A recent survey of 379 investors reveals that while Gen Z dreams of ₹25-crore retirements and Millennials eye global travel, execution is falling short. Here is your generation-specific action plan to fix the fault lines and build real wealth.
Often, we go about earning money so seriously that we forget what we are earning for. Of course, for many of us, it would be a senseless question to ask, as almost everything we need in life comes in exchange for money! But the point is that money may mean something different to each of us. For some of us, it could be the ability to buy whatever we want. For some others, it could be comfort factor to face any emergencies. For the rest, it could be the feeling of independence or freedom that money brings. Milestones to Wealth conducted a survey in the run-up to the Financial Freedom Day on July 1 and we asked the young and old, men and women, salaried, self-employed and retired, a set of six questions on financial freedom. The answers from 379 people across different cohorts clearly brings out their money mindset and throws light on aspects of personal finance which are being managed well by them, as well as those areas where they seem lacking.
Here’s what we found:
Gen Z: Big Dreams, But Execution Wanting
The survey shows that youngsters are aiming high, with nearly 45 % of those in the 20-30 age group targeting a corpus of Rs 25 crore or higher when they retire. Gen Z also considers financial freedom as the ability to spend on whatever they wish to – instead of something more practical like being able to retire early or being debt free – which are among the more popular preferences in the older age groups. When you logically back work this dream, one would imagine a steady and growing income, early start to investing and additions whenever possible, to reap the benefits of compounding to the maximum and so on. But the real picture is far from this idealism. Youngsters have lofty dreams, yes. But, they are not ready for the traditional 9-to-5 jobs. They want excitement, novelty or an adrenaline rush as nearly two-thirds of the respondents in this age group are willing to break away from traditional careers. At the same time, they are worried whether their income will grow in sync with inflation and are unable to increase savings as earnings go up – factors typically associated with earning an income from a start-up or being an entrepreneur, for instance, rather than being in a routine job.
While the younger generation is living within their means – thanks predominantly to entry-level incomes, they are delaying saving in equities/mutual funds. Only 69% in the 20-30 age bracket are investing in stocks/MFs compared with over 90% in their 30s-50s. This doesn’t bode well for the financial freedom they yearn for, in terms of wanting a high corpus, an ability to spend on whatever they wish to, as well as a break from traditional jobs.
Action Plan for Gen Z
Gen Z needs to start early, save more, and invest more. But first, they should know where their money goes. Although most in this cohort say that they are living within their means, there is nothing like mapping every rupee to a spend and plugging the leaks. Frequent Swiggy and Zomato orders on one side, underutilized gym and OTT subscriptions on the other – there is always room for one cut here and another, there. This money can find its way into monthly SIPs, thus helping youngsters begin their investing journey early. A sure shot way to do this is to set goals for oneself. It could be as indulging as a foreign holiday 5 years down the line or it could be a serious one like self-funding a home buy 15 years later. When every rupee you invest is tied to a goal, it adds a purpose to the SIP and prevents one from stopping it on a whim.
Millennials: Reality Hits Hard In The Slog Overs
As one grows in their professional and personal lives, wants and desires start multiplying. This is reflected on the ground, in the survey. It shows that half the people in their 30s want their dream home to come true and over 80% in their 30s and 40s equate the ability to travel around the world to financial freedom. The good news is that this cohort understands that compounding works best only by investing in equities and are working hard to increase investments as earnings go up.
Where do the fault lines lie then? In a late start to equity investing and a race to catch up ; in not being able to live within their means and hence the piling of loans ; and as a result, in an inability to save as much as they would like to. Over 75% in the 30-50 age group are unable to earn or save as much as they would like to, and a little over half the participants in the survey who have big outstanding loans are 30-40 years old. Given all these challenges mid-life, the 30-40 age bracket represents nearly half of everyone concerned about how much is needed for retirement.
A life within means when young and single, goes on to becoming an expansionist one, as family grows and needs and wants multiply. With the tussle between spending and saving taking center stage in the middle ages, loans enter the picture to bridge the gap. Easy availability of loans put their high costs in the back burner, only to bite back when it shows up in the inability to save or invest as much as they would like to, for their future self.
Action Plan For Millennials
The 30-50 age groupneeds to work on bringing down interest as a % of their monthly outgo. Pay back / prepay loans beginning with the ones with the highest interest first ; don’t invest in apartments beyond the one you live in ; buy big-ticket items through savings, rather than EMI. A simple but effective rule will be to invest a fixed % of take- home salary every month first, even before meeting any other expenses. The amount should move up as income increases, even if the rise is not significant. To make up for a late start to equity investing, the middle-aged should make rigorous use of opportunities provided by market fall or volatility to add lumpsum investments.
This is also the age where one typically begins to plan seriously for retirement. Given the multiple variables – projection of expenses, inflation expectations post-retirement as well as life expectancy – it is best to have a baseline, midline and topline number in mind for the retirement corpus. This will make sure you are covered for surprises but, at the same time, at peace if your need is much less.
Happy investing!
At Milestones2Wealth, we help you achieve financial freedom by building your behaviour right. Better behaviour, better decisions, better wealth – is our philosophy. If you wish to join 8000+ investors who are already on their journey towards financial freedom with us, enroll with us now!
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