Making Millennials Millionaire: Here is a plan to get rich, avoid debt traps

Making Millennials Millionaire: A good financial plan is essential not only to create wealth but also to ensure that you do not fall into the dangerous realm of debt trap that could destroy your life.

In short, to make wealth, you need to budget after cutting unnecessary spends and be disciplined to stick to the budget. Photo: Pixabay

Making Millennials Millionaire: A good financial plan is essential not only to create wealth but also to ensure that you do not fall into the dangerous realm of debt trap that could destroy your life. A good financial plan is all about good budgeting and discipline to stay within the budget. So what is good budgeting?

The very first thing we need to do is to understand on what we are spending and how much. This starts from seeing our Bank statement and understanding our spends. The expenses generally fall into 5 categories

Things you can avoid or change and expenses that you cannot change Expenses you cannot change – Bank EMI, Mobile bill, broadband bill etc Expenses you can/maybe change – Rent, Groceries, entertainment, etc.

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When you don’t think of savings, each expense item will have unnecessary spends. You may be spending too much of luxury grocery, spending too much money on entertainment and eating out, may be staying at a higher rented place than necessary etc.

Next step is to look at all the line items and make a considered budget for each:

Take Home salary	50,000
Total Expenses	27500
EMI	1000
Cash for family	2000
Rent	10000	Was 12,000 will reduce to 10,000
Groceries	9000	Was10,000; reducing 1000 of unnecessary spends
Fuel	1000	Was 1500; reducing 500 of unnecessary spends
Holiday Planning	3000	Rs. 37,500	After 12 months at 7.5% FD interest investment scheme
Misc	1500
Availablefor Investments	22,500		Amount after 5 Years
Defensive Equity at 10% return	6750	10%	5,27,000
Aggressive investment at 15% returns	15,750	15%	12,30,000
Net worth after 5 years	17,57,000

The best part here is that if equity performs, there is a chance that you will make at least 15% to 20% more than the said net worth!

Question: Do you really need to use it for a car now or a house or none of these? Ever?

Thought: Car is depreciating; House is binding. If you buy house now with your existing salary, it stops you from going to a bigger home when your salaries and savings increase. salary may increase substantially if you are good. So time buying your home, delay buying your vehicle.

Also, every year, your salary would increase, and this means your savings too that will add up substantially to your net worth.

Conclusion:

In short, to make wealth, you need to budget after cutting unnecessary spends and be disciplined to stick to the budget.

(Authored by Shashank Udupa, Co-founder and CFO at Avalon Meta)

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