement of interest.

Fixed deposit (FD) is an example of debt. Government organizations raise a lot of money through debt.

Two essential things to take care of while investing in debt are

• What is the duration of lending?
• What is the interest rate?

Apart from this, you need to ensure that you will get your money back and check for the probability of default.

The other option is buying hard assets like real estate or gold.

5. What is Long term versus Short term saving

6. Stock Market

A free-market economy includes the Stock Market as one of its elements. It enables businesses to raise capital by selling Stock Shares and Corporate Bonds, giving investors a chance to profit from the business's financial success through capital gains and dividend payments.

The Stock Market serves as a platform for directing individual investors' savings and investments into profitable business ventures, which helps the nation's capital formation and economic expansion.

7. Mutual Funds

Mutual Funds may appear difficult or intimidating to many people, but a Mutual Fund is essentially made up of the money that many different people (or investors) have pooled together.

A qualified Fund Manager oversees the management of this fund. Moreover, it is a trust that amasses funds from numerous investors with similar investment goals. After that, it invests the funds in securities such as stocks, bonds, money market instruments, and other investments. As a result, each investor owns units, a fraction of the fund's holdings.

By determining a scheme's "Net Asset Value, or NAV," the income or gains from this collective investment are distributed proportionately among the investors after certain costs have been deducted.

8. How to evaluate Mutual Funds?

A certain amount of risk is involved when investing in Mutual Funds. On the other hand, the performance of a Mutual Fund may be assessed through a mathematical calculation of prior returns.

There are always opportunities to invest in Mutual Funds and make the most potential profits with the least amount of underlying risk, thanks to the relationship between potential risk and prospective returns.

Here is how to assess the performance of Mutual Funds-

• Benchmarking
• Comparing to Peers
• Portfolio Quality
• Risk-Adjusted Returns
• Fund Manager’s Expertise
• Personal Investment Objectives
• Fund’s Fee Structure

9. Expense Ratio of a Mutual Fund

Every good or service you purchase or use has a Cost. Mutual Funds are the same. Different types of Mutual Funds are provided to us by Asset Management Companies (AMC) or Fund Houses, and each fund is managed by a professional.

Managing the fund and its operating costs requires a lot of behind-the-scenes work, which is expensive. The Mutual Fund expense ratio is the name given to this cost, which is distributed to investors as a percentage of the value of your investment.

10. Liquidity

During an erratic financial crisis, Liquidity refers to the cash readily available for spending or to cover financial needs. Liquidity is the ability to access your investment when you need it. This considers how long it will take you to access your investment.

It also accounts for the time needed to complete all the required paperwork throughout the procedure. This procedure differs and may be unique for various assets. When it comes to multiple investments, Liquidity is an essential factor, but many investors tend to downplay the significance of investment Liquidity.

11. Fixed Deposits (FDs)

A Fixed Deposit, also known as an FD, is an investment tool that banks and Non-Banking Financial Institutions (NBFI) provide to their clients to aid in their ability to save money.

You can invest a sizable sum of money in an FD account for a set period at a predetermined interest rate. You receive a lump sum after the term, along with interest, which is a wise financial strategy. Different interest rates are offered by banks for fixed deposit accounts.

A Fixed Deposit can be made for no less than seven days and no more than ten years. Due to this, an FD is occasionally referred to as a term deposit. It is guaranteed when you open a Fixed Deposit Account at a specific interest rate because the rate of interest never changes due to market fluctuations.

Depending on your preference, the interest you earn is either paid at maturity or periodically. You are not permitted to take the money out before it matures. You must incur a fee if you choose to.

12. Corporate Bonds

A type of Debt Security sold to investors is a Corporate Bond issued by a business. The investor receives a predetermined number of interest payments at either a fixed or variable interest rate in exchange for providing the company with the capital it requires.

The bond "reaches maturity" when it stops making payments and the initial investment is returned. The ability of the company to repay the bond typically serves as its security, and this ability is based on its expectations for future revenues and profitability. Physical assets of the company may occasionally be used as collateral.

13. Exchange Traded Funds (ETFs)

An ETF, or Exchange-Traded Fund, is a collection of securities traded on the stock market and is similar to a stock. Exchange-Traded Funds pool the money of many investors and use it to buy various tradable financial assets, including derivatives, debt securities like bonds, and shares.

Most ETFs have Securities and Exchange Board of India registrations (SEBI). Therefore, it is a desirable option for investors with little experience in the stock market.

14. Index Funds

An Index Fund is a particular kind of Mutual Fund or Exchange-Traded Fund (ETF) whose portfolio is built to correspond to or follow the constituent parts of a financial market index, like the Standard & Poor's 500 Index (S&P 500).

Broad market exposure, low operating costs, and little portfolio turnover are all claimed benefits of Index Mutual Funds. In addition, regardless of the state of the markets, these funds adhere to their benchmark index.

15. Portfolio

An investor's collection of assets is known as an investment portfolio. Investment securities such as bonds, stocks, mutual funds, pension plans, real Estate, and even tangible assets like gold may be included in this portfolio (coins or bars).

In essence, this refers to any asset that has the potential to increase in value or yield returns. Many even invest in priceless artifacts in hopes of making money later. An ideal portfolio has a wide range of investments in it.

Government bonds, small-cap stocks, and foreign currencies are some examples of this. However, it is crucial to manage your portfolio wisely. Otherwise, your returns might be lower.

16. Section 80C - How can I save tax under Sec 80C

According to the Indian Constitution, the government may impose taxes by the rules under the Income Tax Act, of 1961, on any income earned in India (aside from agricultural income).

The income earned by individuals, Hindu Undivided Families, businesses, LLPs, groups of individuals, associations of individuals, or other artificial juridical entities is subject to this tax.

The Income Tax Act also includes some tax exemption clauses that can help people save a significant amount on their income tax payments to reduce these tax obligations.

You can write off a variety of investments under Section 80C. Here are a few of the most well-known-

• Public Provident Fund or PPF
• National Savings Certificate or NSC
• Equity-Linked Savings Scheme or ELSS
• Unit-Linked Insurance Plans or ULIP
• 5-Year Fixed Deposit: Bank or Post Office
• Life Insurance Premium Payment
• Principal Repayments on Loan for purchase of House Property
• Children’s Tuition Fee Payment

17. Provident Fund (PF)

One of the most well-liked long-term savings and investment products is the PPF Account, also known as the Public Provident Fund scheme, primarily because it combines safety, returns, and tax benefits.

The National Savings Institute of the Finance Ministry first made the PPF available to the general public in 1968. Since then, it has become a potent tool for helping investors build long-term wealth. PPF investors use it to consistently set aside money over a long period to accumulate a corpus for their retirement (PPF has a 15-year maturity and the facility to extend the tenure).

The PPF is a top choice for small savers due to its attractive interest rates and tax advantages.

18. Tax-free bonds? Who should invest in them?

Tax-free Bonds are fixed-income securities issued by public entities that provide investors with tax-free interest income. Each year, the investors receive the pre-fixed interest without having to pay taxes on it.

They also pay back the principal amount at maturity, like other bonds. Investors can trade these bonds physically or through a DEMAT account.

19. ELSS

An open-ended Equity Mutual Fund known as an Equity Linked Savings Scheme (ELSS) invests primarily in stocks and other securities that have an equity component.

According to Section 80C of the Income Tax Act of 1961, they fall under a particular category of Mutual Funds that are eligible for tax deductions. They are, therefore, frequently referred to as Mutual Funds that save on taxes. Mutual Funds that offer ELSS offer the chance to reduce taxes while generating respectable returns.

These funds invest at least 80% of the scheme's assets in stocks. As a result, their potential returns are directly correlated with the stock market's performance if you want to invest for long-term objectives like building a retirement corpus.

20. National Pension Scheme (NPS) - How can I save tax with NPS?

The National Pension System (NPS) is a voluntary, defined contribution retirement savings plan created to help members make the best choices for their future through systematic saving throughout their working lives.

The NPS aims to help citizens develop the habit of saving for retirement. It is an effort to find a long-term solution to the issue of giving each Indian citizen a sufficient retirement income.

The National Pension System (NPS) pools individual savings into a Pension Fund. PFRDA-regulated professional fund managers then invest by approved investment guidelines in diversified portfolios that include shares, corporate debt obligations, government bonds, and bills.

These contributions would increase and accumulate over time depending on the returns received on the investments made.

21. Why is Insurance not an Investment?

Investing in financial products is done to make money after considering the investor's financial objectives, risk tolerance, and expected return. As with some fixed-income investments, one can hold onto the asset and take advantage of periodic returns, if applicable.

Alternatively, you can sell it later for a one-time profit to achieve your financial objectives, such as paying for a child's education, a down payment on a home, or as a corpus for your post-retirement needs.

A pure-term insurance plan offers the policyholder no benefits whatsoever, both during the term of the policy and after it expires. However, in the event of an untimely death, the nominees receive the death benefit. Insurance is not meant to make you wealthy while you are still alive but to protect your loved ones from poverty after your passing.

23. ULIPs

Unit-Linked Insurance Plan is the official name for ULIP. Insurance and investment are combined in ULIPs. Your life is only secured with a small portion of the money you invest; the remainder is in the stock market. Premium payments can be made monthly or yearly by policyholders.

The capital market risks affect the investments made in Unit-Linked Insurance Plans (ULIP). The policyholder is responsible for bearing the investment risk associated with their portfolio.

Your investment decision should therefore consider your needs and level of risk tolerance. The need for money in the future is a different aspect that you should think about.

24. Dividends

A Dividend is a payment made by a company to its shareholders that is decided by the board of directors. Dividend payments are frequently made quarterly and can take the form of cash payments or stock reinvestments.

The dividend yield, which is the dividend per share, is expressed as a percentage of a company's share price, for example, 2.5%. If a common shareholder of a dividend-paying company owns the stock on the ex-dividend date or earlier, they are eligible to receive a distribution.

When businesses have extra cash due to profits or reserves, they distribute it to investors as dividends. A company does not necessarily have to pay dividends. Some businesses believe they can use this money more effectively to expand and provide better returns.

Some companies distribute the majority of their profits as dividends. Investors are not subject to tax on dividends, but businesses are subject to tax on dividend distribution. However, this law is subject to change just like any other.

25. Why Investing in Gold ETF is better than Gold?

26. Why Investing in Real Estate is good or bad?

Real Estate investing is a passion for some people. Insinuations like "Real Estate Never Goes Down" are widespread.  However, it is crucial to understand a few essential Real Estate facts.

• Positives-

• Real Estate is a hard asset: If something goes wrong and you own a house, you will at least have a place to stay.
• Or if you have agricultural land, you can produce something.
• If you have invested in a house, it will generate some rent. Similarly, agricultural land will produce something and give you some income.

• Negatives-

• In the current scenario, real Estate needs a lot of investment in one shot. Unlike a stock you can buy for Rs 100 or Rs 1000, real estate investments are typically in lakhs or crores.
• Real Estate investments are not very liquid – you cannot sell them quickly whenever you want.
• The yields (i.e., the income that real estate investments generate) are meager compared to the investment. This is because the return on most of the current assets is from the increase in real estate prices.

27. Why should everyone have an emergency fund?

The phrase "Emergency Fund" refers to money set aside for use by individuals in times of adversity. The goal of an Emergency Fund is to increase financial security by providing a safety net that can cover unforeseen costs like a medical emergency or significant home repairs.

Cash and other assets with high liquidity tend to make up an Emergency Fund's assets. This lessens the need to deplete retirement savings or jeopardize your future security by using high-interest debt options like credit cards or unsecured loans.

28. Why is a loan not a bad word?

A loan is a sum borrowed to repay it over a predetermined period. The loan's size, length, and interest rate will affect how much must be repaid.

Loans help us in 3 ways-

• We cannot afford to purchase something with our Current Savings but can pay quickly with future income and savings. EXAMPLE: Car Loan.
• Tax Reasons: Some loans have a tax advantage because the government wants to promote these specific types of loans. EXAMPLES: Housing Loans & Education Loans.
• It can help beat inflation (if the interest on the loan is lower than the inflation rate); believe it or not; inflation eats most of your savings.

You lose money if the interest rate is lower than the inflation rate. So it would be better to use that money now, or better yet, take out a Loan!

29. What is your net worth?

Simply put, a person's net worth is the amount that remains after deducting liabilities from assets. Disadvantages include obligations like Mortgages, Credit Card Debt, Student Loans, and Auto Loans, among others.

Bills and Taxes are examples of obligations that can be considered liabilities. The value of a person's assets includes the contents of their checking and savings accounts, the value of their real Estate, the market value of their car, and other securities like stocks and bonds.

The net worth remains after all assets have been sold and all debts have been repaid.

Net Worth = Assets – Liabilities

30. When can you retire?

Retirement is the time in life when one decides to stop working and rely on savings or other passive sources of income. Depending on personal preferences and financial planning, each person will have different retirement ages, lifestyle choices, and funding methods.

Planning for retirement entails preparing for your future so that you can continue to achieve all your objectives and dreams on your own. Setting your retirement goals, calculating how much money you will require, and making investments to increase your retirement savings are all included in this. Every retirement strategy is different.

Because you might have concrete plans for your retirement, for this reason, it's crucial to have a program that is created specifically to meet your unique requirements. You do not retire from life; you retire from work. For your life after retirement, you might have a new set of aspirations.

You might also want to keep up your usual way of life while not worrying about money at the same time. The path to achieving these life goals without relying on cash can be defined by advanced planning.